DC Deciphered

Wednesday brought some good news for congressional Republicans – though it probably isn’t anything you were picturing on their Christmas list.  Nope, they didn’t get their tax bill passed (yet), Roy Moore didn’t announce he’s dropping out of the Alabama Senate race, and Trump didn’t suddenly delete his Twitter account.

But what did happen is that Richard Cordray – the head of the Consumer Financial Protection Bureau (CFPB) – announced he’d be stepping down by the end of November. (That’s more than half a year before his term ends. There have long been rumors that he plans to run for Ohio Governor).  Why is this good news for Republicans?  Because they’ve been trying to get rid of Cordray since the moment he was appointed by President Obama back in 2012.

It’s not that they have anything personal against Cordray (at least, not as far as I’m aware), but Republicans are furiously opposed to the agency he runs.  When Cordray took charge of the CFPB, it was a new regulatory agency, just built by President Obama in response to the 2008 financial crisis.  The idea was to create a “watchdog” agency that would help protect consumers from the types of industry abuses that helped lead to the financial crisis and, in general, to protect customers from fraud or mistreatment by the financial industry.

But Republicans, true to form, opposed the idea of new regulation, and they opposed the agency that would be responsible for implementing it.   Since they weren’t able to take down the agency itself, they turned their furor on the agency’s leader instead.  And now, Cordray’s resignation finally brings an end to the GOP’s long, bitter battle to remove him from power.

I first told you about the history of Republican opposition to the CFPB in a post called Protection Objection back in April.  Most of that post focuses specifically on the GOP’s years-long battle against Cordray and on GOP attempts to either minimize his power or remove him from power completely.  The post also explains why, even after Trump took the presidency, they’ve haven’t succeeded in that goal.*

Did you ever wonder why Trump left an Obama appointee in charge of the CFPB? Did it ever seem strange that the CFPB is the one agency where Trump hasn’t appointed a leader who’s either (a) totally clueless (e.g. Ben Carson, Rick Perry); (b) completely opposed to the mission of the agency (e.g. Scott Pruitt); or (c) both (e.g. Betsey DeVos)?  Are you curious why this is the one area where Trump didn’t immediately dismantle the legacy that Obama left him?? Well, Protection Objection explains why:

Republicans have been complaining about and criticizing Cordray’s leadership of the agency ever since [his appointment] . . .

Though the GOP’s original complaint was that the CFPB should be headed by a commission, not a single director, their focus has since shifted to getting this particular director – Cordray – removed (his term doesn’t officially end until July 2018).  The law that created the CFPB states that the director can only be removed “for cause” (defined as “inefficiency, neglect of duty or malfeasance”).  So even with Trump now in the Presidency, they can’t simply get rid of Cordray – Trump is not permitted to fire him just because he wants to.

However, a company called PHH Corp. that was the subject of a CFPB fine in 2014 filed a lawsuit against the agency claiming that the single director structure of the CFPB is unconstitutional.  In October 2016, a three judge panel of the DC Circuit Court of Appeals agreed . . .

You’ll have to read the rest of the post in order to see why Cordray is still in his post, despite that court ruling.  And I hope you’ll read the post anyway, because it gives a good picture of why the battle over the agency isn’t going to end, even now that Cordray is stepping down. [If you just want to read about the lawsuit, and are not interested in the more detailed background of the agency and the GOP’s battle with Cordray, go to this more recent post, Warren, E. Had to Regulate ].

In the meantime, you can be certain that whoever Trump appoints to succeed Cordray, he or she will be much more in the mold of Trump’s other agency heads.  As noted in DC’s original April post, the CFPB was designed very intentionally to be an independent agency, walled off from both political influence and industry influence.  That’s likely about to change, and the CFPB is about to get a lot less consumer friendly.  There was an article in the New York Times on Wednesday about another financial watchdog agency, the Office of the Comptroller of the Currency, which oversees our national banks. The changes that agency is experiencing under the Trump administration give a good hint of what’s to come for the CFPB.

On a related note – in a funny case of timing, Rep. Jeb Hensarling, chair of the House Financial Services Committee and Cordray’s foremost antagonist in the House, announced just 2 weeks ago that he will be retiring at the end of his current term. He’s been a member of the House since 2003.  So I suppose now he can retire knowing at least part of the dream has been achieved:

Hensarling – who has previously called the CFPB “arguably the most powerful and least accountable Washington bureaucracy in American history” – might be the agency’s most outspoken foe.  He wrote an op-ed for the Wall Street Journal in February calling the CFPB “destructive” and “dangerous.”  He accused the agency of “tyranny” and said the people who work there are “zealots.”  In the past, he has accused the CFPB of conducting “shakedowns” of innocent financial institutions and has referred to it as a “rogue agency.”

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NOTE:

*This doesn’t mean that Republicans haven’t had some success in defanging the agency.  For example, you likely heard about them overturning the CFPB’s arbitration rule last month. (For a bit more detail, I wrote about it in the 10/27 “What Did I Miss?”).  That rule would have banned the forced arbitration clauses that are usually contained in the fine print when you sign up for financial products such as credit cards and checking accounts.  This would have allowed consumers to bring class action suits against banks and credit card companies.  But now the GOP has reversed that rule.