It took about an hour for someone on the Senate Finance Committee during its hearing today to mention the “elephant in the room” — namely, the fact that the CFPB is only allowed under Dodd-Frank to be funded out of “combined earnings of the Federal Reserve System” and that there has been no combined earnings of the Federal Reserve System beginning in September, 2022. Senator John Kennedy (R-LA) tried unsuccessfully to get CFPB Director Rohit Chopra to distinguish revenues from earnings and explain how the CFPB is entitled to money when the Federal Reserve has no earnings right now. Without explaining his rationale, Director Chopra gave the back of his hand to Senator Kennedy’s allegation that the CFPB is being unlawfully funded. Director Chopra said, “We have heard about this theory. I can tell you we’ve looked at this issue and we believe wholeheartedly everyone is complying with the statute.” Senator Elizabeth Warren (D-MA) referred to Senator Kennedy’s argument as being “absurd” without explaining why she believes that to be the case. Another Democratic Senator referred to Senator Kennedy’s argument as a “fantastical legal theory.” Other than Senator Kennedy’s “debate” with Director Chopra, no other Senator decided to question him any more about this issue. However, Senator Mark Warner (D-VA) observed that the next time that Chairman Jay Powell of the Federal Reserve Board appears before the Committee, he would like to have a fulsome discussion with him about the issue.
We would expect that there will be more questioning of Director Chopra about this serious issue tomorrow when he testifies before the House Financial Services Committee.
For earlier discussions about this issue on our blog, please see here, here, here, and here. We also hosted a podcast episode earlier this month with Professor Hal Scott of Harvard Law School titled, “Did the Supreme Court hand the CFPB a Pyrrhic victory?”
