Financial Reform Newsletter: Dec 6 2018

Senate Republicans Confirm Trump’s Grossly Unqualified, Anti-Consumer Nominee to be the Director of the Consumer Financial Protection Bureau
Contrary to everything he said to voters when he was a candidate running for office, President “Flip Flop” Trump continues to deliver for Wall Street and stomp on the most basic protections for hardworking Main Street families. Trump’s latest gift to Wall Street and financial predators is his nominee to be Director of the Consumer Financial Protection Bureau (CFPB), who Senate Republicans confirmed today on a straight party line vote.

She demonstrated an embarrassing lack of genuine interest in protecting consumers or fulfilling the legally mandated mission of the CFPB in her Senate Banking Committee nomination testimony. It was so bad that, when asked if there was any decision made by acting director Mick Mulvaney that she disagreed with, she could not cite a single example.

However, Trump’s acting director has a pathetic record who has worked hard to change the Consumer Financial Protection Bureau into the Financial Predator Protection Bureau as Better Markets tracks here and the Washington Post detailed here. How bad is it? The charts below (also from the Washington Post) speak for themselves and show the CFPB’s lack of enforcement, budget cuts, personnel cuts and precipitous drop in financial protection rules.

This is really bad news for Americans. First, they deserve to be protected from predators and scammers as they were under former Director Cordray when more than $12 billion was returned to more than 25 million ripped off American consumers. Second, the CFPB is vital also for financial stability because unrestrained predatory conduct spreads like a disease and becomes a springboard for financial crashes. That’s what happened in the subprime mortgage markets years before the 2008 financial crash: financial predators ripped off unsuspecting and unprotected mortgage consumers who were victims of egregious fraud, which inflated the subprime bubble and fraudulent derivatives markets.

The financial industry has high hopes for Trump’s new CFPB Director, but that means that the hopes and dreams of many Americans who use financial products will be crushed as they become victims of financial predators and scammers who the CFPB seems intent on unleashing.

Report Shows the CFPB Has Been Working Hand in Glove with Financial Predators
A recent report from Senator Sherrod Brown, ranking member of the Senate Banking Committee, confirms what we already know: “Working families and seniors are suffering while [CFPB acting director] Mulvaney does favors for corporate special interests.”

The report, “Pushing the Envelope: The Consumer Financial Protection Bureau under the Trump Administration” confirms another truth when it states, “Wall Street and the financial industry have armies of lobbyists at the beck and call — the CFPB was created to deliver results for American consumers.” Yet, the 36-page report identifies many of the policies and stances the CFPB has taken under Mulvaney’s leadership, which we at Better Markets have also been tracking on our website, totaling at least 29 anti-consumer actions in just one year.

While the report mainly focuses on the year-long tenure of Mulvaney and the harmful actions he has taken at the CFPB, the report does also offer an ominous warning about the person who will be replacing him, Kathy Kraninger stating that she has stood shoulder to shoulder with Mick Mulvaney and has, even after direct questioning during her confirmation hearing, put any daylight between herself and the outgoing director who has done so much damage to the agency.

This report from Senator Brown highlights the glaring hole that currently exists when it comes to protecting hardworking Americans from financial predators and scammers. It is a sorry record showing that the Trump administration has dedicated itself to helping the crooks that rip off Main Street rather than protecting Main Street from the crooks.

Are Corporate Debt Storm Clouds Gathering on the Financial Horizon?
Danger is lurking in the growing levels of corporate debt according to the very first Financial Stability Report issued by the Federal Reserve. Focusing on non-financial corporate debt, the report further indicated that there have also been signs of deteriorating credit standards, as debt has been growing more quickly at firms with weaker earnings and higher leverage.

In particular, the Fed report highlighted worrying levels of riskier business debt, such as high-yield bonds and leveraged loans. Indeed, Senator Warren has also been discussing the leveraged loan issue lately, calling on regulators to examine the leveraged lending market more closely.

As the economy nears the end of the current business cycle, the need to heed these warnings become all the more important. As Better Markets has noted, it is time for the adults in the room to end the current mindless deregulation frenzy and ensure that the financial sector is strong enough to not only survive the coming downturn, but also to continue to support the productive economy through the business cycle. That is the test that elected officials, policymakers and regulators must pass, not the near-term demands of special interests focused on short-term profit and bonus maximization.

Report of Financial Stability Conference in Berlin Now Available
Last month Dennis Kelleher, President and CEO of Better Markets, delivered the keynote address at the sixth annual Financial Risk and Stability conference in Berlin, Germany.

Kelleher kicked off the conference with a speech, which you can read here, by providing insights to top European policymakers, regulators and elected officials, including that Dodd Frank has refocused the financial industry on supporting the real economy and Main Street families and away from bonus driven, risky activities that have the potential to cause another crisis and more bailouts.

The daylong conference had many panels and addresses that covered a wide range of key issues and topics, often by leading policymakers and regulators. The entire conference Report is now available and is well worth reviewing by those interested in these topics.