CFPB: Big Banks and Government v. The Little Guy

Brian McNicoll
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Posted: Dec 02, 2015 12:01 AM
CFPB: Big Banks and Government v. The Little Guy

I have a friend in Texas who believes everything you see on the news is made up. The 9/11 attacks? A media creation. Newtown? Secret footage exposes the fraud.  The recent Paris attacks? A false flag operation to get us all scared.

Part of me thinks my friend is a little wacky, but part of me thinks he has a point. It does seem a lot of what the government treats as a crisis is a crisis only for those who stand to profit from it.  

Take the 2008 financial “crisis.” After the $800 billion TARP bailout, what truly needed to be done? If Washington had been serious about responding to the problems exposed by this “crisis,” it would have shut down Fannie Mae and Freddie Mac, ended the federal government’s involvement in the home mortgage market and called it a day.

But that, as Rahm Emanuel would say, would be letting a good crisis go to waste. So instead, we got Dodd-Frank, which was sold as government looking out for the little guy but was in fact close to the opposite. It locked in the too-big-to-fail mentality, promised government would bail out banks no matter what and instituted rules that benefited the big over the small.

It also created the Consumer Financial Protection Bureau to look after the interests of regular Americans as they dealt with the financial system. Only it too was a sop to the big banks.

In recent years, banks have worked to bolster their bottom lines through account fees, check cashing fees, transaction fees, statement fees and overdraft penalties. Working class people increasingly have withdrawn from the system rather than see their meager paychecks frittered away on these fees.

They find a gas station to cash their checks and get their loans through payday lenders. They pay more in interest, but they can get the loans with little collateral or income and they can get them quickly without having to maintain an account and eat all those fees.

Banks can’t stand seeing all those dollars slip away, so they have purchased some particularly cynical Democrat politicians to address the problem – first among them Elizabeth Warren, who pushed President Obama to create the Consumer Financial Protection Bureau to provide her a sinecure and outside funding source.

The agency’s image has taken a hit recently thanks to commercials that debuted during the Democratic debate and depict Warren and Richard Cordray, the illegally appointed head of the agency, as communist rulers in a room full of people getting their loan applications denied.

But it continues to push forward with regulatory initiatives that come directly from the playbook of still another banking industry-funded operation – the Center for Responsible Lending. It’s interesting how the Left went berserk over Vice President Cheney talking to energy companies about their needs in energy policy, but it views as wholly appropriate when banking industry-funded front groups consult on banking policy.

But the level of involvement between the Center for Responsible Lending and the regulatory agency is so close, so intertwined, that it has raised questions even among Washington insiders.  

It met frequently with agency officials, sent over emails, reviewed documents, developed policy papers and even worked on messaging for the agency. It changed policy papers to align with agency goals and initiatives and even coordinated with agency officials in developing what it dubbed the “just right” loan to be offered through the Self Help Credit Union, its own foray into small-dollar consumer lending.  

It’s one thing for interest groups to lobby Congress and even to offer draft legislation and other specific input. It is quite another for a self-interested outside group to coordinate policy for a federal agency that not only has extensive enforcement power but whose budget and leadership are, by law, beyond congressional purview.  

The closeness of the group and the agency was revealed in emails and other documents produced in response to a Freedom of Information Act request by an organization representing the payday lending industry.

The emails and documents, said Jamie Fulmer of Advance America, a payday lender, “put in very stark terms the closeness of the relationships” and “highlights the coordinated research.”

“It’s a different relationship,” Fulmer said. “And it appears like they aren’t taking the industry’s perspective with the same level of interest as the advocacy groups. I imagine some of that is not surprising, but I think it is troubling.”

The agency says the document and email production paints an incomplete picture since it focuses only on interactions with so-called responsible lending groups and does not similarly highlight its outreach to the consumer loan industry. The Center for Responsible Lending says it makes recommendations but does not march in lockstep with the agency and indeed disagrees with its leaders on some issues.

But the emails suggest a close relationship with few differences, and the agency has become a revolving door for talent for the associated groups. It seems they all sing from the same song sheet – one crafted by a trade group sponsored by big banks to direct the actions of an agency created to the bidding of big banks.

And it’s all done for the little guy.

“What I found most surprising is the degree of familiarity between the personalities,” said Dennis Shaul, head of a trade association that represents payday lenders. “Regulators ideally have some distance from all those who might intervene on behalf of a point of view.”

But then, when it comes to the Consumer Financial Protection Bureau, there is no intervening … a private group has become the policy maker.