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The Consumer Finance Protection Bureau

March 27, 2014 Leave a comment

The Dodd-Frank bill passed after the most recent recession created the Consumer Finance Protection Bureau (CFPB). I got to thinking about this new agency when I recently read about the Fed paying just under $80 Billion dollars to the U.S. Treasury. The Fed earns interest on its bond holdings and covers its expenses from these earnings, giving whatever is left over to the U.S. Treasury. What does this have to do with the CFPB?

It turns out that this agency is financed out of the Fed’s interest earnings but, remarkably, the Fed has no budgetary authority over it and neither does Congress (although there have been attempts to give Congress budgetary authority). I am not sure that there is any oversight at all which is of course organizationally absurd. Why would the agency be financed this way? Was it an attempt to prevent the budgetary cost of the bureau from becoming readily known by the public. Obviously its existence reduces the interest earnings paid to the Treasury so, all else the same, it increases the government’s deficit.

Further, can you imagine the waste in this bureau without any oversight by the Fed which is paying the bills? There was a claim in the Wall Street Journal by a Congressman some time ago that the secretary to the bureau director was being paid $160,000.  Think it is possible to get a decent secretary for half that? I bet you can.

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