WASHINGTON — In a heated, hourlong hearing Tuesday, Republicans on a House of Representatives financial oversight panel criticized a leading consumer advocate for setting up a protection agency that they say will escape congressional oversight in favor of cracking down on banks.
Elizabeth Warren, a Harvard law professor, conceived the Consumer Financial Protection Bureau during the financial crisis, and President Barack Obama asked her to oversee its startup. Many consumer advocates and Democrats want Warren to become the bureau's new director, but she faces overwhelming Republican opposition.
The Consumer Financial Protection Bureau, which will begin work in July, is charged with being the consumers' voice in financial matters such as opening bank accounts, using credit cards or buying homes.
The bureau is a key part of the financial overhaul that passed into law a year ago. But many financial institutions strongly oppose it, and the House subcommittee wanted to ask Warren on Tuesday about oversight.
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The snappy exchanges lasted an hour, ending with an argument about whether Warren could leave for another meeting or had to stick around for more questions at the hearing, which was held before the House Oversight Committee's panel on financial services and TARP.
Warren told the panel repeatedly Tuesday that the agency will develop rules to help consumers compare financial products, and Democrats lauded her.
But Republicans said the agency had too much power.
"Once fully operational, the bureau will possess virtually unchecked discretion to identify financial products and services that the director determines to be 'unfair, deceptive or abusive,' " Republican Rep. Patrick McHenry, the subcommittee's chairman, said in his opening statement. McHenry's home state, North Carolina, is the headquarters of Bank of America.
"To fund and execute this mandate, the law has granted the bureau an unparalleled budgetary authority — free from congressional authorization — and an unacceptable degree of autonomy — hidden from congressional oversight," McHenry said.
As an example, McHenry questioned why Warren had been advising other government agencies, including at least one state government, in writing agreements with financial agencies. He said she hadn't been straightforward in testimony earlier this spring about the extent of her involvement.
Answered Warren: "When I was asked my advice, I gave it, and I was proud and enthusiastic to do it."
McHenry followed up: "If you're so proud and enthusiastic about your advice, why didn't you express that before the committee?"
A Democrat came to Warren's rescue.
"I apologize for the rude and disrespectful comments of the chair," said Rep. John Yarmuth of Kentucky. "People are afraid of you."
For now, McHenry and some other House Republicans are working on chipping away at the consumer bureau, saying it would operate with too little congressional oversight, a charge the business community has echoed.
The consumer bureau "consolidates more power in the director than in any other agency that regulates private individuals and entities," said Andrew Pincus, who spoke for the U.S. Chamber of Commerce.
The House Financial Services Committee already has considered three bills to increase oversight of the bureau.
One of them would change the governing feature from a single director to a five-member commission. Another would require only a majority vote — instead of a supermajority — of the Financial Stability Oversight Council to veto proposed regulations by the bureau. The third would delay implementing the bureau for 18 months to complete rule-making.
Roger Hickey, a consumer advocate and co-director of the Campaign for America's Future, a liberal advocacy group, said the Republican worries about lack of oversight appeared disingenuous.
"These concerns are coming from people who didn't want to create the bureau in the first place," Hickey said. "So you have to take their concerns with a big chunk of salt."
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