Federal Reserve Chair Jerome Powell today said that “no other federal regulator” is examining large banks to ensure they are complying with certain consumer protection laws following the Trump administration decision to suspend all Consumer Financial Protection Bureau activities this week. During an oversight hearing before the Senate Banking Committee, Powell was also pressed about supervisory failures regarding the Silicon Valley Bank closure, regulators’ work on implementing the proposed Basel III endgame capital requirements and the Fed stress tests.
CFPB Acting Director Russ Vought, who is also director of the Office of Management and Budget, recently announced he had ordered bureau staff to suspend all activities. He also directed the CFPB will not be taking its next draw of funding from the Fed because it is not “reasonably necessary” to carry out its duties. Committee Ranking Member Elizabeth Warren (D-Mass.) questioned Powell on what the CFPB hiatus meant for the laws and regulations the bureau enforces. She noted the CFPB oversees consumer compliance exams for banks at least $10 billion in assets with the Fed providing that function for smaller banks.
“You know that [the Dodd-Frank Act] moved all authority for examinations in the consumer space to the CFPB,” Powell said. “We still have some jurisdiction,” although he later added that “not one federal regulator” provides consumer compliance exams for large banks.
Some Republicans on the committee pushed back against the suggestion by Democrats the CFPB hiatus left a hole in consumer protection enforcement. Sen. Pete Ricketts (R-Neb.), who is the former governor of Nebraska, said state and federal banking regulators are still enforcing consumer protection laws and regulations.
“Having been a governor and having a department of banking that reported to me, if any consumer would contact us and make a complaint about banking a big bank… we would investigate, as could the OCC, the FDIC and the FTC,” Ricketts said. “So to characterize it as ‘nobody’s out there for consumers’ I think is inaccurate, and we ought not to try and scare consumers right now that somehow this is the case.”
Other issues
Committee Chairman Tim Scott (R-S.C.) questioned Powell on why the Fed did not fire or reprimand any employees in relation to the supervisory failures that contributed to the 2023 SVB closure. Powell said the problems identified were systemic in nature rather than attributable to any employees.
“It wasn’t actually fair to the employees to say you violated our practices in some way. That wasn’t really what happened,” Powell said. “What happened was a lot of focus on process and on governance and controls, and not enough focus on basic bread and butter banking: credit risk, liquidity risk, interest rate risk, things like that.”
Asked about Basel III, Powell said regulators remain committed to completing the proposed capital requirements, with the agencies’ original proposal pulled last year amid numerous concerns about their effects on the economy. When questioned whether the revised proposal would take a “neutral approach” to capital, Powell said “that is a good starting place.”
“I’ve said many times in this committee that I think that I think that the level of capital in the largest banks is about right, and it’ll shake out somewhere in that area,” he said.
Powell also said the Fed plans to make public its stress test models for large banks and make them available for public comment. “We’re also going to release the stress test scenarios before we implement them,” he said.
