Treasury secretary Timothy Geithner can continue to run the Consumer Financial Protection Bureau if the Senate does not confirm the president's pick to head the agency, according to an opinion issued by two Inspector Generals.
The opinion appears to contradict a common belief of Republican senators who think they can hamstring the new agency by simply blocking the confirmation of a CFPB chief.
Rep. Judy Biggert, R-Ill, sought the opinions of the Treasury IG and the Federal Reserve Board IG on several issues regarding Treasury's effort to make the agency operational by the July 21 "designated transfer date."
On July 21, consumer protection employees at eight regulatory agencies will be transferred to the CFPB. The new agency then will be in charge of the supervision and regulation of the consumer lending activities of banks and nonbanks alike.
Rep. Biggert asked the IGs if they "agree" that Treasury's interim authority over the CFPB would expire on July 21 if the Senate does not confirm a CFPB director.
Treasury's interim authority "does not fully terminate on the designated transfer date," the IGs say in their joint response. "The secretary is authorized to perform the functions of the bureau…until the director of the bureau is confirmed by the Senate."
Treasury IG Eric Thorson and Fed IG Elizabeth Coleman noted that the secretary can prescribe rules and enforce regulations related to federal consumer laws that were in existence before July 21. However, the "secretary is not permitted to perform certain newly-established bureau authorities" mandated by the Dodd-Frank Act.
This means the secretary cannot prohibit unfair, deceptive and abusive acts or practices defined in the DFA, or require model mortgage disclosures or supervise non-depository institutions.
"The bureau's power to regulate America's financial sector without a Senate-confirmed director has limits," Rep. Biggert said. "Unfortunately, responses given by the IGs of the Treasury and Board do not make those limits clear," she said. The Illinois congresswoman chairs the House Financial Services subcommittee on housing.
