In its short life, the Consumer Financial Protection Bureau has taken steps to rid the mortgage market of loans designed to self-destruct; shielded military families against various financial scams; warned auto lenders against practices that jack up the price of credit for African-Americans, Latinos, women or seniors; returned nearly half a billion dollars to consumers cheated by credit card companies; and begun to tackle a host of other problems, including predatory payday loans, excessive bank overdraft fees, abusive debt collection practices and the plight of students and families trapped in high-cost private education loans.
It has been doing its rightful job, in short, and has thereby earned a spot in the cross-hairs of some of the worst elements of the banking and lending world and their friends on Capitol Hill.
"If I had my way, we wouldn't have the agency at all," Senate Minority Leader Mitch McConnell, R-Ky., reminded an audience of bankers several months ago. McConnell has not had his way. Yet. But three years after the CFPB was approved by Congress and affirmed by the president, to the applause of a large majority of voters regardless of party, McConnell and nearly all his fellow Republican Senators are out to squelch it – by refusing to confirm a director unless their demands are met.
There is thankfully little sign of a willingness to yield on the part of the White House or the Senate as a whole right now. But since paying ransom is always tempting in a hostage situation, it is worth examining the so-called "commonsense reforms" put forward by McConnell & Co., and asking what they would actually do to the CFPB.
"Reform" No. 1: Its director would be replaced with a five-member commission appointed by party leaders. These bodies have a track record of quarrelsomeness and reluctance to stand up to corporate power; moreover, in dysfunctional times like the present, they tend to wind up with only four confirmed members who can't agree on much of anything. And with a committee in charge, it becomes much harder to hold individuals accountable for their decisions and actions.
"Reform" No. 2: The CFPB would have to come to Congress every year for its funding, rather than continue to receive a small, capped share of the budget of the Federal Reserve, where the agency is housed. Each of the other bank regulators – the Fed, the FDIC and the Office of the Comptroller of the Currency – has some form of independent funding as insulation against political shenanigans. By contrast, the two non-bank financial regulators that already fall under the appropriations process, the SEC and CFTC, have faced massive problems.
Under an exemplary chairman, the CFTC has made admirable progress in reining in the crazed derivatives trading that nearly crashed the world economy in 2008. Yet, as a reward for that success, Chairman Gary Gensler has seen his agency starved for resources and bullied by industry-coddling legislators. And for good measure, the CFPB faces…
"Reform" No. 3: Its actions would be subject to majority-veto by a committee of traditional bank oversight agencies. In short, consumer protection would once again be dictated by the sort of old-school bank regulators who, in the name of protecting the "safety and soundness" of the financial system, have been chronically unwilling to lay down rules that would mean even a modest dent in bank profits. (Their safety-and-soundness record hasn't been so hot lately, either.)
It is perhaps relevant to note that the 43 Senators vowing to block a vote on a CFPB director have collectively received nearly $143 million in campaign contributions from Wall Street and the financial and real estate industries – a sum untold multiples greater than any money to be had from the consumer, civil rights, labor, senior, small business and other groups arrayed on the other side of these issues.
Of course, the influence of money is hard to prove in a court of law (as opposed to a court of common sense), but the effect of the senators' proposed "reforms" is clear: by undermining the authority and independence of the CFPB, they would be a godsend to the megabanks and storefront loansharks that this invaluable agency has had the nerve to go after.
Do the 43 senators believe their high-minded talk about bringing more "accountability" or "transparency" to the CFPB? It's hard to see any evidence of that. A host of federal agencies, including (in the banking realm) the Office of Comptroller of the Currency and the Federal Housing Finance Authority, are led by single directors, while most of the financial watchdogs have independent funding. Yet the senators who object to these characteristics in the CFPB's case have failed to evince a comparable desire to "reform" any other such agencies. In fact, some of the them explicitly favored a single director for the the FHFA, arguing that it would be more effective that way.
Nor, for the most part, have they questioned the qualifications of the CFPB's current director and director-nominee, former Ohio Attorney General Richard Cordray. Since his recess appointment in January 2012, Cordray has won praise from consumer advocates and bankers, and, indeed, from senators on both sides of the aisle. "I think you have done a wonderful job so far in carrying out your duties," Senator Tom Coburn, R-Okla., told him at a senate hearing a few months ago. Just the same, Coburn is among the 43 vowing to block a vote on Cordray or any other CFPB nominee.
What they have against this agency is, it would appear, neither its structure nor the person nominated to lead it, but its mission as the first and only financial watchdog charged with protecting consumers instead of banks.” And that's what we will lose if the 43 Senators get away with their shabby scheme.
UPDATE: Senate Majority Leader Harry Reid, D-Nev., filed for cloture on the Cordray nomination, among others, today.
Jim Lardner is the communications director at Americans for Financial Reform, a coalition of more than 250 civil rights, consumer, labor, business, investor and other groups working for a strong, stable and ethical financial system.