Published February 11, 2013
Is the same federal government that has Social Security headed for bankruptcy looking to mess with your 401(k) or IRA? Yes, according to a recent interview with Richard Cordray, the director of the so-called Consumer Financial Protection Bureau (CFPB). Cordray recently said: “That’s one of the things we’ve been exploring.”
Retirement accounts are already regulated by the Securities and Exchange Commission and, notwithstanding the roller coaster of the financial crisis and subsequent recovery, most Americans are much happier with their privately owned and privately managed accounts than they are with their government-promised retirement benefits. Yet the CFPB may step in with new regulations despite the fact that nothing in the thousands of pages of the Dodd-Frank Act that created the CFPB mentions retirement accounts.
That’s what’s so frightening – and unconstitutional – about the CFPB. It has boundless authority to interfere in nearly any consumer financial transaction and product anywhere in the economy, and to do so without any accountability to the American people. Its director cannot be removed even by the president absent a dereliction of duty. Its budget comes not from Congress through the annual appropriations process, but directly from the Federal Reserve, where it is formally housed. But the Federal Reserve itself is prohibited from exercising any oversight over the CFPB.
The result is an agency that could, on its own whim regardless of the wishes of the American people and their elected representatives, begin regulating retirement accounts. The only significant check on the agency is the requirement that its head be confirmed by the Senate, and Obama contrived to circumvent that requirement by declaring the Senate to be in recess to the purpose of installing Cordray as a recess appointee. The D.C. Circuit Court of Appeals emphatically ruled that maneuver was illegal and unconstitutional in a recent case challenging the appointments that were made the same day to the National Labor Relations Board. Yet White House spokesman Jay Carney said that ruling “has no bearing on Richard Cordray.“
A few months ago, Time magazine reported on an effort afoot in Congress to get their hands on your 401(k). But a direct attack by Congress would run into a buzz saw of public outrage. According to the American Society of Pension Professionals & Actuaries, most families with a retirement savings account have nearly two-thirds of their accumulated life savings in those accounts. They also found a whopping 83 percent of American oppose even reducing the current contribution limits, let alone allowing Congress to grab a piece of what’s already in the accounts.
But what if the CFPB can accomplish the same thing by other means, tapping your retirement account to keep the government spending spree going?
There’s just no way to know what “helping Americans manage” their retirement accounts would mean to the CFPB. But it could certainly include forcing an allegedly safer asset allocation that would require holdings of federal government bonds, forcing everyone with retirement savings to lend a hefty portion to the U.S. government to turn around and spend.
Whether that’s likely not, the fact that the CFPB could use its unchecked power to pursue such a scheme underscores the urgent need to either overturn the entirety of Dodd-Frank, whose constitutionality is being challenged in court, or at least alter the board’s structure to be subject to oversight.