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The CFPB’s Budget

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Last year, the President signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act, which established the new consumer bureau. The central idea behind the creation of the CFPB was the need to increase accountability by consolidating core consumer financial protections that were scattered across government. Previously, seven different federal agencies were responsible for consumer financial protection, but none of those agencies viewed consumer financial protection as their top priority – and none was sufficiently accountable for getting the job done. Moving forward, the CFPB will serve as a cop on the beat dedicated to making the markets for consumer financial products and services work for American families.

Today, the President released the Budget of the United States Government for Fiscal Year 2012. The release includes budget and personnel estimates about the CFPB for this fiscal year and the next.

Under the Dodd-Frank Act, the CFPB is funded by transfers from the Board of Governors of the Federal Reserve System. The CFPB can request funds from the Federal Reserve that are reasonably necessary to carry out its consumer financial protection functions, but the CFPB’s funding from the Federal Reserve is capped at a pre-set percentage of the total operating expenses of the Federal Reserve, subject to an annual adjustment. To date, the CFPB has requested two funding transfers from the Federal Reserve for a total of just under $33 million.

The President’s budget includes personnel projections showing that the CFPB expects to hire several hundred employees over the course of 2011 and 2012. Additionally, the CFPB expects to receive staff transferred from six of the federal agencies that will be transferring consumer financial protection functions to the consumer bureau. The CFPB’s personnel needs span a range of areas, but we expect some of the biggest resource requirements to be in enforcement and examination – cops on the beat – and consumer complaints.

You can read more about the CFPB’s responsibilities here and about the CFPB budget here and here. Additionally, the CFPB is working to put together more information about our funding and expenses to be posted to the website in the coming weeks.

  • Nicole

    I’m so excited to see this bureau develop. I’m a Certified Fianical Planner and feel we need to educate and protect financial consumers.

    Nicole

    • Get A Job

      I haven’t seen any efforts discussed by this agency to educate financial consumers.

      Isn’t that what you, as a Certified Financial Planner, are supposed to be doing?

      I fear this organization’s mission is to take choices away from consumers. They want to commoditize the financial product world so that all products look the same. This will reduce choices, increase prices, and eliminate my ability to find a product or service that will fit my specific need.

      This agency is taking the incentive out of financial innovation and instead stifling the very inventiveness that makes our nation the world’s premier financial center.

      Let’s not lull ourselves into some dream that this bureau is going to educate and protect financial consumers. We need to educate within our schools and within our homes, not within our government.

  • Jennifer

    How will the bureau be organized? How will the employees of the bureau be qualified? The bureau, as I understand it, will be comprised of employees from across the different regulatory agencies and other “qualified” individuals. How is it, that all of these people that come from different professional backgrounds and beliefs are suddenly going to be “qualified” to become the “cops” of consumer financial protection and suddenly all be on the same page?

  • http://www.osborneink.com OsborneInk

    Blogger question here: with such emphasis on law enforcement, how much will the CFPB focus on cleaning up the mortgage market?

    • Get A Job

      The mortgage market has already been “cleaned up”.

      How?

      First, the types of loans that got many into trouble have been eliminated. Stated income, stated asset loans, also known as “liar loans” are no longer being purchased by the mortgage industry. The free market has found that these were too risky, experienced too many losses, and have been eliminated. No government needed here.

      Second, there are many laws already in existence that regulate the markets.

      Third, companies have tightened their underwriting requirements making it more difficult for those who are not qualified for a mortgage loan to get one.

      Fourth, the mortgage insurance market has become more restricted, making it more difficult for one to obtain a mortgage without an appropriate down payment.

      Fifth, housing values have fallen to levels that are more realistic, eliminating the value bubble that got so many into trouble.

      In summary, I believe the free market has corrected itself without any governmental intervention. Did anyone get hurt? Yes. Thousands of individuals got hurt. But it has been this way for centuries. We have always had cycles – ups and downs.

      I feel sympathy for those who have been hurt by these issues.

      But how about me? What about the guys who have lived responsibly and within their means? Do I have to now pay for the persons who did not? I hope not.

      And what about the government? It’s not living within its means. Yet it wants to tell me what I can and cannot afford in the purchase of financial products and services. Seems very hypocritical to me.

      We don’t need this bureau.

