"Our budget is a means to an important end: to make life better for American… (J. Scott Applewhite, Associated…)
Reporting from Washington — The agency protecting consumers in the financial marketplace plans to increase its budget 26% next year as it ramps up to full operation, but the newly installed director was short on details about where the money is going — raising the ire of Republicans.
The Consumer Financial Protection Bureau, which has started monitoring banks and related institutions for compliance with consumer laws, said it plans to spend $448 million next year, compared with $356 million it has budgeted for expenses this year.
But the director, Richard Cordray, remained vague in testimony Wednesday before the House Financial Services Committee about his priorities and exactly what the bureau would spend its money on.
"Our budget is a means to an important end: to make life better for American consumers," Cordray said.
Republicans groused that there was little they could do to hold the agency accountable: Congress has no say in how the agency doles out the money because of a special, independent funding stream.
"If they spend $100 million on paper clips, we can't even say, 'Wait a minute, you can't do that. Next year we're going to cut your budget,'" committee Chairman Spencer Bachus (R-Ala.) complained to Cordray at the hearing. "We have absolutely no control."
The agency, which opened for business in July, plans to spend significantly more money next year, in part because it will increase its full-time staff 44% to nearly 1,400 people.
Of the new hires, most will supervise banks and other financial institutions for compliance with consumer protection laws, such as restrictions on fees, interest rate hikes on credit cards and disclosure requirements for mortgages and other loans.
The agency also will be expanding its enforcement staff for actions against violators, as well as increasing the number of employees handling consumer complaints and promoting financial education.
The agency also plans a smaller increase in the number of employees working to analyze financial markets and research new regulations.
The 2010 financial reform law set up the agency outside the congressional appropriations process. Instead, the money comes directly from the Federal Reserve's coffers with only an annual spending cap.
The Obama administration pushed for the unusual process to prevent Republicans, who opposed the agency's creation, from starving it of money.
Senate Republicans had blocked Cordray's nomination for months, demanding that the funding be put back under congressional control as one of three major changes to weaken the agency's authority.
President Obama strongly opposed the demands, and last month he installed Cordray with a recess appointment while the Senate was on a short break.
House Republicans summoned Cordray to explain the agency's budget and criticized what they said was a glaring lack of details and some high salaries.
Rep. Randy Neugebauer(R-Texas) said the agency initially provided just 12 pages of details on its 2013 budget on its website, much less than the lengthy booklets provided by agencies seeking appropriations from Congress.
"It appears to me that you all could use a little beefing up in your budget plan," Neugebauer said.
Cordray said that the budget documents were doubled to 25 pages and that the agency is posting quarterly spending reports on its website. He promised there would be more details in coming years. He also noted the consumer bureau is audited twice a year, and last year's audit found no problems.
Rep. Brad Miller (D-N.C.) was one of several Democrats who came to the agency's defense. He said that the Office of the Comptroller of the Currency, another agency with an independent funding stream, provided 23 pages of budget documents for more than $1 billion in 2013 spending.
Cordray said that unlike other banking agencies, the consumer bureau's budget is capped under law and that its spending hasn't come close to that cap.
He estimated that the bureau would spend $356 million this year, well below its legal cap of $548 million. The cap for 2013 — 12% of the Federal Reserve System's annual operating expenses — is $598 million.
And although Congress doesn't control the purse strings for the agency, the requirement that he testify at least twice a year before lawmakers provided an additional check on spending, Cordray said.
"The notion that … we would spend $100 million on paper clips and it wouldn't matter, that we can be brought up here in front of you and have to answer for that publicly and embarrass ourselves if it turns out we were engaged in frivolous expenditures, that's very meaningful oversight, I believe," he said.
Rep. Bill Posey (R-Fla.) questioned some salaries at the bureau, citing findings by watchdog group Judicial Watch that one intern was earning $42,000 annually and an associate director for consumer education was earning $251,000 a year.
"That doesn't pass a straight-face test," he said, calling such high salaries unjustified.
Cordray said that Congress sets the salary levels for the agency and that they are comparable to other banking agencies, which all must compete for employees skilled enough to oversee the complex financial industry. The consumer bureau's average salary is 4% below the average salary at the Federal Reserve, he said.
Democrats said the Republican criticism highlighted the reason they wanted the agency to have an independent funding source.
"The appropriations process oftentimes can become very political," said Rep.Carolyn B. Maloney(D-N.Y.). "It could be it would result in significant cuts in your ability to help people."