Tuesday, President Trump released an outline of his FY 2018 Budget entitled “A New Foundation for American Greatness”.  There is good news and bad news for the CFPB, although most of it is bad news.  The good news for the CFPB is that the Administration does not propose to abolish the CFPB.  The bad news for the CFPB is that it proposes to drastically change the way the CFPB is funded and the amount of such funding.

Under Section 1017 of the Dodd-Frank Act, the CFPB is funded by transfers each year of up to 12% of combined earnings of the Federal Reserve System.  During the current fiscal year, the CFPB’s budget is approximately $600,000.

Under the Administration’s proposed Budget, the CFPB’s funding would be supplanted by Congressional and appropriations.  This, of course, would require separate legislative action.  The outline of the Budget provides the following rationale for this change:

“CFPB’s interpretation of the Dodd-Frank Act has resulted in an unaccountable bureaucracy controlled by an independent director with unchecked regulatory authority and punitive power.  Restructuring is required to ensure appropriate congressional oversight and to refocus CFPB’s efforts on enforcing the law rather than impeding free commerce.  The Budget proposes to limit CFPB’s funding in 2018 to allow for an efficient transition period and bring a newly streamlined agency into the regular appropriations process beginning in 2019.”

A separate document released along with the outline of the Budget is entitled “2018 Major Savings and Reforms”.  The document projects that there will be savings from the CFPB funding change of $145 million in 2018, $650 million in 2019, with the savings increasing every year, for a total savings of $6,833,000,000 over a 10-year period.  These numbers are puzzling since they suggest that the CFPB is currently being funded through Congressional appropriations which, of course, is not the case.  I assume that these numbers really represent additional funds that the Fed will be able to send to the Treasury each year if it no longer needs to fund the CFPB.  According to an American Banker article, the “Fed remitted $91.5 billion to the Treasury last year, after providing $600 million in funding to the CFPB.”  Even more puzzling is the fact that these purported savings, beginning in 2019, seems to be almost the entire CFPB budget.  Thus, the Budget seems to propose a de facto abolition of the CFPB.

In any event, I think it will take the enactment of legislation like the Financial Choice Act (which contains a provision requiring Congressional appropriations for future funding instead of Fed payments) or H.R. 2553, The Taking Account of Bureaucratic Spending (TABS) Act (which would eliminate the Fed funding for the CFPB) to accomplish the Administration’s objective.  That will require at least 60 votes in the Senate.  Thus, the Democrats on the Senate should be able to block it.