  • Myezplan

    Careful!!! Regulate only where it’s necessary. Financial institutions use computers to take money from consumers. They use complicated transactions that can fool people. The less consumers know, the more money they can take. Why not require those institutions to allow consumers to use similar tools that work for consumers? Consumers need their own tools integrated into today’s automated spending environments to advise them on financial matters such as when to spend, borrow or save. We have the technology and we should use it to rebuild the economy.

    • Get A Job

      Okay. Time for a reality check.

      You state, “Financial institutions use computers to take money away from consumers.” That’s a new one on me. Instead of making dramatic statements such as that, how about providing the readers here with some actual evidence of a situation where a financial institution used its computers to take money away from consumers.

      “The less consumers know, the more money they can take.” Please, let’s examine the reality of this situation.

      In a typical mortgage transaction, there are many pages of calculations and disclosures. Attorneys are involved. There are a multitude of laws and regulations in place already establishing criteria for the disclosure of financial information in a consistent manner. The most important of these regulations are the Truth In Lending Act and the Real Estate Settlement Procedures Act.

      A typical mortgage transaction requires about thirty or more pages of disclosures showing all of the costs and requirements of a transaction. There is a mortgage document that lists the terms and conditions over multiple pages.

      If a consumer wants to know what is happening with a mortgage transaction, it is all there for them to read. The problem is, most don’t.

      Consumers need to begin taking some personal responsibility for their actions. I, for one, do not want nor need a government bureaucrat negotiating my financial transactions for me.

      You state “consumers need their own tools integrated into today’s automated spending environments to advise them on financial matters such as when to spend, borrow or save.” This really doesn’t make a lot of sense. I certainly hope you are not advocating that this bureau provide these types of tools.

      There is one tool that has existed for many generations and will continue to be superior to any other device. It is called a brain. It is used to think. Unfortunately, many consumers have chosen to stop using this important tool and to cede responsibility to the government for this function. Unfortunately, this is the primary cause of our nation’s current fiscal situation.

  • http://www.videoynat.net Video izle

    ohh very interesting

  • Joe Collins

    As a former financial advisor I look forward to the day I can submit a resume and cover letter. I spent 11 years as a financial advisor. The financial advisor as broker is a broken model. The industry can no longer be self-regulated. I’ve had first hand experience with FINRA, the SEC and the Texas State Securities Board. I can attest to the fact that none of them care one bit about the regular consumer. They are reactive not proactive.

    The SEC was formed to protect investors. In it’s heyday the SEC was feared by JP Morgan and other financiers. Today no one fears the SEC because it has no teeth, no guns and no badges and no way to proactively educate the regular consumer saving for the great goals of life- retirement, education and protection.

    Glass and Steagel, the men who wrote the Glass-Steagal Act were men of vision. They knew that the banks, brokerage houses and insurance companies should be separated. They were proven right again by the rip off of the American public by the big financial services companies.

    I hope this bureau will enable the consumer to be able to recognize when they are getting duped and put the bad guys out of business. It is a tall order indeed.

    • Get A Job

      Dear Joe,

      Financial advisors get paid based on their productivity and on a commission basis. Unfortunately, it doesn’t sound as if you were successful in that realm.

      Sorry to say this, but please don’t burden me as a taxpayer by obtaining a government job.

      You being a former financial advisor, I am surprised that you weren’t frustrated by the many regulations that you were required to comply with. Are you saying there isn’t enough regulation within your industry? I can find thousands that would disagree with you.

      You state “They were proven right again by the rip off of the American public by the big financial services companies.”

      Hey Joe, how about some facts? What are the specific instances where the American public got “ripped off”?

      I believe, as a taxpayer, I am getting ripped off by this new agency. I don’t need an agency of the government to protect me. Let alone spend hundreds of millions of dollars attempting to justify its existence.

      Get a job.

