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  November 27, 2017

Trump's Coup on Consumer Protection

The Consumer Financial Protection Bureau is in limbo as two people claim to be its new acting director. The outgoing head tapped Leandra English as his successor, but Donald Trump then appointed Mick Mulvaney, who has called the CFPB a "sick, sad" joke
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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. Black was a central figure in exposing Congressional corruption during the Savings and Loan Crisis.


AARON MATÉ: It's The Real News. I'm Aaron Maté. Imagine showing up for work Monday morning and finding two people who claim to be your new boss. On top of that, one of those people has previously called your workplace a sick, sad joke and tried to dismantle it. It sounds like a very dysfunctional workplace, so it's perhaps no surprise that that's what's taking place right now in Washington D.C..

The fight is happening at the Consumer Financial Protection Bureau. On Friday, the CFPB director, Richard Cordray, announced his resignation and named his chief of staff, Leandra English, as his temporary replacement. Hours later, President Trump announced he was instead appointing White House Budget Director Mick Mulvaney. Both English and Mulvaney sent emails to staff today claiming to be the acting director and now a lawsuit is underway.

Joining me to help make sense of this is Bill Black, a white collar criminologist and professor of Economics and Law at the University of Missouri, Kansas City. Welcome, Bill. If you could first, to set the scene for us, what is going on here in this fight over who will head the CFPB?

BILL BLACK: What's going on, of course, is that the Republicans didn't want this agency to exist. Once it was created and became the most effective financial regulatory agency in the United States, and the only one devoted to protecting small investors and consumers of financial goods, then the Republicans decided they really didn't want this agency to exist. They have been hatching lots of ideas of how to get rid of the agency, and they were blocked as long as it had the guy appointed by President Obama. But now that he's left, they have invoked a general statute on vacancies that allows the president to appoint heads of agencies on a temporary basis when there's a vacancy. They're citing that as their basis and President Trump has indicated, as you indicated, that he would put in former Representative Mick Mulvaney, who was a Freedom Caucus Republican, who as I said wanted to prevent the agency from being created and now is desperate to destroy it.

They're also rumoring that they would appoint one of the most anti-regulatory scholars in America, someone from George Mason, which is notoriously anti-public, anti-regulation. He's not just that. He's at their Mercatus Center, which is the most extreme of the extreme folks, Zywicki. If he is appointed, he will complete the destruction of the CFPB and turn it into a device for protecting the banks and other financial companies from any effective remedies by consumers.

AARON MATÉ: In the meanwhile, we have Trump trying to hand it off to Mick Mulvaney. Let's talk about him for a second. I want to go to a clip back when he was a lawmaker. As you mentioned, in 2014, he was asked about the CFPB, and this is how he described it.

MICK MULVANEY: It's a wonderful example of how a bureaucracy will function if it has no accountability to anybody. It turns up being a joke, and that's what the CFPB really has been, in a sick, sad kind of way because you've got an institution that has tremendous authority over what you all do for a living, over your businesses, over your members.

AARON MATÉ: That's Mick Mulvaney speaking in September 2014. He is now Trump's choice to head the agency that he previously called a sick, sad joke. Bill Black, what do you expect to happen now during this confusion? How effective can the agency be, and what kind of hindrances will it face as there is now this legal battle over who leads it?

BILL BLACK: First, a little context: he was speaking to an industry group, which is to say, a donor group, a contributor group that is the reason he was able to get office and return to office time after time with very little opposition. That's the stakes and the stakes are independents. The agency was deliberately set up to be independent of these kinds of contributor bases. That's what they hate about it, is that it allowed the organization to be effective and this is the only agency designed to actually protect the little person.

When I was a top banking regulator, we tried to do the right thing, and part of our responsibility was compliance with the laws, which is what CFPB is all about, and fairness to folks but frankly as banking regulators, our top priority was always the health and safety of the organization, not the consumer. Again, this was set up, deliberately crafted by Senator Warren to have only one responsibility of protecting folks.

On a day to day basis, I've been in wars where the head of the agency was trying to prevent us, the regional office, from taking on the frauds and such and went so far as to remove our jurisdiction over the worst fraud in the nation, Charles Keating's Lincoln Savings. That kind of war is going to play out and Mulvaney has already indicated that he's going to play hardball. First, he occupied the office. Second, he immediately sent out a memo to all the staff saying, "Ignore anything that comes from" let's remember the person who was appointed in accordance with the Dodd-Frank statute to be the acting director.

I think that the Trump administration is going to win, by the way, in this lawsuit, but it really is essentially a coup d'etat against the Dodd-Frank mechanism, and it is designed to kill that independence of the agency and to turn it and to pervert it into exactly the opposite, where they will protect the industry from the consumer. It's a consistent pattern that you've seen, and that is Trump always plays his core base as chumps, where his policies are directed most against his own base.

AARON MATÉ: Bill, when Mulvaney showed up to work today, he was carrying with him a large bag of Dunkin' Donuts. He tweeted out that most of the donuts had been eaten. Just to quote that email that you mentioned of his, he wrote to all staffers at the CFPB to say, "If you receive additional communications from her today in any form related in any way to the function of her actual or presumed official duties, please inform the general counsel." Why do you think that the Trump administration will win this legal battle here? It's in the law that established the CFPB that it's the director who gets to appoint his acting successor.

