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Republicans are Jumping the Shark With Consumer Finance Protection Bureau Attack
The Republicans seem intent on jumping the shark, even if they have to do it one goldfish at a time. This time they are staking a lot of political capital on a battle to disable the Consumer Financial Protection Bureau (CFPB) and its director Richard Cordray.
On Friday, Senate Minority Leader Mitch McConnell and 42 other Republicans sent a letter to President Barack Obama announcing they will block the appointment of Cordray to be permanent director of the Consumer Financial Protection Agency, a position he already holds through a recess appointment made by the President on January 4, 2012. This appointment will not be ratified, the letter said, “Until key structural changes are made to ensure accountability and transparency” at the CFPB. The letter demands the director be replaced by a commission, CFPB’s independent funding be replaced by Congressional appropriation, and “a safety-and-soundness check” for financial regulators who oversee those aspects of financial institutions be established.
CFPB was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act and was the brainchild of Elizabeth Warren who was expected to head the agency. When the Republicans made it clear Warren stood a better chance of being deported than confirmed, the President nominated Cordray, former Attorney General of Ohio and Warren’s right-hand man. Of course it wasn’t just Warren, although they were particularly hostile toward her, but the Bureau itself to which the Republicans and their Wall Street buddies objected. In a 2011 letter much like the one last Friday, Republicans said no conceivable nominee would be acceptable so the President invoked his recess appointment powers.
That appointment and three others to the National Labor Relations Board (NLRB) have been challenged in separate law suits and the NLRB appointments were invalidated by a federal appeals court last week, but more about that in a moment.
In attempting to defang CFPB Republicans of course are pandering to their Wall Street constituency. However Dodd-Frank is no longer the Wall Street bugaboo that it was two years ago and CFPB has earned some credibility, even if it is of the “devil we know” variety.
The Agency has only slowly rolled out its mandate, taking on consumer financial domains one at a time. It now regulates credit cards, mortgages, student loans, and credit reporting agencies. Elizabeth Warren described CFPB as “a new sheriff in town” and consumers are beginning to recognize it as such. In its first 15 months of operation it logged approximately 79,200 consumer complaints. Not a bad total for an agency just hitting the ground, especially since it did not have a director or launch its non-bank supervision until January 2012 or begin accepting student loan complaints until last March.
One of its responsibilities is formulating rules to carry out consumer laws and some critical ones for mortgage servicing, mortgage standards, and appraisals were released in final form in mid-January. While few of the stakeholders were happy about the idea of regulations they almost universally praised the process the Bureau had pursued in developing them. Lobbying groups representing mortgage bankers, credit unions, consumers, and home builders all issued statements thanking the Bureau for not just inviting their comments, but listening to and incorporating them. These rules are all due to go into effect in January 2014.
Small business owners – those job creators we hear so much about from McConnell – were recently surveyed by the Small Business Majority about Dodd-Frank generally and CFPB specifically. Eighty-four percent of the majority Republican sample supported the Bureau and 58 percent agreed its regulations are needed. Only one-third associated CFPB with bureaucracy that hurts small businesses and job creation.
Now back to the law suits. If the NLRB recess appointments are unconstitutional so too are any decisions those members made in the past year. If the Cordray appointment suffers the same fate so will some, but not all of CFPB’s rule making and even many personnel decisions. More worrisome is the potential for months of uncertainty about the new rules going into effect in 2014 at a time when major banks are gearing up and spending millions of dollars to meet their requirements.
There are a few ways to resolve this crisis should it emerge but the most immediate and cost neutral is Senate confirmation of a CFPB director who could then ratify the Bureau’s previous work. Instead the Republicans are preparing for a fight to rid the country of a regulator that no one but them seems heavily invested in destroying. Wall Street could spend millions to comply with rules that may be moot and that they aren’t all that opposed to anyway; small businesses actually like the Bureau, and consumers might notice that once again their financial welfare doesn’t count on one side of the Senate aisle.
Looks like the Republicans are about to be the stupid party again.
And particularly stupid when one realizes another little wrinkle in their plan. CFPB is Elizabeth Warren’s baby and she is now a senior U.S. Senator and a member of the Banking Committee. There will be vigorous defenses of the Bureau by consumer organizations and the President and Senate Democrats have said they will not consider the Republicans’ demands. But it will be Warren who will lead the charge. She may be a freshman senator but she is the survivor of many congressional hearings and a master of media sound bites. She also has a broad and enthusiastic army of supporters both inside and outside her home state and will be able to command a lot of vocal support from every senator’s constituency.
This will, in the end, give the Democrats another opportunity to accuse Republicans of disregarding the middle class and being pawns of Wall Street, an opportunity which Warren will exploit to the max, while Wall Street frankly doesn’t give much of a damn.