      • Truenorthadvisor

        How much did your 401(K) go down? Did you bail out of the market completely in November 2007? When is the last time you actually read your statement from front page to back. If the Fed had not given (not loaned) over $1 Trillion dollars to the major financial institutions then Bank of Amerca, Citibank, Lehman, Bear Stears, Goldman Sachs, AIG and many others- not just nationwide but worldwide would have gone bankrupt putting millions more on the unemployment payrolls.
        Who pays for this bailout of the banks? We do. In the form of higher taxes and depreciation of the dollar in the future. The dollar is now worth about 9 cents based on it actually being worth $1.00 in 1926. Remember when gas was $29 cents a gallon.
        In a tree free market system those financial institutions that formed as a result of the repeal of Glass-Steagall would would have been allowed to succeed, or, if they screwed up, allowed to fail. Before passing judgement on the whole situation read the Bank of America filing CIK: 0000070858 on the SEC.gov website. When you start researching each of these companies you’ll see that they have had to bring billions of dollars back onto their balance sheets because formerly the PCAOB allowed them to keep the VIE’s off their balance sheets and out of sight of investors.
        Who do you have your brokerage account with? Check them out on the SEC website. Look at the derivatives they hold or they had to bring back onto their website in their September 30, 2010 filing. Somewhere, somehow they will have to make up these losses. They will do this through higher fee’s to you as a client and then our wonderful congress will increase your taxes either directly or indirectly.
        The big financial service cong

        • Get A Job

          Joe,

          I can see why you had difficulty in your vocation.

          First, sorry about your 401(k). Most have rebounded nicely over the past 18 months. However, in case you didn’t know, there is no guarantee that all investments increase in value. I fail to understand how a decrease in values of investments, many of which were overvalued, equates to your comment they are the result of – “the rip off of the American public by the big financial services companies.”

          Second, actually the TARP funds used to inject capital into the nation’s banks actually has earned our government a profit. Yes, a profit. I know, it is hard to believe, but if you examine the facts, it is indeed true. I disagree with the TARP program, but it actually has earned more from banks than it has cost.

          Third, bank deposits are insured by the FDIC. No taxpayer money is used to fund the FDIC. All FDIC losses and expenses are paid for by the banks through the insurance premiums they pay to the FDIC. There is a very common misperception that bank failures cost our government money. That could not be farther from the truth.

          So, with TARP to banks earning a profit, and the FDIC a bank funded entity, I do not understand how anyone’s taxes have increased as a result. You say in your recent post that we are paying for these “In the form of higher taxes”. Not true Joe. In fact, at the end of 2010 the tax bill was passed that did not raise taxes.

          Your sense of cause and effect are to be questioned. The value of a dollar in 1926 compared to today doesn’t really have anything to do with the CFPB. Inflation is a naturally occurring event that has been in existence for centuries. All economies, in all parts of the world, are impacted by inflation.

          Please help me out here. How does the value of a dollar being impacted by inflation since 1926 have anything to do with your argument? Actually, over the past few years when we have experienced the great recession, inflation was actually at its lowest points.

          Yes, I remember when gas was 29 cents per gallon. But again, what does that have to do with the CFPB or financial regulation? Gasoline prices are impacted by supply and demand. Supplies are falling and demand is rising, especially from developing countries such as China and India. Environmental laws are also impacting the cost of gasoline when emission guidelines require additional refining. Again, help me out here. What does the price of gas have to do with anything in your original argument?

          Was the original goal of the SEC to educate and train consumers, as you are critical of in your original post? I don’t think so. I thought that is part of the services a financial advisor provides.

          I agree that there are accounting rules that are suspect, that institutions need to be allowed to fail, and that derivatives can be a problem. But the very act that you encourage me to engage in, reviewing information from the SEC website, allows me to examine what these companies are doing. Is it easy to study? No. Does it take time? Yes. Is it my favorite thing to do? No. But the information is available if I so choose.

          But isn’t that part of what a financial advisor gets paid for? To understand my needs, study the investment options, and then match my needs with the right option?

          Joe, no offense, but your recent post doesn’t make a lot of sense. Inflation, investment fluctuations, gasoline prices, false information on taxes increasing – all of these make me suspect of your true knowledge of the situation.

          I sincerely hope that you are not one of the persons the CFPB chooses to regulate the industry.

  • Get A Job

    $329 MIllion Budget.

    Again – $329 million in annual spending for this agency.

    I believe, in the spirit of full transparency, this agency should be required, at a minimum, to calculate the savings that it will bring to all consumers annually and then compare it to its annual budget.

    Please, let’s be reasonable here. Do we really need to add another $300 million annually to our nation’s spending? Are we protecting consumers or government bureaucrats?

    • Truenorthadvisor

      Get a job.

