Liberals and Democrats are suddenly worried about the Consumer Financial Protection Bureau, an agency they created to regulate lenders.
The cause for their concern is that Richard Cordray, the chairman appointed by former President Barack Obama and confirmed by a Democratic Senate, announced Wednesday that he will resign, a few months before the end of his five-year term.
Democrats are gnashing their teeth because President Trump will now nominate Cordray’s replacement, and Republicans, who control Capitol Hill, get to confirm him.
Democrats are distressed by Trump nominees’ managing of all sorts of agencies, including Homeland Security, the Department of Justice, and the Export-Import Bank. With the CFPB, their anxiety is particularly acute, in part because the agency is such a darling of the Democrats — Sen. Elizabeth Warren, D-Mass., conceived it and Dodd-Frank created it — but in part, too, because of its nature.
Shockingly, and perhaps unconstitutionally, the CFPB exists beyond congressional oversight. The supposedly supreme body of our government, the one most responsible to the people, the one designated by the Constitution to control the pursestrings of government, Congress neither sets funding for CFPB nor has any real oversight besides confirmation of its members.
The reason why is an entertaining tale.
Warren, before her days in the Senate, was sure that what the country needed was another financial regulator. It was, she argued, inadequate to have the Securities and Exchange Commission, the Federal Reserve, the Federal Deposit Insurance Commission, the Commodity Futures Trading Commission, the Financial Crimes Enforcement Network, the Financial Industry Regulatory Authority, the Office of the Comptroller of the Currency, the National Credit Union Administration, and 50 state banking authorities.
Warren and friends would say these agencies were “captured” by the industries they were supposed to regulate. This criticism isn’t wrong, but the outlandish solution of Warren and her crew was to create a regulator that wouldn’t be captured by industry by putting it outside the oversight of Congress.
In other words, to be a reliable regulator for the people, the CFPB had to be freed of control by the people.
(As a side note, the effort to block industry capture was always doomed. The original staffers of CFPB have mostly cashed out to run firms that help financial firms game the CFPB.)
The agency was created with the idea that Elizabeth Warren would run it. Literally, that was the plan. Hillary Clinton was supposed to succeed President Obama. So, it was deemed fine that there would be no checks and balances. What was the need when the right people would be in charge.
With Cordray’s resignation under Trump and a GOP Senate, perhaps Democrats will learn a lesson about checks and balances and hubris. Perhaps, but it seems unlikely. But even if they don’t, perhaps they’ll find an interest in congressional oversight in this one case.
Republicans ought to offer Democrats a deal to make the CFPB accountable. Democrats, suddenly fearful of an agency run by Trump's appointees, might accept. Congress should pass a law bringing this rogue agency into line within the Constitution’s framework for executive agencies, so it is funded and regulated by Congress.
The CFPB vacancy could be a perfect instance of one of the results of Trump’s election: Democrats are learning the virtues of limiting government power.