Last week, the Director of the Office of Management and Budget—who also moonlights as the acting director of the Consumer Financial Protection Bureau (CFPB) on the side—announced that he had fired all 25 members of the CFPB’s board of advisors. While the wailing and gnashing of teeth from the elite political class was all-too predictable, it did provide an opportunity to explore exactly what this notoriously unaccountable agency has been spending its money on.
As background, the Consumer Financial Protection Bureau is an independent agency that came into existence following the passage of the Dodd-Frank Act. Ostensibly, it was designed to issue regulations on financial institutions—banks, credit services, and other financial entities such as payday lenders—to “promote fairness and transparency” for consumers engaging in financial transactions in the aftermath of the ‘Great Recession.’
There’s been significant partisan divisions over the very existence of the CFPB, much less its relatively short track record since its authorization in 2010 and subsequent implementation in 2011. One of the many critiques aimed at the agency is that its structure remains largely unaccountable to Congress and therefore lacks proper oversight of its actions and its regulations. Indeed, a federal circuit court in D.C. declared its very structure unconstitutional in the fall of 2016.
But what about its expenditures? And why did it have a 25-person board to begin with?
Funded almost entirely by the transfer of earnings within the Federal Reserve System, the CFPB’s budget has increased steadily over the years while remaining almost completely insulated from the appropriations process in Congress. In FY2016, the agency’s total expenses came out to around $575.6 million. Within a year, the agency’s expenses were at an estimated $646 million for FY2017; a twelve percent increase in expenditures.
A closer inspection of how it issues its contracts reveals no shortage of curious dealings. A review of its contracts just over the past two fiscal years shows dozens of “undisclosed recipients” that come out to millions of dollars in expenditures. In June 2016, the agency awarded a $2.3 million contract to an undisclosed entity for “expert witness services.” It awarded another undisclosed contract for expert services in labor economics and consumer finance to the tune of $916,163 for an 11-month contract. It awarded another contract for nearly $900,000 for litigation consultant services and a $921,245 contract to an undisclosed recipient just three weeks ago for “time and materials” spent preparing research.
And this past April, the agency levied a presidential-level salary of over $400,000 to hire a consumer behavior and communications expert. Who among us wouldn’t want to make presidential money to develop press releases and social media strategies about how people consume products on a contract that is unlikely to be severed?
Sweet gig, guys.
There are literally dozens more. And that’s only within the past two years. If one were to go back further, there are hundreds of such undisclosed contracts to recipients with preferred government access.
The dismissal of the CFPB’s Consumer Advisory Board last week has only highlighted the opaque operations of this agency and all but guaranteed increased scrutiny—from both its supporters and detractors. And for those of us monitoring the federal government’s activities, it’s kind of like going on a blind date. Sometimes, the result is a pleasant surprise. Sometimes it’s the beginnings of a hilariously awful story that can only be told after mild inebriation and a blood pact among close friends.
Of course, one might also wonder why an independent federal agency with minimal congressional oversight has a 25-person board of volunteers—especially when this board has their travel expenses paid for largely at the discretion of a single individual. I suppose there’s nothing like publicly-funded first-class flights, four-star hotels, and open bars for twenty-five of one’s closest friends and associates at least twice a year. But for some people, that might come across as a bit excessive.
The passage of the Federal Advisory Committee Act (FACA) in 1972 is a good start for understanding how these weird public-private hybrid boards developed. That law helped pave the way for them. The nature of these entities has always been somewhat mercurial and concern has only grown over the years given the always present danger of cronyism that runs rampant when big government and big business interests work together.
As the nation sits at over $21 trillion of national debt (not including unfunded liabilities), the scrutiny that entities like the CFPB receive should—and will—be dialed up. And such scrutiny will probably be dialed up to eleven. Both because it’s the right thing to do and because 80’s pop culture references never go out of style.
Officials at the CFPB have said the board restructuring will save hundreds of thousands of dollars a year. Hopefully, officials will begin to tackle the opaque contract process as well—both in terms of reducing their overall number and fully disclosing who is receiving payment. When the nation is facing a looming debt crisis that is in the trillions, such savings might seem minuscule. But the truth is that the fight to salvage the fiscal future of millennials and the post-millennial generation has to start somewhere.
And often, it’s the smaller battles that are the most telling.