House Financial Services Committee Chairman Jeb Hensarling (R-Texas) is preparing a major overhaul to the Consumer Financial Protection Bureau that would place it squarely under President Trump’s authority, according to a memo obtained by The Hill.

Hensarling is overhauling his broad legislation to rework the Dodd-Frank financial reform law, putting in place changes that would significantly curtail the CFPB’s powers and make it answer directly to the president.

According to a staff memo outlining changes to his legislation, Hensarling plans to replace prior calls to establish a bipartisan commission at the top of the CFPB. Instead, he wants to stick with the single director now in place, but put that person directly under the president’s authority.

ADVERTISEMENT

Republicans have called for a bipartisan commission at the helm of the bureau since its inception in 2010, but Hensarling now is pushing a change that would effectively allow Trump to dictate the direction of the CFPB for as long as he is in office.

The change was detailed in a memo running down updates Hensarling plans to make to his Financial CHOICE Act, which is expected to serve as a blueprint for deregulatory efforts from congressional Republicans. A new version of that bill is expected to be unveiled shortly.

The memo, dated Feb. 6, says it is from Hensarling to the “Financial Services Committee Leadership Team." While the document is circulating widely on K Street, a spokesman for Hensarling’s committee said he could not confirm the accuracy of the document.

The proposed changes to the CFPB are likely to be resisted fiercely by Democrats, and in particular by Sen. Elizabeth Warren Elizabeth WarrenNo new taxes for the ultra rich — fix bad tax policy instead Democrats back away from quick reversal of Trump tax cuts It's time for newspapers to stop endorsing presidential candidates MORE (D-Mass.), who is widely seen as the architect of the agency. She helped it get up and running as a White House adviser.

Rep. Maxine Waters (D-Calif.), the top Democrat on Hensarling's panel, quickly criticized the proposed changes.

ADVERTISEMENT

"This new version of the Chairman's Wrong Choice Act is even worse than the original," she said in response to the memo. "This bill makes it crystal clear that Republicans mean to disarm our consumer protections, expose the American public to financial predators, and ultimately steer us in the direction of another Great Depression."

A major question swirling in Washington is whether Richard Cordray, the CFPB’s current director, can survive GOP efforts to oust him. His term does not expire until July 2018, and with the CFPB currently operating as an independent agency, the president cannot remove him. A legal battle over the agency’s status is working its way through the courts, as some Republicans now argue Trump does, in fact, have the power to fire Cordray.

Other changes to the CFPB proposed by Hensarling would include eliminating its consumer education role, as well as its ability to supervise financial institutions and conduct market research. The agency would only be able to write rules authorized by Congress, and its database where consumers can lodge complaints about financial institutions would be eliminated.

Under the plan, the agency also would no longer be able to regulate entities already regulated by the Securities and Exchange Commission or the Commodity Futures Trading Commission. And it could no longer levy fines against institutions, seeing its enforcement powers limited to cease and desist letters and subpoenas.

Hensarling is also looking to rework how banks submit “living wills,” detailing how they could be dissolved in a time of crisis.

Under his upcoming bill, the Federal Deposit Insurance Corporation would be removed from that consideration process, handing sole authority over to the Federal Reserve. The bill would also relax the stress testing process for banks, under which their books are run through difficult economic simulations to see if they can withstand a downturn. The stress testing process would be on a 2-year cycle under the upcoming bill, and would bar the Fed from using an qualitative standard in evaluating those stress tests.

The Fed had rejected a number of big banks’ stress tests in the past, oftentimes referring to its qualitative findings as justification.

Hensarling's bill, the Financial CHOICE Act, was first unveiled in September. It is a broad reworking of the financial regulatory structure, addressing many of the central provisions of the Dodd-Frank Act.

A central provision of Hensarling's bill would allow large financial institutions to avoid many Dodd-Frank rules, if in turn they agree to substantially increase the amount of capital they hold to withstand shocks.

Hensarling's bill would also subject the Fed's monetary policy decisions to outside review, repeal the "orderly liquidation authority" that allows regulators to step in and wind down ailing financial institutions and replace it with a new bankruptcy process, and repeal the "Volcker Rule" that prohibits banks from trading for their own profit.

This story was updated at 3:13 p.m.