Scheduled for consideration before the House Financial Services Committee this week is a draft bill creating a Consumer Financial Protection Agency.
While there is a lot wrong with the bill – after all it is based on the premise that somehow consumers were tricked into not making a downpayment or re-financing thousands out of their homes, and then walking away – perhaps the most important provision, and the least discussed, is funding the agency by a transfer of cash from the Federal Reserve. Section 119 of the bill requires the Federal Reserve to transfer an amount equal to 10 percent of its expenses to the new agency’s Director.
This I believe is the first time in history that Congress is using the Federal Reserve to simply fund another agency. Why stop there, how about have the Fed just prints trillions of dollars to pay for the rest of the government? If Congress believes this agency will benefit the public, then the agency should be funded by the public, by a direct appropriations raised by taxes.
Of course after watching Ben Bernanke turn the Fed’s balance sheet into a slush fund for Wall Street, it was only going to be a matter of time before someone in Congress decided to use that slush fund for their own purposes. So much for transparency in government.