U.S. Republicans prepare consumer watchdog, SEC probes as mid-term elections loom
2022.08.10 13:50
FILE PHOTO: U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler speaks with Senator Elizabeth Warren (D-MA) prior to testifying before a Senate Banking, Housing, and Urban Affairs Committee oversight hearing on the SEC on Capitol Hill in Wash
By Pete Schroeder and Katanga Johnson
WASHINGTON (Reuters) – U.S. Republican lawmakers are preparing a crackdown on the U.S. consumer and securities watchdogs in the expectation they will gain control of a key congressional committee following the November mid-term elections, according to a dozen financial lobbyists, congressional staffers and lawmakers.
With an 80% chance of the House of Representatives flipping to Republican control, according to poll-tracking website FiveThirtyEight.com, Republicans on the House Financial Services Committee are planning probes into the Consumer Financial Protection Bureau (CFPB) and the Securities and Exchange Commission (SEC), the sources said.
They allege that the agencies, which have operated under Democratic leadership since January 2021, have overstepped their authority, flouted the legal process for writing rules, and adopted a hostile stance toward the industries they regulate.
Democrats say the agencies are merely fulfilling their mandate to protect investors and consumers.
Republican lawmakers have already begun seeking information and documents from the agencies, according to the sources and public letters, but with control of the House they will be able to issue investigative subpoenas and compel public testimony.
At a minimum, such probes can suck up hundreds of hours of staff time and make the agencies more vulnerable to private litigation, said lobbyists and analysts.
Key efforts that could be stalled or curtailed include the CFPB’s bid to curb a range of bank fees and boost competition, and proposed SEC rules on company climate risks and the agency’s crackdown on cryptocurrency firms.
“A new day is coming,” Tom Emmer, the top Republican on the House finance panel’s oversight and investigations subcommittee, said in an interview, adding the two agencies are not being held accountable by Democrats. “Once we have the power to subpoena, once they have to listen to us, aggressive congressional oversight will only strengthen our system of government.”
Other prominent Republicans ramping up pressure on the agencies, according to public letters and sources, include Representative Patrick McHenry, who is likely to chair the House finance committee if the chamber flips, and Representative Blaine Luetkemeyer, also a senior member of the House committee.
A spokesperson for McHenry did not respond to requests for comment. Luetkemeyer’s office could not immediately provide comment.
CFPB Director Rohit Chopra and SEC Chair Gary Gensler are top targets due to their ambitious agendas and tough enforcement stances, which have sparked pushback from industry groups. The groups have urged Republicans to rein in the agencies and are identifying issues they believe lawmakers should probe.
The U.S. Chamber of Commerce, for example, has filed public records requests with the CFPB for information on, among other issues, its ties with external policy groups; its enforcement dealings with state attorneys general; and Chopra’s role in a December bid by Democrats on the Federal Deposit Insurance Corporation’s board to circumvent the agency’s then-Republican chair with the aim of strengthening bank merger rules.
That December fracas is likely to be a big focus for Republicans, along with Chopra’s review of the fees lenders charge on credit cards, overdrafts and bounced checks, said Emmer and lobbyists.
“We will focus on helping what we see as necessary, corrective action from congressional Republicans to investigate the CFPB’s actions,” said Neil Bradley, executive vice president at the Chamber of Commerce, the country’s biggest trade group.
Chopra told Reuters last month that he and his staff had met with “hundreds” of financial firms to provide guidance on his thinking and that he hopes to find common ground with Republican lawmakers. “It’s important, no matter who is sitting in the seat, that people look to find areas where they can work together,” he said in an interview.
Also in Republicans’ sights is a draft SEC rule requiring public companies to disclose climate-related risks, including greenhouse gas emissions, which corporate groups say is overly onerous and exceeds the agency’s authority.
That proposal is part of what they and Republican allies characterize as a broad assault on U.S. capital markets by Gensler who has pursued more than 30 regulations, while giving the industry little time to digest and respond to them.
“They are out of control … (President Joe) Biden’s regulators have politicized rulemaking,” said Emmer.
An SEC spokesman declined to comment. Lisa Gilbert of progressive group Public Citizen said, in line with the SEC’s mandate, Gensler is working to protect investors by getting them more information and that he will not be “distracted” by partisan probes.
Some lobbyists said the probes could eventually lead to legislative action favorable to the banking industry.
“We’ve been playing a lot of defense in the current environment,” said Paul Merski, executive vice president at the Independent Community Bankers (NASDAQ:ESXB) of America. He added that he expects that focus to shift next year to “more oversight and getting a better handle on the needs for these types of policy changes.”
