President Trump’s executive orders slashing onerous Obama-era regulations on industry have been credited with kick-starting the sluggish economy and rocket-boosting the stock market. But there’s one mountain of red tape that’s eluded his machete — the Obama-created Consumer Financial Protection Bureau. Until now.
Last week, the White House finally wrested control of the mammoth regulatory agency following the resignation of CFPB Director Richard Cordray, an Obama appointee and liberal Democrat who quit his special five-year post early to run for Ohio governor. Trump installed his conservative budget director, Mick Mulvaney, to temporarily take over the powerful agency — which has the authority to determine the “fairness” of virtually every financial transaction in America.
On his first day on the job, Mulvaney instated a 30-day freeze on all new hiring and regulations at the CFPB, triggering a collective sigh of relief from the financial industry.
“It is a completely unaccountable agency, and I think that’s wrong,” Mulvaney explained. “If the law allowed this place not to exist, I’d sit down with the president to try to make the case that other agencies can do this job well if not more effectively.”
Already regulated by half a dozen other federal agencies, bankers have complained the new agency has too much power, is too partisan and has abused its regulatory authority over the past six years. Congressional Democrats established the CFPB in 2011 as part of the post-crisis financial overhaul.
Though most agreed at the time banks required more government supervision, concerns about the CFPB arose when it overstepped its statutory authority and started cracking down on auto sellers in addition to home mortgage lenders. It also has targeted for the first time credit-reporting agencies, while trespassing in the areas of debt collection, student loans, school accreditations and credit unions, among others.
CFPB is a Democrat shop with an anti-business agenda that goes well beyond protecting consumers
Industry analysts say unduly harsh regulations and unreasonable penalties have driven thousands of banks out of business, denying many areas access to credit. To appease CFPB’s army of regulators, they say, some banks for the first time have had to hire more compliance officers than loan officers — and they, in turn, have to pass those compliance costs on to customers in the form of higher fees and finance charges.
CFPB defenders such as former Democratic Rep. Barney Frank, who drafted the bill creating the watchdog agency, have sought to rebut criticism by accusing Republicans of exaggerating complaints of overregulation.
“In all the years since we created it, they do not give one single example of abuse. They talk about an agency that is ‘out of control,’ it’s a ‘bureaucratic monster.’ You would think there would be some horror stories. You would think they would say, ‘And here’s what they did wrong, it created this sort of problem,’ ” Frank said. “I hope people will ask these critics — what is an example of what they did wrong?”
Actually, there are many. Partisan politics is the main area of complaint, even among former officials.
They say CFPB is a Democrat shop with an anti-business agenda that goes well beyond protecting consumers and includes closing the “wealth gap” and administering “economic justice,” as Cordray has been fond of saying. It hires almost exclusively Democrats and “rejects Republican job applicants,” according to former CFPB enforcement attorney Ronald Rubin. Federal election data show 100 percent of political donations made by CFPB employees during the 2016 election were given to Democratic candidates.
It’s no surprise then that the agency has:
- Bounced business owners and industry reps from secret meetings it’s held with Democrat operatives, radical civil-rights activists, trial lawyers and other “community advisers,” according to a report by the House Financial Services Committee.
- Retained GMMB, the liberal advocacy group that created ads for the Obama and Hillary Clinton presidential campaigns, for more than $40 million, making the Democrat shop the sole recipient of CFPB’s advertising expenditure, Rubin says.
- Met behind closed doors to craft financial regulatory policy with notorious bank shakedown groups who have taken hundreds of thousands of dollars in federal grant money to gin up housing and lending discrimination complaints, which in turn are fed back to CFPB, according to Investor’s Business Daily and Judicial Watch.
- Funneled a large portion of the more than $5 billion in penalties collected from defendants to community organizers aligned with Democrats — “a slush fund by another name,” said a consultant who worked with CFPB on its Civil Penalty Fund and requested anonymity.
What’s more, CFPB has secretly assembled giant consumer databases that raise individual privacy as well as corporate liability concerns. One sweeps up personal credit card information and another compiles data on as many as 230 million mortgage applicants focusing on “race” and “ethnicity.” Yet another database of consumer complaints contains more than 900,000 grievances against named financial companies without any vetting to determine their merit, points out Alan Kaplinsky, lead regulatory compliance attorney at Ballard Spahr LLP.
Before Cordray’s departure, CFPB was preparing to launch a crackdown on banks who deny loans to “minority-owned businesses,” according to a CFPB notice and Ballard Spahr.
His exit gives Trump an opening to overhaul the agency, which he calls “a disaster,” as part of his sweeping regulatory reforms. According to the Federal Register, which records government regulations, rules on Obama’s watch hit an all-time high, imposing a cumulative burden of $890 billion on businesses.
In contrast, Trump has vowed to “put the regulations industry out of business,” which he says will lead to more jobs and higher wages.
“If you’re wondering about his commitment to deregulation, don’t,” Mulvaney told a libertarian group earlier this year, “because this is one of the things he pounds on again and again and again” in White House meetings.
Paul Sperry is the author of “The Great American Bank Robbery: The Unauthorized Report About What Really Caused The Great Recession.”
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