Hoist by Their Own Petard

George Yacik - INO.com Contributor - Fed & Interest Rates - Consumer Financial Protection Bureau

I certainly don’t agree with Mick Mulvaney’s purported efforts – if true— to emasculate the Consumer Financial Protection Bureau, but I am thoroughly enjoying the consternation he’s putting his enemies through – although probably not nearly as much as he probably is. The blatant hypocrisy they’re displaying as they fall over themselves with their fake outrage has been fun to watch.

In case you haven’t been following the story, Mulvaney – who also heads the White House Office and Management and Budget – has been running the CFPB on an interim basis ever since his predecessor, Richard Cordray, resigned from the agency the Friday after Thanksgiving last year so he could run for governor of Ohio. On his way out the door, when he thought no one was looking, Cordray appointed his second-in-command, chief of staff Leandra English, to succeed him, a move that was thrown out by a federal judge. At the same time, President Trump appointed Mulvaney – a very vocal opponent of the agency – to run the CFPB until a permanent replacement is named and seated.

Which bring us to today. The president has nominated Kathy Kraninger, one of Mulvaney’s minions at OMB, to run the CFPB. According to media reports, her nomination is dead on arrival, but that may have been Trump and Mulvaney’s intention. Republicans may be able to delay bringing her nomination to the Senate for a while, leaving Mulvaney sitting in his acting role for as long as two years.

Needless to say, this has Trump and Mulvaney’s enemies apoplectic. They’re beside themselves with anger that Republicans have the audacity to be just as sneaky and devious as they are. They had no problem when Cordray tried to appoint his own successor on the day after Thanksgiving, metaphorically patting him on the back for his cleverness. But they positively can’t stand it when their opponents do something similar. At least Trump is going through the nominating process, which Cordray evidently felt was beneath him.

Their latest tactic is to paint Kraninger as one of the architects of the border crisis. Senator Elizabeth Warren, D-Mass., the mother of the CFPB, tweeted out that Kraninger “has no track record of helping consumers. That’s bad news for seniors, servicemembers, students – and anyone else who doesn’t want to get cheated. And it gets even worse.

“Kathy Kraninger helps oversee the agencies that are ripping kids from their parents,” she said in a follow-up tweet. “Now @realDonaldTrump wants her to run the @CFPB. I will put a hold on her nomination – & fight it at every step – until she turns over all documents about her role in this.”

Other than the fact that he’s a Republican, it’s not clear what Warren and her acolytes have against Mulvaney. Maybe it’s because he’s shown how politicized and feckless the CFPB was under Cordray.

Remember, it was Mulvaney’s CFPB that hit Wells Fargo with a $1 billion penalty two months ago for its 2016 phony accounts scandal, including a restriction by the Federal Reserve on the bank’s ability to grow its assets and in order to shore up its risk management procedures. Cordray, by contrast, fined the bank a laughably low $100 million even though the agency’s own lawyers had argued at the time for a $10 billion penalty. Not to mention that the Wells scandal happened right under Cordray’s nose, and was exposed by the Los Angeles Times, not the CFPB. So the agency not only was apparently asleep at the wheel but let Wells get away with a slap on the wrist.

Given Mulvaney’s rather short tenure so far at the CFPB, I think the jury is still out on whether he will be an industry lapdog, like his enemies charge, or a true consumer watchdog, as he’s supposed to be and should be. Hopefully, the Wells penalty was a sign of things to come. The enormous amount of waste is allegedly going on at the agency also needs to be reined in, not to mention the game of “gotcha” the agency has been playing with consumer lenders, fining them when they inadvertently trip over some minor technicality that harms no one.

Mulvaney also deserves credit for trying to make the agency more accountable to Congress – i.e., taxpayers – by putting the agency’s funding under the Congressional budget process, rather than the Fed’s, where it resides now. Warren’s purported intent to put the CFPB’s funding under the Fed was to shield it from political pressure when the reality is that it was meant to have the agency run by a single political party while the other party had no say in it. No wonder she’s angry. Well, tough noogies.

The fact is, the CFPB needs some serious reforming, but not to the extent that it becomes too chummy with the lenders it regulates. To be fair, Mulvaney has provided no indication that he has plans to do that, despite what his critics charge. What he apparently is not going to do is punish lenders for minor missteps, but he will throw the book at those financial companies that cause serious harm or defraud consumers. If that’s what Warren also had in mind, then she should be happy instead of complaining.

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George Yacik
INO.com Contributor - Fed & Interest Rates

Disclosure: This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.