New York and California governors are concerned about careless federal supervision of the financial sector and are advocating for increased state regulatory power, The Wall Street Journal reported on Monday (March 16).
The Democratic governors said they have seen lax enforcement – comprising just 11 cases in 2018 – by the federal Consumer Financial Protection Bureau (CFPB) under President Donald Trump. The CFPB was created under President Obama in 2007 to assist people with sub-prime mortgages during the financial crisis. The agency was created after the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law.
New York Governor Andrew Cuomo has suggested a broader function by the Department of Financial Services, which supervises 1,800-plus insurance companies and 1,500 financial institutions with combined assets in excess of $7 trillion. The proposal would enhance New York law to the level of federal law, which allows wider enforcement actions for unfair, deceptive or abusive acts or practices (UDAAP).
“It would mean the expansion of an already aggressive agency into a totally new realm,” Joel M. Cohen, a partner at law firm Gibson, Dunn & Crutcher LLP, told WSJ.
In January, California Governor Gavin Newsom recommended increasing the responsibilities of the Department of Business Oversight and giving it a new name: the Department of Financial Protection and Innovation. His plan would add another $19.3 million to the agency’s budget and would expand staffing by 90 positions.
In February, Maxine Waters, the chairwoman of the U.S. House Committee on Financial Services, told the CFPB Director Kathy Kraninger that the organization needs to do better.
Waters said she was “appalled” by Kraninger’s move to undercut the Dodd-Frank Act’s disallowing of unfair or abusive practices, and that by doing so, Kraninger made it harder for the agency to do its job.