US Senate panel presses consumer watchdog pick over agency stoppage

By Douglas Gillison and Pete Schroeder

WASHINGTON (Reuters) -President Donald Trump's pick to oversee a consumer watchdog faced a grilling from Democrats in the U.S. Senate on Thursday as the White House presses ahead with aggressive efforts to dismantle the agency.

Jonathan McKernan, nominated to lead the Consumer Financial Protection Bureau, vowed before the Senate Banking Committee he would "fully and faithfully" enforce consumer financial protection laws. But he maintained the agency had previously operated beyond those responsibilities, and needs to be streamlined and made more accountable.

McKernan was pressed by Senator Elizabeth Warren, the top Democrat on the panel who helped establish the agency after its creation in 2010. She in particular challenged McKernan's ability to effectively lead the agency while the Trump administration moves aggressively to curtail it.

"It kind of feels like you've been lined up to be the number one horse at the glue factory," she said.

Thursday's hearing marked the first time Democrats, incensed at the dismantling of an agency they view as a critical safeguard for consumers using financial products, were able to directly press a Republican official on the future of the agency.

Under the acting leadership of Office of Management and Budget Director Russ Vought, the CFPB has been effectively shuttered, with the agency's doors locked and most staff placed on administrative leave.

Signs on the agency's headquarters next to the White House have been removed, and its lease is being canceled in a bid to create a more "streamlined" agency, according to court filings. The agency has also begun dropping lawsuits it had filed against financial firms under previous leadership.

Republicans and industrial lobbies have long reviled and even sought to abolish the CFPB, which they describe as a politically unaccountable burden to free enterprise improperly shielded from lawmakers' oversight.

McKernan, who previously served as a commissioner on the Federal Deposit Insurance Corporation, a bank regulator, echoed those complaints, saying the agency needs to be reined in and become more accountable to elected officials. But he did not suggest that the agency itself be eradicated, instead vowing to "right-size" it.

Thursday's hearing was a critical first test for McKernan, as his ability to gain approval in the narrowly split committee could clear the way for his ultimate confirmation by the full Senate. McKernan was generally supported by Republicans on the panel, who occupy a majority of its seats.

Alongside McKernan, the panel also considered the nomination of Bill Pulte, a private equity executive Trump nominated to lead the Federal Housing Finance Agency. That regulator oversees mortgage giants Fannie Mae and Freddie Mac, which guarantee most of the nation's mortgages but have remained under a government conservatorship since the 2008 subprime mortgage crisis.

Freeing the government-sponsored enterprises from government control is expected to be a priority for the Trump administration.

In his testimony, Pulte said the conservatorships should not be indefinite, but the pair's exit from government backing must be "carefully planned" to avoid housing market disruptions.

(Reporting by Douglas Gillison and Pete Schroeder; Editing by Alistair Bell)