Trouble at the Consumer Financial Protection Bureau has Grave Implications for Wall Street
The Consumer Financial Protection Bureau, also known as the CFPB, was plunged into chaos early last week when its director, Richard Cordray, abruptly quit. In his resignation letter, Cordray named Leandra English, his former chief of staff, as the new acting director of the agency. Trump disregarded Cordray’s request and designated Mick Mulvaney to head the agency.
Mulvaney and English both claim to be the rightful head of the CFPB, leading to confusion as to who is actually in charge. Since Friday, the agency has been caught in the midst of a power struggle, as each refuses to recognize the authority of the other.
The Bureau has also become a highly partisan issue, with Republicans like Senator Lindsey Graham (R-SC) calling it “the most out of control, unaccountable federal agency in Washington” and President Trump declaring it a “total disaster” in a tweet on Saturday.
Democrats have considered the organization to be a bastion of consumer protection and a vital tool against the wrongdoings of the big banks. Senator Dick Durbin (D-IL) even went so far as to say that, “Wall Street hates it (CFPB), like the devil hates holy water” in an interview with CNN on Sunday.
Congressional democrats have been supportive of English during the recent controversy. Senator Chuck Schumer (D-NY) and Senator Elizabeth Warren met with her on Monday and announced their support of her.
Mr. Mulvaney had no great love for the CFPB before his recent appointment. He once called it a “sick, sad joke” in a 2014 interview with the Credit Union Times. A former member of the House of Representatives and a strong supporter of the tea party movement, Mr. Mulvaney would probably fundamentally change the agency.
On Tuesday, Mulvaney hinted at the fate of the bureau under his hands, “anybody who thinks that a Trump administration CFPB would be the same as an Obama administration CFPB is simply being naïve.”
What is the Consumer Financial Protection Bureau?
The CFPB was born in response to the 2008 financial crisis to serve as a watchdog of the big banks and wall street corporations.
First proposed by Senator Elizabeth Warren (D-Ma), the bureau was officially created with the 2010 Dodd-Frank Act as part of President Obama’s effort to bring the United States out of the recession.
The organization has become instrumental in assisting consumers with a host of financial subjects including student loans, mortgages, and credit card disputes. The CFPB also monitors large banks, to prevent illegal transactions and customer fraud.
What is the Future of the CFPB?
The role which the CFPB will play in the next four years is highly dependent on who comes out on top in the fight to become acting director.
If English is the successor, she would likely follow in the steps of her predecessor. Her appointment is likely to result in continued supervision of Wall Street and in the dealings of the financial sector.
Mulvaney would probably steer the agency in the opposite direction and limit its involvement in the financial world. The agency has long been unpopular with Wall Street, which views it as an unnecessary burden that stifles growth.
Setting the stage for further deregulation, Mulvaney has already instituted a freeze on both regulations and hiring in the CFPB.
Late Tuesday a federal judge seemed to put an end to the disagreement between the two directors by ruling that Mr. Mulvaney was the rightful leader of the CFPB.
The White House immediately announced that it “applauds the decision” of the court and it gives “support for the president’s rightful authority to designate Director Mulvaney as acting director of the CFPB.”
Lawyers for Ms. English did not immediately attempt to challenge the court decision, but vowed to continue the fight and appeal at a later date.