Com­pli­ance & Reg­u­la­tion

Will bad blood over CFPB ham­per reg re­lief bill?

National Mortgage News - - Contents - By ian mckendry

the ill will gen­er­ated be­tween Democrats and Repub­li­cans in the con­tro­versy over ap­point­ing an act­ing chief for the Con­sumer Fi­nan­cial Pro­tec­tion Bureau adds a new wrin­kle to con­gres­sional talks over a bi­par­ti­san reg­u­la­tory re­lief deal.

The Se­nate Bank­ing Com­mit­tee voted last month on the tar­geted re­lief pack­age, worked out be­tween Chair­man Mike Crapo, R-Idaho, and four mod­er­ate Democrats. The bill is ex­pected to pass the panel eas­ily, and it cur­rently has nine Demo­cratic cospon­sors — along with In­de­pen­dent An­gus King, who cau­cuses with the Democrats — that is enough to vote the bill out of the full Se­nate. Yet the deal was worked out be­fore the po­lit­i­cally charged war of words be­tween Democrats and Repub­li­cans over who will run the CFPB.

Se­nate ne­go­tia­tors are still con­fi­dent the bi­par­ti­san coali­tion will hold, but an­a­lysts say the CFPB tur­moil — trig­gered by for­mer Direc­tor Richard Cor­dray’s at­tempt to hand­pick an act­ing suc­ces­sor fol­lowed by Pres­i­dent Trump’s coun­ter­move in­stalling Mul­vaney — has left Democrats vexed and could af­fect how many votes the reg re­lief bill ul­ti­mately gets.

“For mem­bers on the fence about whether to sup­port this deal, the pres­i­dent’s de­ci­sion to cre­ate this drama and ap­point a White House of­fi­cial as act­ing direc­tor of CFPB … will pro­vide one more rea­son to op­pose the leg­is­la­tion,” said Aaron Klein, pol­icy direc­tor at the Cen­ter on Reg­u­la­tion and Mar­kets at the Brook­ings In­sti­tu­tion.

Crapo ended up cut­ting a deal with mod­er­ate Democrats — in­clud­ing Joe Don­nelly of In­di­ana, Heidi Heitkamp of North Dakota, Jon Tester of Mon­tana and Mark Warner of Vir­ginia — af­ter his talks broke down with Sen. Sher­rod Brown, D-Ohio, the com­mit­tee’s rank­ing mem­ber.

The re­sult­ing deal makes lim­ited changes com­pared with a more am­bi­tious House reg re­lief pro­posal, propos­ing non­con­tro­ver­sial mea­sures such as sim­pli­fied cap­i­tal rules and a higher as­set thresh­old for banks con­sid­ered “sys­tem­i­cally im­por­tant.” The only CFPB-re­lated pro­vi­sion is al­low­ing more loans to be “qual­i­fied mort­gages” un­der the bureau’s un­der­writ­ing rules.

Yet the spirit of bi­par­ti­san­ship re­flected in the deal was in con­trast to the events that started Nov. 24. Be­fore leav­ing his perch, Cor­dray tapped his chief of staff, Le­an­dra English, to be the deputy CFPB direc­tor, a po­si­tion that as­sumes the act­ing direc­tor slot un­der the Dodd-Frank Act. But the Trump ad­min­is­tra­tion cited the Fed­eral Va­can­cies Act in ap­point­ing Mul­vaney, a move that was chal­lenged by English.

Prom­i­nent Democrats im­me­di­ately leapt to English’s de­fense. As Mul­vaney first worked out of the CFPB’s of­fice, English at­tended a photo shoot on Capi­tol Hill with Se­nate Mi­nor­ity Leader Chuck Schumer and Sen. El­iz­a­beth War­ren, D-Mass., the CFPB’s orig­i­nal ar­chi­tect. The backand-forth was seen as hurt­ing the cause of bi­par­ti­san reg re­lief.

“The White House is need­lessly pro­vok­ing a fight with con­gres­sional Democrats at the very same time that the Se­nate is try­ing to ad­vance a dereg­u­la­tory bill for banks,” Cowen an­a­lyst Jaret Seiberg said in a Nov. 27 note to clients.

“It is hard to see how a bank dereg­u­la­tory bill can ad­vance while this fight is rag­ing,” he added.

