The fact that Mick Mulvaney is now acting director of the Consumer Financial Protection Bureau hasn’t changed the former congressman’s opinion that the post carries with it far too much unfettered power.
In fact, he points to Democrats’ criticism of his actions in the role to bolster his assessment, noting that Republicans were just as fierce in their disapproval of his predecessor, Richard Cordray.
“Such continued frustration with the bureau’s lack of accountability to any representative branch of government should be a warning sign that a lapse in democratic structure and republican principles has occurred,” he wrote in an introduction to the agency’s semi-annual report to Congress that’s sure to be a lightning rod during when he testifies before oversight committees on April 11 and 12.
Whether that frank assessment warms Democrats to Mulvaney’s proposals to strip the bureau of much of its independence, outlined in the report, remains to be seen. Doing so would increase the agency’s accountability, something Wall Street and some congressional Republicans have long argued it lacks, and hamstring it at the same time.
In addition to recycling Republican proposals such as removing restrictions on the president’s power to fire the CFPB director and forcing it to obtain funding through Congress rather than the Federal Reserve, Mulvaney proposes requiring congressional approval of any major rules the agency seeks to impose.
“Given the many priorities occupying legislators at any time as well as the difficulty of getting a congressional blessing on agency action, Mr. Mulvaney’s proposal could result in not only a significant scaling back of rulemaking activities by the CFPB, but a virtual standstill in rulemaking,” said Quyen Truong, a Stroock & Stroock & Lavan partner who previously served as the bureau’s assistant director and deputy general counsel.
Lawmakers already have the power to block the bureau’s rules, she noted, as congressional Republicans did with a ban on banks’ practice of requiring customers to agree to private arbitration of disputes before opening accounts.
The difference, she said, is that under the Congressional Review Act, Congress must proactively block agency rules while under Mulvaney’s proposal, “Congressional inaction would be sufficient to prevent a CFPB rule from becoming final.”
The fate of Mulvaney’s proposals in the run-up to midterm elections, only seven months away, is unclear, though his plans to curb its interventions is a positive for lenders, said Jaret Seiberg, an analyst with Cowen Washington Research Group.
“Financial firms with exposure to the CFPB will see their policy risk drop dramatically as the agency pulls back on enforcement and eases many regulations,” Seiberg said. “The CFPB had gone too far under Director Richard Cordray.”
While Cordray used the bureau’s relative independence to expose abuses like the creation of millions of phony accounts at Wells Fargo and return $12 billion to consumers, Mulvaney has leveraged it to scale back what he considered overreach by his predecessor while giving short shrift to information requests from Sen. Elizabeth Warren, D-Mass.
A champion of the agency’s creation in the aftermath of the financial crisis, Warren has been a vocal critic of Mulvaney’s leadership. In at least nine letters from late November through March, she demanded he explain the rationale for actions including a review of CFPB enforcement actions under way when he took office and reports that he had slowed an investigation into credit-reporting bureau Equifax that exposed personal data for nearly half the country.
When Warren and other Democrats questioned Mulvaney’s plans to revamp a proposed rule to tighten oversight of high-interest payday lenders, pointing to contributions the industry had made to his election campaigns, he responded with a three-paragraph missive rejecting any insinuation his actions were based on factors “other than a careful consideration of the law and facts.”
Maintaining a civil dialogue despite disagreements on policy matters requires accepting that each party is motivated by principle and a desire to serve the American people, he told Warren. The senator’s takeaway was that Mulvaney had answered none of her questions, and she reiterated her concerns in a late March column published in the Wall Street Journal.
Mulvaney never pretended to support the agency. If federal law allowed him to do so, he said in a news conference on his first day, he’d try to convince President Trump that other agencies could handle the roles assigned to the CFPB and that it should be dismantled.
In the months since, Mulvaney has proved himself a key player in the president’s push to curb what he sees as over-regulation in order to boost the economy, dropping lawsuits the agency was planning and announcing his overhaul of the payday lending rule. Altogether, the Trump administration has canceled or delayed more than 1,500 regulatory actions planned under former President Barack Obama. About $570 million a year in costs, which comes out to $8.1 billion over a lifetime, has been eliminated as a result, the White House says.
At the CFPB in particular, directors have a responsibility to recognize that the power they wield “could all too easily be used to harm consumers, destroy businesses, or arbitrarily remake American financial markets,” Mulvaney wrote in his report.
“I have no doubt that many members of Congress disagree with my actions as the acting director of the bureau, just as many members disagreed with the actions of my predecessor,” he added. “This cycle will repeat ad infinitum unless Congress acts to make it accountable to the American people.”
