Compliance & Regulation
Will bad blood over CFPB hamper reg relief bill?
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.