The watchdog meant to protect Americans from predatory lending is about to get 'the most anti-consumer' boss

  • President Donald Trump is likely to appoint someone to head the Consumer Financial Protection Bureau who despises the agency even more than his interim appointment, Mick Mulvaney
  • Mulvaney has previously expressed contempt for the agency he is overseeing.
  • The role of CFPB director is much broader than most people think, and includes a seat on the powerful Financial Stability Oversight Council.

President Donald Trump’s takeover of the Consumer Financial Protection Bureau may be just the start of a far-reaching process of financial deregulation that could lead to a repeat of the behaviour we saw ahead of the 2008 financial crisis.

Whoever Trump chooses to appoint as a permanent head of the CFBP will not only have the power to oversee the agency created to protect consumers from widespread predatory lending.

He (or she, but who are we kidding?) will also sit on the powerful Financial Stability Oversight Council, a group of regulators in charge of making key decisions about financial safety, including deciding which banks or financial firms pose a risks to the system.

“This is a lot broader than a consumer protection appointment, it’s also a financial stability appointment,” Jeremy Kress, who teaches business law at the University of Michigan’s Ross School of Business, told Business Insider.

Trump’s interim appointment, his budget director and former Congressman Mick Mulvaney, has created enough controversy already, particularly since he’s often stated opposition to the CFPB’s very existence, and described it as an example of government overreach.

Apparently, he’s going to be doing the job part-time, since he’s still planning to head the Office of Management and Budget.

Mulvaney’s disdain for the agency comes despite its strong reputation as having returned some $US12 billion to consumers from cases of financial wrongdoing.

Elizabeth WarrenMark Wilson/Getty ImagesElizabeth Warren.

Rot from within

The CFPB, the brainchild of Senator Elizabeth Warren, was designed specifically to be an independent agency, much like the Federal Reserve, even though its chair is appointed by the president. In fact, the CFPB is technically part of the Fed system, part of an effort to shield it from budgetary pressures.

“The CFPB is an independent bureau of the Federal Reserve,” Kress said. “The Fed devotes 10% of its budget directly to the CFPB – that’s important not reliant on Congress for annual appropriations.

“If you’ve got someone like Mulvaney who answers directly to the president making decisions about financial stability and potential bank bailouts, that raises a lot of risks.”

Kress thinks the effects could last well beyond the Trump presidency – even if Trump himself doesn’t make it to a full term. That’s because the president could appoint someone so radical that the Senate will not confirm him, leaving Mulvaney in power for several years. After that, Trump’s actual appointee would serve a full five-year term.

“Trump will come up with the most anti-consumer nominee he can find,” Kress said. “That nominee will be antithetical to what CFPB stands for. He either gets confirmed or while nomination is pending Mulvaney continues to act as interim head. Trump still wins.”

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