February 2, 2017

Republicans Plan to "De-Supervise" the Consumer Financial Protection Board

Overwhelming the CFPB with lawsuits and cost-benefit analyses will undermine its capacity to enforce regulation, says former financial regulator Bill Black
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William K. Black, author of The Best Way to Rob a Bank is to Own One, teaches economics and law at the University of Missouri Kansas City (UMKC). He was the Executive Director of the Institute for Fraud Prevention from 2005-2007. He has taught previously at the LBJ School of Public Affairs at the University of Texas at Austin and at Santa Clara University, where he was also the distinguished scholar in residence for insurance law and a visiting scholar at the Markkula Center for Applied Ethics.

Black was litigation director of the Federal Home Loan Bank Board, deputy director of the FSLIC, SVP and general counsel of the Federal Home Loan Bank of San Francisco, and senior deputy chief counsel, Office of Thrift Supervision. He was deputy director of the National Commission on Financial Institution Reform, Recovery and Enforcement.

Black developed the concept of "control fraud" frauds in which the CEO or head of state uses the entity as a "weapon." Control frauds cause greater financial losses than all other forms of property crime combined. He recently helped the World Bank develop anti-corruption initiatives and served as an expert for OFHEO in its enforcement action against Fannie Mae's former senior management.


Republicans Plan to SHARMINI PERIES: It's The Real News Network. I'm Sharmini Peries, coming to you from Baltimore.

I'm speaking with Bill Black. He's an Associate Professor of Economics and Law at the University of Missouri - Kansas City. He is a white-collar criminologist and the author of "The Best Way to Rob a Bank is to Own One." Thanks for joining us again, Bill.

BILL BLACK: Thank you.

SHARMINI PERIES: So, Bill in segment 1 we were talking about all the various deregulations that are on the chopping block at this time under the Trump administration. Another favorite of the Republican Party is the Consumer Financial Protection Board, or what we call CFPB, which is also part of Dodd-Frank. Trump can't get rid of it as easily as you would think, can he?

BILL BLACK: No, but you have to remember, don't focus simply on deregulation. Focus on the three D's -- deregulation, desupervision and de facto decriminalization. Desupervision is you put people in charge who won't enforce the rules. And there is now a District Court opinion in D.C. which says that the CFPB is unconstitutionally organized in that it has a single director, as opposed to at least three commissioners running it. Now, personally I think that legal decision is nonsensical but that's the state of the litigation as of now.

So, the problem with the single director is that that person is appointed for a term of years and Trump can't get rid of him. So, the Republicans are eagerly trying to get rid of him. One of the things they're trying to do is gin up anything they can find as a supposed scandal by the director, and to try to force him out. And those efforts are legion and have been going on for months.

But the second is this idea: "Well, you can't really make any decisions because you're not a full commissioner and, therefore, we need to rush through emergency legislation repairing the constitutional defect by creating a," -- you know three or five member, doesn't matter – "commission, which we of course will immediately be able to make appointees to, which will immediately be a majority and will remove the Chairmanship from you, the incumbent, and give it to one of our folks."

Now, this has just been done, something a little similar at the Federal Energy Regulatory Commission where they removed the Chairmanship from the prior appointee, gave it to a Republican, the Democrat resigned and now there's no quorum at the FERC. So, they can't adopt rules. They can't even take enforcement actions. It's all open to whatever the energy companies want to do. But not a problem, I'm sure Tillerson will convince them over at State to be good model citizens. Right?

So, there's this end around made possible by this excuse from this District Court case that you might see rushed through in terms of legislation. On top of that, you're going to see general legislation that says, "We're going to remove the independence of all the independent agencies. We're going to say that they must do benefit/costs analysis and it has to be under these standards, which biased against rules and, you know, make sure that the true benefits and costs are not weighed. And we're going to require any proposed rule to go through the Office of Management and Budget," which is controlled now by a new director, who is particularly ultra-far right and lives to hate all regulations. So, he could be killing those rules.

On top of that, you're going to see Court challenges to everything that the CFPB does by private industry and a whole raft of these right-wing legal firms that the Kochs have created to try to destroy effective regulation. Plus the State AGs, Attorney Generals, who are Republicans will be suing against many of these rules. So, they're going to try to overwhelm the CFPB. And then whenever they get a chance to make an appointment, the CFPB actually has a real split within it. It has a few progressives and a bunch of folks who are basically Hillary Clinton Democrat-ish – "We really don't want to have financial regulations. Consumers protect themselves," you know, this type of stuff. These are the people who really watered down the protection against predatory lending.

So, with just a few personnel changes then, again you'll get desupervision. So, that you won't see, but that'll be going on below the surface actively throughout the Trump administration.

SHARMINI PERIES: Right. Alright, Bill, I thank you so much for joining us and look forward to your ongoing reports, analysis, as you are I know looking out for us out there. Thank you so much.

BILL BLACK: Thank you.

SHARMINI PERIES: And thank you for joining us on The Real News Network.




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