There are two narratives about the latest hijinks at the Consumer Financial Protection Bureau (CFPB). Narrative number one comes courtesy of the mainstream media and Democrats. It goes something like this.
Once upon a time, businesses roamed the land preying on the foolish and the poor. They sought to exploit holes in the free market to stack the deck against unwitting innocents, and were backed in this effort by a corrupt Congress chock-full of beneficiaries of big banks and deep-pocketed donors.
It was a dark time. And those dark times culminated in the economic apocalypse of 2007–2008.
Then, a Daughter of the Plains arrived. Elizabeth Warren, a Native-American professor from Harvard Law School, climbed down from her horse, carrying a plate of cold omelets with crab meat—a dish long favored among Cherokees of Oklahoma —and told the rich white males that their time was over: now she would cleanse the system of such rot. Her chosen tool: the Consumer Financial Protection Bureau. She lobbied Democrats to include the CFPB in their Dodd-Frank Act. It would be completely independent from both Congress and the executive branch, funded by Federal Reserve profits (so its budget could not be cut by Congress), and its director would be appointed for a non-revocable five-year term. This independent agency would make the world safe again for the little guy.
Warren would not be appointed to lead the agency. Instead, Richard Cordray got the job; Warren instead won a Senate seat in Massachusetts. Cordray, so the legend goes, used the CFPB to clean up the markets and set them on a new footing, to protect the consumer.
But then came disaster: President Trump was elected. In a last, heroic move, Cordray stepped down from his position before his term could expire, leaving his chosen deputy Leandra English in his place to guard the agency from the predations of those cruel, defiled politicians until the senate confirmed a new head, only to have Trump illegally appoint Mick Mulvaney acting director instead.
That’s the media’s story.
Then there’s the real story.
The CFPB was always a misbegotten enterprise.
The CFPB was always a misbegotten enterprise. It was specifically designed to act as an agency free of constitutional restraints. There’s a reason the D.C. Court of Appeals described its set-up as ridiculously unconstitutional, stating, “when measured in terms of unilateral power, the Director of the CFPB is the single most powerful official in the entire US Government, other than the president. Indeed, within his jurisdiction, the Director of the CFPB can be considered even more powerful than the President.”
And Cordray didn’t use the CFPB to protect consumers as much as to set up a protection racket. The CFPB would shake down companies into million-dollar settlements to continue funding the organization. The CFPB would then redirect millions of dollars into the pockets of firms connected with top-tier Democrats. As Ronald Rubin, former CFPB lawyer, wrote in National Review last December:
Targets were almost certain to write a check, especially if they were accused of subjective “unfair, deceptive, or abusive acts or practices.” Even the size of the checks didn’t depend on actual wrongdoing — during investigations, Enforcement demanded targets’ financial statements to calculate the maximum fines they could afford to pay.
Meanwhile, the CFPB tried to crack down on legitimate businesses such as payday lenders. This was all about public relations, not consumer protection: the vast majority of people who interact with payday lenders need the money, and are willing to undertake the interest rates.
Even the supposed “big wins” for the CFPB, such as the $185 million Wells Fargo fine levied against the bank for opening millions of unauthorized bank and credit card accounts, were exaggerated; the CFPB failed to identify Wells Fargo’s abuses for years until a Los Angeles Times story awoke them from their stupor.
So, in short, the CFPB was a partisan organization set up for partisan purposes, but operating under a popular name; now Democrats want to claim that any attempt to bring the organization under bipartisan control represents a rollback of its central mission. That’s a lie, and an obvious one. No wonder a court dismissed Cordray’s and English’s claims this week and allowed Mulvaney to fill the directorship. As usual, the Democrats and media claimed that the rule of law was secondary to an agenda item. They were wrong. We still live in a nation of laws, even if Democrats wish we lived in a nation of bureaucratic rule from above.