Ever since Rep. Jeb Hensarling (R-Texas) and Rep. Maxine Waters (D-Calif.) were named the chairman and ranking member of the House Financial Services Committee late last year, Capitol Hill observers have waited for the two members of Congress and their polar opposite ideologies to clash publicly.
That day came April 22 when the two sparred over the legitimacy of CFPB Director Richard Cordray and his ability to testify before the group.
Hensarling threw down the gauntlet when he announced in letters to Consumer Financial Protection Bureau leaders that Cordray won’t be allowed to testify until confirmed by the Senate. The committee was expected to call Cordray to a hearing in coming weeks, as it has before, to present the CFPB’s semi-annual report to Congress.
Hensarling said until Cordray is confirmed, “The committee intends to continue to conduct rigorous oversight of the CFPB’s activities and will expect the CFPB’s cooperation in those efforts, including making other employees available to testify at committee hearings and responding fully to committee requests for documents and information.”
In a letter to CFPB Associate Director and General Counsel Meredith Fuchs, Hensarling referenced a Jan. 25 District of Columbia federal appeals court ruling that invalidated National Labor Relations Board appointments made by President Barack Obama while the Senate was in recess. Those appointments were made the same day Cordray was also appointed to head the CFPB.
“The court’s unanimous ruling makes it clear that there is no legally appointed director of the CFPB at this time,” Hensarling said. “By law, the committee can receive this testimony only from a director who is appointed in accordance with the Constitution and the Dodd-Frank Act, which created the bureau.”
Chairman Hensarling also sent a letter last week to Cordray, noting the federal appeals court ruling and requirements under Dodd-Frank that specify the CFPB director must be appointed with the advice and consent of the Senate. “Absent contrary guidance from the United States Supreme Court, you do not meet the statutory requirements of a validly serving director of the CFPB and cannot be recognized as such,” Hensarling wrote.
Ranking Member Waters (D-Calif.) responded the following day with a letter to Hensarling saying she disagreed the NLRB ruling affected Cordray’s appointment and added banning him from testifying would impede Congressional oversight.
“It is inappropriate and unwarranted to prematurely and unilaterally conclude that the … case warrants blocking Director Cordray from fulfilling his statutory obligation to testify before the Committee,” she wrote in the April 23 letter.
“If you choose to continue to ignore the law, then I am prepared to use the rules of the Committee to provide the Director the opportunity to give testimony before the Committee,” she added.
The committee also played politics April 24 when it held a hearing that investigated regulatory impediments to private investment capital in the housing market. Hensarling has made no secret of his desire to privatize the currently conserved government- sponsored entities Fannie Mae and Freddie Mac and pressed the issue again during his opening remarks.
There are three steps to a sustainable housing policy, Hensarling said.
“Step No. 1 would be to gradually reduce and eventually eliminate the government guarantee of Fannie and Freddie. Second step would be to reform the FHA so that its mission is explicit, targeted and paid for. And three, to remove the artificial barriers to private capital coming into the market, which is the subject of today’s hearing,” he said.
“Now, it may be a challenge for members of this committee to come to agreement on all of the positions of the first two steps. But surely, surely, we can find some way to come together on the third, and that is removing the barriers to entry of private capital coming into this market.”
The Texas Republican then took a pot shot at the Dodd-Frank Act, saying qualified mortgage rules would have to be carefully examined for their impact on the market.
“I know that many of my friends on the other side of the aisle have much invested in the Dodd-Frank law and its brand, and I respect this,” Hensarling said. “But if you agree that private capital and not taxpayer capital should be the foundation of our housing finance system, then I hope you will have open minds that perhaps some limited number of provisions of the Dodd-Frank law perhaps could be refined and improved upon at this time.”
Waters returned the favor, stating in her opening remarks that committee inactivity, not policy, is to blame for a lack of private investment in the housing market.
“There are now over a dozen different comprehensive proposals to reform our housing finance system, many with bipartisan support,” she said. “I find it disappointing that while we have convened more than 20 hearings on FHA and the GSEs over the last three years, we have not considered any of these ideas.”
NAFCU Executive Vice president of Government Affairs Dan Berger, who will take over as president/CEO this summer, wrote Hensarling and Waters in anticipation of the hearing, saying credit unions need continued unfettered access to the secondary mortgage market. He added that any reform efforts must place a heavy emphasis on fair pricing that reflects loan quality.
“In addition to access to a healthy and viable secondary mortgage market, fair pricing is equally as critical in ensuring community-based financial service providers are not discriminated against based on type of institution, an institution’s asset size or any other geopolitical issues,” Berger wrote.