Trump’s Anti-Consumer Protection Nominee Gets a Senate Hearing; Here’s Why You Should Care
Today, Trump’s nominee to be the Director of the Consumer Financial Protection Bureau (CFPB) had a contentious hearing in the Senate Banking Committee, where she refused to answer even the most basic and straightforward questions. Last November, Better Markets’ President and CEO, Dennis Kelleher, talked with BillMoyers.com about why the CFPB is so important to all American consumers and families. Here are the excerpts:
BillMoyers.com: Over Thanksgiving weekend, Richard Cordray, the first and only director of the CFPB, stepped down. But before doing so, he named Leandra English his deputy and, citing rules set out in Dodd-Frank regarding leadership transfer, put her in charge as acting director. President Trump disagreed and named his own interim chief, Office of Management and Budget Director Mick Mulvaney. English filed suit, but her request to block Mulvaney from taking the job was denied on Tuesday by US District Judge Timothy Kelly — a Trump appointee. What’s your view of the situation?
Dennis Kelleher: People should not get distracted by the personalities or the legal details of this fight. What’s important is that this shows once again that President Trump is Wall Street’s most reliable ally and appears to be willing to do virtually anything that the financial industry wants him to do, no matter how much it hurts Main Street and the Americans he claims to care about.
The CFPB is the most successful consumer protection agency in the history of the country, and that’s why the financial industry has been trying to kill it. The CFPB has returned about $12 billion to more than 27 million ripped-off Americans. That’s $12 billion the industry wanted to keep in its pockets, rather than being forced to return that money to the people they ripped off. Before the 2010 Dodd-Frank law created the CFPB, consumer protection was spread across more than six agencies, and it was not a priority for any one of them. The CFPB was created with one mission: Protect financial consumers. The industry simply does not want an effective consumer protection cop on the Wall Street beat.
Although it’s not often discussed, the CFPB is vital also for financial stability, because predatory conduct is often the springboard for financial crashes. That’s what happened in the years before the 2008 financial crash. Financial predators ripped off unsuspecting and unprotected mortgage consumers who were victims of egregious fraud. Federal regulators did nothing, and actually stopped state regulators from enforcing their state consumer protection laws. The result was rampant predatory lending, the collapse of underwriting standards, and the creation, packaging, sale and distribution of fraudulent derivatives and structured products — all of which inflated the subprime bubble that crashed the financial system. The risk of that happening again (undoubtedly in a new and different form) is virtually assured as the Trump administration, on behalf of the financial industry, appears committed to crippling the CFPB and leaving consumers once again unprotected.
BillMoyers.com: What do you think we can infer from his choice of Mulvaney as the interim chief — someone who once testified before Congress that he doesn’t like the fact that the CFPB exists?
Kelleher: Showing his true beliefs, the president has appointed someone to head the CFPB who has attacked it and voted to kill it. We don’t have to infer what Mr. Mulvaney will do as the acting director of the CFPB, because as a congressman, he called the CFPB a “sad, sick joke.” Only someone who believed the biased talking points of the financial industry could make such a statement. Only a president who wanted to destroy an agency would put such a person in charge of it. That is exactly what the president has done here, with the clear intent that Mr. Mulvaney will prevent the CFPB from doing its critical job protecting consumers from financial predators.
While the champagne corks are popping on Wall Street and at its lobbyists’ offices in Washington, DC for Mr. Mulvaney’s appointment, it is a sad day for everyone else and for the country. The CFPB was created to stand up for anyone who has a bank account, credit card, debit card, car loan, student loan, home loan, payday loan, credit report or any other financial product of any type — which is virtually every single American — and crippling it is going to harm every one of those people, who will once again be left largely defenseless against gigantic financial institutions and financial predators.
Now, Trump has nominated Mr. Mulvaney’s deputy to become the permanent Director of the CFPB. Based on her performance at the Senate Banking Committee today, the industry is going to be very happy with this Mulvaney-like nominee and America’s financial consumers are going to once again be victimized without a government ally.
Wall Street’s Latest Lobby Group Tries to Hide Their Self-Interest Behind the Public Interest – Again
Ever notice how Wall Street’s biggest banks and their lobbyists, lawyers and various other allies and advocates don’t mention that they are in the business of pursuing their self-interest in maximizing revenues, profits and bonuses? Instead, they talk about lending to Main Street and wanting to help the economy grow and create jobs. If you closed your eyes, you’d think you were listening to the Chief Jobs Officer of the US who worries exclusively about the public interest.
That’s not an accident. It’s Wall Street’s longstanding strategy: camouflaging, disguising and, ideally, merging (at least in the minds of Americans and their elected representatives) their self-interest behind and with the public interest in economic growth, jobs and prosperity. Sure, they care about growth and jobs, but that’s a means to an end of maximizing profits and bonuses. Sure, they care about lending, but that’s not where the biggest bonuses are. Funny how you never hear them talking about how they love cashing in on fixed income, currency and commodities (FICC), mostly through high risk, highly leveraged, dangerous derivatives and structured products.