BILL BLACK: And did so lawfully in accordance with the statute. Because there are two laws, there's a conflict and it's that very person you just named, the general counsel, who has really swung this issue. The general counsel has said that she finds persuasive and applicable a Department of Justice memo, which of course says that Trump can make this appointment, that it actually is a vacancy within the meaning of this more general statute and that he can appropriately persuade because Cordray not only isn't there but isn't coming back.

I think that even if Ms. English succeeds as acting director in getting a temporary restraining order, and I think that's unlikely, but a temporary restraining order could happen for a few days, I think that the Trump administration is going to win. With the general counsel siding, and the general counsel was hired by Cordray, the general counsel of the CFPB siding with the Trump administration, there's a technical legal doctrine called the “Chevron doctrine,” which by the way conservatives want to get rid of, and Gorsuch in particular wants to get rid of, but they may find it very handy here to say, "Even the general counsel agrees with us."

AARON MATÉ: Bill, I don't think it will be a surprise to learn that the Trump administration official who wrote that Office of Legal Counsel memo justifying his appointment of Mulvaney himself has ties to a company that was brought before the CFPB. The Intercept reports today that Stephen Engel who wrote the Office of Legal Counsel memo justifying Mulvaney's pick himself was one of two lead counsels for NBG Financial, a Canadian payday lender that CFPB cited for running a nine-year scheme to use its foreign status to offer US customers high-cost loans that were at odds with state and federal law. That's from the Intercept. Irony upon ironies there, Bill.

BILL BLACK: There's no irony of course at this point, as the fact that Mulvaney's former chief of staff is in the pay of the payday industry, as well. Again, it's the old story on Trump. Anything he accuses opponents of, that's what he's doing. He is deepening and making more opaque the swamp. It's a government that is openly now of plutocrats, for plutocrats. As I say, they will pervert, they won't, in the end I think, destroy this agency. They'll pervert it into a device for further protecting the industry from any effective lawsuits.

Remember that the context further is that Congress has just overridden and destroyed one of the most valuable rules that the CFPB had created that was going to give us back, as the American people, our ability, which is in the constitution, to be able to sue people who defrauded us, bankers that defrauded us. As a practical matter, we can only do that through class action because otherwise there's never enough money involved unless you're incredibly rich. The CFPB was going to ban those practices that forbid our ability to sue and the Republican majority in the Senate and the House have already overturned that with the joyous support of Trump.

We're going to see more and more of that. By the way, what else is in the news? Those same techniques are used to prevent people who suffer sexual harassment from having any effective remedy. Shock and surprise, we find that Congress uses in its own processes exactly those kinds of rules, so that the victim becomes further victimized by the process. That's what we have in front of us, unless and until the House and the Senate change and new people are elected who are not simply a different party but are not beholden to big finance.

AARON MATÉ: Bill, finally, let me ask you, is some of this on Richard Cordray? Presumably when he resigned he knew that Trump would appoint someone like Mulvaney to take his place. If it's not assured that his choice for a successor, English, is going to prevail, then did he perhaps make a big mistake in stepping down and putting it in Trump's hands? It's rumored that he is seeking political office but I'm wondering, did he drop the ball for the consumers that he spent so many years protecting?

BILL BLACK: I think he should not have resigned. I think that this was all predictable on the part of the Trump administration, but remember, he's been the most effective financial regulator under Obama, and of course, the only effective regulator under Trump and he only had about eight months more. He couldn't keep it going very long.

Really, if you want a criticism in addition to Trump, but obviously that's where the focus should be, it was the Obama administration was never a great supporter. This is something that Senator Warren got done by sheer force of will. The treasury administration under Geithner, for example, was hostile. Under Jacob Lew, it was hostile to the CFPB. It was really the years under Obama when we could have been much more effective at the CFPB. As good as it was, it could have been multiples more effective. It needed to proceed with incredible urgency in getting these rules out.

Again, the industry has done everything possible to delay and obfuscate these rules through litigation. Here's a weird thing, President Obama finally used a variant of what's called the “nuclear option” to be able to get votes on circuit court judges without the filibuster requirement. The reason they had to invoke the limited nuclear option was because the Republicans knew that they controlled the D.C. Circuit with ultra-conservative judges, and so everybody was suing in the D.C. Circuit and it was overturning the actions. There were multiple vacancies, enough to swing the court to a much more progressive agenda and the Republicans said it was illegitimate for the president of the United States to appoint new judges who would change the ideological balance of that D.C. Circuit.

Again, the industry will always fight this, always, and it's only going to be really truly progressive elements, even within the Democratic Party and if they still existed within the Republican Party, or some other party that is going to fight it. There are plenty of Democrats in the House who are very closely allied with the financial industry and a number of folks in the Senate as well.

AARON MATÉ: On the other hand, there were many progressives out in the streets today in Washington, D.C., outside the CFPB offices protesting Mulvaney's appointment. We'll continue to follow this story as it develops. Bill Black, professor of Economics and Law at the University of Missouri, Kansas City, and former financial regulator, thank you.

BILL BLACK: Thank you.

AARON MATÉ: Thank you for joining us on The Real News.


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