The CFPB Is Still Out Of Control

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The hijinx coming out of the Consumer Finance Protection Bureau just won’t stop.You’ve likely already read about the huge cost overruns the agency is running up as it renovates its new headquarters. (Last year’s original $95 million budget had soared to$150 million by six months ago, and now sits at $215 million.) Now comes word from the Federal Reserve’s inspector general that the agency failed to even follow its own procedures in approving the project in the first place. Oh, and the dog ate its homework.

A government watchdog criticized the Consumer Financial Protection Bureau’s controversial headquarters renovation, whose price tag has risen to an estimated $216 million, saying there was not a “sound business case” for the project because the agency never analyzed other options.

The inspector general’s report, released Wednesday, said bureau officials have been “unable to locate any documentation of the decision to fully renovate the building.”

The bureau also failed to follow its own guidelines for approval by an internal investment review board because a required analysis of alternatives to the renovation was not completed, the report said. [Emph. added]

Without me getting into the weeds on federal budgeting and procurement, the CFPB’s charter requires that proposals for major capital projects (which its new headquarters surely counts as) be reviewed by a body called the Investment Review Board, and that any such submissions include a sound business case for the project and fully costed-out alternatives. Sensible, right?  Except that the IG found that, while the CFPB did go through the motions of submitting to the IRB, it left out of its proposal what is surely the most important information: the cost of alternatives. Oh, then there’s this:

CFPB officials stated that the IRB approved the business case without this information because funding approval was viewed as a formality given that the decision to proceed with the renovation had already been made. We interviewed the former Treasury official who signed the letter of intent in 2011 on behalf of the CFPB to occupy the building. This official stated that the decision to renovate was made after the letter of intent was signed, but he did not know when or by whom. As of June 23, 2014, the CFPB was unable to locate any documentation of the decision to fully renovate the building.

If I’m reading this right, the CFPB didn’t bother to follow its own rules because,well, it decided it didn’t have to. Funding approval was a mere “formality.” Who made the decision to stiff the IRB? Sorry, we don’t know. Is there any documentation to support the decision? Sorry, we can’t find it.

This is what you get when you set up a government agency that is accountable to no one.  The CFPB, recall, is not funded via annual Congressional appropriation the way other agencies are, but rather via a direct line into the Federal Reserve’s annual profits. The agency is governed by a single chairman, rather than by a bipartisan board, and that chairman can’t be fired.

It is an arrangement, in other words, that allows the CFPB can do whatever it wants, and no one—not Congress, not the White House, nobody–can stop it. Which is why (surprise!) the agency can decide it’s going to use government money to build itself a Taj Mahal, and that’s that.

By now the project is more or less out of control. House Financial Services Committee Chairman Jeb Hensarling reports that, with this latest budget estimate, the building is going to cost more than $590 per square foot—more than the Trump World Tower, the Bellagio in Las Vegas, and the Burj Khalifa. And why is it that the CFPB is paying for these renovations in the first place? The agency is leasing the property from the OCC. In a typical commercial real estate transaction, it’s the owner, not the tenant, who pays for the renovations.

I said early on that the CFPB is an affront to democracy in a very basic way and, while I’m surprised the agency has already overreached this far this fast, this is exactly the sort of thing I had in mind. In a well-functioning republic, government bureaucrats simply wouldn’t be able to pull stunts like this. But at the CFPB, they can.

The CFPB is an abomination (can you imagine what with people with mindsets like this will do when they decide it’s time to bring the hammer down on lenders?). In an ideal world, the agency would be abolished. Absent that, then at least: a) cut off its money hose to the Fed and fund it via annual appropriation, and b) have it be run by a bipartisan board rather than a single unfireable individual. Until that happens, the CFPB is going to be one, long, slow-motion train wreck.

What do you think? Let me know!