At this point people are still combing through the fine print of Senator Dodd's financial reform bill to determine all its ramifications, however one point is very clear in assessing the independence of the new Consumer Financial Products Protection Agency. The Fed will have control over the agency's budget. This means that if the Fed believes that the agency is causing too much trouble to the financial industry, it would have the power to squeeze its budget so that it would become less troublesome.
It is also worth noting in this context that the Fed sets its own budget. (It gets its money the old-fashioned way: it prints it.) Every year the Fed sends a budget showing its major budget lines to Congress. This is purely informational, Congress does not approve the budget. Given the way Dodd proposes to set it up, if the Fed were to decide to squeeze the new agency Congress would have no immediate recourse.
This fact should be mentioned in news coverage of the issue.
If you enjoyed this article, please consider making a tax-deductible donation today. For over 30 years, The American Prospect has delivered independent reporting that exposes corporate power, investigates political corruption, and analyzes threats to our democracy. Unlike many media outlets, we’re not owned by billionaires or corporations—we’re powered by readers like you.
Today’s independent journalism faces unprecedented challenges. Your support makes our reporting possible and keeps our work free and accessible to all. Whether it’s $5 or $50, every contribution helps sustain our nonprofit newsroom.
Join our community of supporters and make a donation today to help keep independent journalism thriving.
Copyright 2025 | The American Prospect, Inc. | All Rights Reserved
