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Balanced regulatory reform the only realistic solution to CFPB divisiveness

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The recent combative hearings between House Financial Services Chairman Jeb Hensarling (R-Texas) and the director of the Consumer Financial Protection Bureau (CFPB), Richard Cordray, and Hensarling’s proposed changes to the Financial CHOICE Act underscore the deep philosophical divide that exists between the proponents and opponents of the CFPB.

While the sides continue to stake out and evaluate their positions in expectation of a battle over the director and the agency, it might be better for each camp to realize that given the sophistication and degree of integration of the mortgage and financial markets, the respective sides should (and do) have far more in common than they have differences.  A dramatic win by either side, as opposed to a moderate compromise, could hurt both banks and consumers.

Both Democrats and Republicans have at various times agreed that the CFPB should be headed by a bipartisan panel.  Sen. Elizabeth Warren (D-Mass.) – the original architect of the CFPB — initially envisioned the agency as headed by a panel as opposed to a single director.  The concept of a single director was a change made by the Obama administration.

Last year, when the Republicans introduced the Financial Choice Act to amend Dodd-Frank, it included a provision changing the CFPB’s leadership to a panel.  Since that time, both Democrats and Republicans have changed their position, with each now wanting a single director, the difference being whether that director can be removed for cause or at the will of the president.  While the latter issue will be decided by the D.C. Court of Appeals if no compromise is reached, the simple fact is that both Democrats and Republicans have seen the merits of panel leadership, a model applied at analogous agencies.  Accordingly, one would think that it is an easy-to-reach compromise.

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