In an article in this weekend’s Cleveland Plain Dealer entitled Congress Fiddles While Anger at Wall Street Burns: Plain Dealing, business columnist Sheryl Harris takes Senate Republicans to task for not confirming Richard Cordray to lead the Bureau.
Ms. Harris’ analysis is premised on a number of assertions that are simply not true. Take, for example, the following, which mischaracterizes the financial consequences of the Republican’s proposal:
“Most dangerously, Republicans want the bureau’s budget to be part of the appropriations process, which not only makes its funding subject to the whims of Congress but also forces the cost onto the backs of taxpayers. The previous Congress funded the bureau through the self-supported Federal Reserve precisely to protect it from political pressures.”
Ms. Harris leads her readers to believe that “the self-supported Federal Reserve” and not the U.S taxpayer is presently paying for the CFPB. But this is not really true.
The Federal Reserve System is funded principally through interest on U.S. government securities traded through open market operations, interest on foreign currency investments, fees for the services it offers and interest on loans to banks. The interest and fees the Fed receives far exceeds the Fed’s operating costs, and the Fed returns all of the unused funds to the U.S. Treasury. In 2009, for example, the Washington Post reported that the Fed returned $45 billion to the Treasury.
The CFPB’s budget, which Congress authorized to well exceed $500 million per year, is subtracted from the money that the Federal Reserve returns to the Treasury. See sec. 1017(a)(2). Accordingly, if the CFPB spends, e.g., $500 million next year, the Federal Reserve will send $500 million less to the U.S. Treasury. Under the Republican proposal, the $500 million would come from the omnibus budget instead of from the Fed. Either way, U.S. taxpayers are $500 million poorer.