Yet the le­gal fight sim­mered when United States Dis­trict Judge

em­ploy­ees at the con­sumer fi­nan­cial Pro­tec­tion Bureau are pri­vately ques­tion­ing why out­go­ing direc­tor Richard Cor­dray abruptly tapped a 34-year-old chief of staff with no en­force­ment, su­per­vi­sory or le­gal ex­pe­ri­ence to head the em­bat­tled agency af­ter he re­signed.

Many were caught off guard when Cor­dray handed the reins to Le­an­dra English by nam­ing her deputy direc­tor as he stepped down. The White House also ap­peared sur­prised, scram­bling to of­fi­cially name Mick Mul­vaney, the direc­tor of the Of­fice of Man­age­ment and Bud­get, as in­terim direc­tor.

In in­ter­views, sev­eral cur­rent and for­mer CFPB of­fi­cials, most of whom did not want to speak on the record, were up­set by Cor­dray’s eleventh-hour move dur­ing a hol­i­day week­end, typ­i­cally a time when the only news that is re­leased is the kind peo­ple want to bury. They were also an­gry at his choice, ar­gu­ing that English was not ex­pe­ri­enced enough for the job.

“It was shock­ing to peo­ple that English was se­lected,” said one for­mer CFPB em­ployee, who spoke on the con­di­tion of anonymity. “Many peo­ple were ques­tion­ing Le­an­dra’s qual­i­fi­ca­tions and her ex­pe­ri­ence. It’s symp­to­matic of the en­vi­ron­ment at the CFPB where they just hand­pick whomever they want and this crony­ism and fa­voritism leads to dis­crim­i­na­tion.”

Lit­tle is known about English. Pre­vi­ously, she worked as a prin­ci­pal deputy chief of staff at the Of­fice of Per­son­nel Man­age­ment, the chief of staff and se­nior ad­viser to the deputy direc­tor for man­age­ment at OMB, and was a mem­ber of the CFPB im­ple­men­ta­tion team at the Trea­sury Depart­ment dur­ing the Obama ad­min­is­tra­tion.

But she’d only for­mally served as the agency’s chief of staff since Jan­uary, and has never been sub­jected to the kind of pub­lic scrutiny that comes from hold­ing a top-level post.

One key ques­tion was why Cor­dray passed over David Sil­ber­man, who had served as act­ing deputy direc­tor for nearly two years, in nam­ing a full-time deputy direc­tor. Sil­ber­man kept his job as as­so­ciate direc­tor of re­search, mar­kets and reg­u­la­tions.

Cor­dray’s move was widely panned out­side the agency, with many blam­ing him for sow­ing dis­cord at the CFPB as he left. Though Cor­dray has claimed he was fol­low­ing the Dodd-Frank Act in ap­point­ing English as act­ing direc­tor, the CFPB’s own gen­eral coun­sel, Mary McLeod, dis­agreed.

“This was a con­tin­u­a­tion of Richard Cor­dray’s his­tor­i­cal prac­tices as he went out the door to cre­ate as much chaos and con­flict as he could,” said Scott Pear­son, a lawyer at Bal­lard Spahr.

Richard Hunt, the pres­i­dent and CEO of the Con­sumer Bankers As­so­ci­a­tion, ques­tioned why Cor­dray waited un­til the last minute to name a new deputy direc­tor.

“I like Le­an­dra, I think she was a ter­rific chief of staff, and she did ev­ery­thing she could to keep the trains run­ning on time,” Hunt said. “But she has never run a gov­ern­ment agency, never run a busi­ness and never worked at a bank. I hope she’s not be­ing used as a pawn, be­cause cer­tainly David Sil­ber­man was highly qual­i­fied to serve.”

Democrats have ral­lied to English’s de­fense, but that may not help her cause. English barely spoke at a re­cent pub­lic ap­pear­ance with Sen. El­iz­a­beth War­ren, D-Mass., and Se­nate Mi­nor­ity Leader Chuck Schumer, D-N.Y., that ap­peared awk­ward. Mul­vaney used the ap­pear­ance to ac­cuse her of play­ing pol­i­tics while he was at the CFPB tak­ing con­trol of the agency. But Democrats have per­sisted in their ef­forts.

“This is about Wall Street banks ver­sus fam­i­lies and right now Don­ald Trump has put him­self firmly on the side of Wall Street banks,” War­ren said.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.