That’s why they make more money from fees and charges on their credit cards than they do on interest (even though the interest rates are obscenely high). That’s why they continue to pay almost nothing on customers’ savings accounts while charging lots for loans (pocketing the wider spread thanks to the Fed’s Wall Street-friendly interest rate policies). That’s why they rejoice in “volatility,” which hurts Main Street businesses and consumers but juices profitable derivatives trading. That’s why they gorged on subprime loans, derivatives and structured products for years until they blew themselves up in 2008, causing the worst financial crash since 1929 and the worst economy since the Great Depression of the 1930s.
You’d think that maybe that’d cause some genuine self-reflection, maybe even self-criticism or at least a little humility. Not a chance. The biggest banks, all of which got bailed out and their execs still got huge bonuses, have fought nonstop against the Dodd-Frank financial reform law and fought the rules passed to prevent them from blowing up the world’s financial system and economy again. Moreover, even though the Trump administration has ushered in a wave of deregulation, Wall Street’s biggest banks still aren’t happy because they claim they haven’t gotten enough deregulation.
That’s why two of Wall Street’s biggest Washington lobbying powerhouses (the Clearing House and the Financial Services Roundtable) have merged under a new, more innocuous name: the so-called “Bank Policy Institute.” While 48 of the largest banks in the country will be members of the new BPI lobby group, it will be dominated by Wall Street’s biggest banks (JPMorgan Chase, Bank of America, Citigroup, Wells Fargo), which have permanent seats on the 17-member board.
Like other groups lobbying to bend Washington’s laws and rules to favor the interests of the largest financial firms, Wall Street’s latest political and lobbying group claims it’s a “nonpartisan research and advocacy group” that is “helping drive the economy ahead” and “drive economic growth.” Continuing Wall Street’s pretense to objectivity, it also claims that all of its “work will rest on a foundation of research and analysis”
However, make no mistake about the true purposes of this new organization, as reported by Wall Street Journal:
“Big banks are revamping their lobbying approach as Trump-appointed regulators set out to ease [the Dodd Frank financial protection] rules put in place after the financial crisis” and will be “working to influence the paring down of those rules by a set of receptive regulators.”
That is really what this comes down to: Wall Street’s latest political and lobbying organization has been created to get Washington to prioritize the interests of Wall Street and get as much deregulation as possible, which will often be at the expense of Main Street families, consumers and investors. While that may make sense for the short-term interests and bonuses of Wall Street, it risks snatching defeat from the jaws of victory because the Dodd Frank financial reform law has worked to:
- stabilize the financial system,
- reduce the risk of financial crashes,
- protect investors and consumers, and
- rebalance banks’ activities away from bonus-driven, socially useless trading and toward loans and other investments in the real economy that creates jobs, growth and prosperity.
All that is what is at risk when Wall Street’s lobbyists work the policymaking processes in Washington to bend the laws and rules to benefit them. The two best examples are the nonstop efforts to increase their leverage by reducing their capital cushions and boosting their proprietary trading by gutting the Volcker Rule.
None of this is to suggest anyone at the newest lobby group or on Wall Street are evil. None of this is “bank bashing” or being anti-capitalism. The country needs – and Better Markets supports — a vibrant, efficient banking and financial sector, but one that is focused on supporting Main Street and the real economy through lending to America’s small, medium and large businesses and individuals so that they can create jobs and economic growth. That, after all, is why the financial sector is backed by taxpayers.
But it’s just not true that Wall Street’s interests correlate 100% with Main Street’s interests. Sure, sometimes those interests will overlap, but often they will not and, regardless, Wall Street will be lobbying for its self-interest. Pretending otherwise is an often effective political and public relations strategy for Wall Street, but that doesn’t make it true. For example, it will be good for Wall Street profitability and bonuses to reduce the capital cushions required by Dodd-Frank, but that’s what protects Main Street and taxpayers from financial crashes and bailouts.
Regardless of the PR and spin, Wall Street’s newest lobbying and political action organization is going to aggressively use its money, power and connections to pursue Wall Street’s self-interest in maximizing the biggest banks’ profits and bonuses. That’s fine and just like any other business in America is entitled to do. However, if it genuinely wants its work to have credibility in the policy debates, then it will need to be much more transparent, including:
- It should publicly disclose all the data and information underlying all of its reports, whitepapers and other written and oral advocacy. Without such disclosure and the ability of independent experts to validate the lobbyists’ conclusions and claims, they should be given no more weight than any other self-interested advocate talking their book. After all, if the undisclosed data and information actually did support their conclusions and claims, then they’d disclose it and reap the rewards of being validated.
- It should fully disclose all direct and indirect payments, reimbursements or any other type of remuneration to academics or any other influencers and require them to always disclose such payments in any written materials or testimony. That way the public can judge for themselves if anything has influenced their work.
Unless the BPI lobbyists make those disclosures, then their work should be viewed skeptically, acknowledged to be incomplete, and understood as solely promoting their self-interest.