      Actually the laws we have on the books are not being enforced. FINRA and the SEC put up a big front and attempt to regulate brokers and brokerage houses but with their current technology it’s impossible. The problem is that the creation of new products happened faster than the SEC could keep up with. Just try researching one of those CDO’s on BOA’s website to see what is actually in it. It’s impossible for you or I to see what’s in these investments, who actually owns them, and how much the losses are. At least with your mutual fund there are quarterly reporting rules. Over $1 trillion dollars of investments are on the books who know’s how many companies and pension funds and they are virtually impenetrable.
      I agree we don’t need more legislation. We need people with the guts to fight. We need investors to become more educated and not turn their investment planning over to 23 year old college grads who have no experience in life or complex investments.

      For instance when Christopher Cox put a moratorium on naked shorts in 2008 there was already a rule on the books that forbid brokerages from selling naked shorts.

      • Get A Job

        So, if we have laws and regulations in place that are not being enforced, why do we need yet another government bureau to create yet another set of overlapping laws and regulations?

        Why shouldn’t the current laws and regulations simply be enforced?

        I hope you would agree with me that creating another layer of bureaucracy will only lead to more confusion, turf protection, and expense without much in the way of a favorable result.

        I would challenge you with this question, since you have experience within the industry. What additional regulations should be in place for brokers? What additional regulations for brokers would actually be of benefit to the investing public?

        If an investor is ignorant enough to turn their life savings over to a 23 year old college graduate with no experience, then the investor will get what they deserve. We cannot create regulations or agencies to protect consumers from themselves.

        Investors have to take some responsibility for their actions and decisions. There are no guarantees in the investment world. I feel sorry for those who have lost money in the markets. I really do. But that is the way the market works. If someone fares poorly with their investment, I certainly don’t want to be asked to make them whole. I also don’t want my freedom of choice in investments taken away from me.

        • Truenorthadvisor

          So, if we have laws and regulations in place that are not being enforced, why do we need yet another government bureau to create yet another set of overlapping laws and regulations?

          A: That is a very good question that I would like to ask Elizabeth Warren personally

          Why shouldn’t the current laws and regulations simply be enforced?

          A: Because there is not enough manpower to enforce them. I think the SEC has one employee for every financial institution they are supposed to be regulating. It’s like in the old west where they had one Texas Ranger for every 5,000 miles.

          I hope you would agree with me that creating another layer of bureaucracy will only lead to more confusion, turf protection, and expense without much in the way of a favorable result.

          A: I agree. Coming from outside the govt and a non politico I would push for education through social media and technology rather than enforcement.

          I would challenge you with this question, since you have experience within the industry. What additional regulations should be in place for brokers? What additional regulations for brokers would actually be of benefit to the investing public?
          A: I believe that financial advisors should be financial advisors. Brokers should be brokers. I’ve seen too many brokers masquerading as financial advisors selling huge annuities and VUL’s to people because the up front commissions are so big. Financial Advisors should be paid by the hour and/or assets under management. What you don’t see is the 12b1 fees that brokers make on the back end which makes your mutual funds cost more.

          A: The problem with the profession is that they have a conflict of interest.
          Regulators don’t really know what’s at stake. As a financial advisor I always did what was in the best interest of my clients. My clients trusted me 100%. Many times the best thing to do was to hold a rollover IRA in cash- for a very long time. I made nothing doing this but it was the right thing to do for my client.

          If an investor is ignorant enough to turn their life savings over to a 23 year old college graduate with no experience, then the investor will get what they deserve. If you read The Big Short you’ll see thats exactly what people did and that’s what they’re still doing. In the land of the blind the one eyed man is….. king.

          Investors have to take some responsibility for their actions and decisions. There are no guarantees in the investment world. I feel sorry for those who have lost money in the markets. I really do.

          A: Reserve Primary Fund was the largest money market fund in the country. The manager had invested $782 million in Lehman Brothers paper yet didn’t disclose it on the prospectus. The fund had never broken a buck ($1.00 NAV) since it’s inception in 1972. Eventually it paid out but clients suffered losses because they couldn’t pay their mortgage, health insurance, norsing home expenses and other bills. The managers are still in a court battle. The people who had their money in cash in this account- some of them lost their homes. Their brokers didn’t know. Even big companies didn’t know and paid a huge price for it.

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