Ron Rubin, a lawyer and author who used to work for the Consumer Financial Protection Bureau, discusses the character of the federal company with The Daily Signal’s Genevieve Wood. What follows is an edited transcript.
Wood: Tright here’s been a number of controversy round this Consumer Protection Financial Bureau. The head of this company, the director, Mr. [Richard] Cordray, stepped down proper earlier than Thanksgiving. He appointed somebody on his staff to come back in and take his place, however the president had different concepts and made OMB Director Mick Mulvaney, who we really simply noticed leaving the constructing, the performing director as a substitute. Ron, we’ve acquired so much we might speak about right here. First let me ask you: What do you assume the legitimacy is of Cordray’s making the appointment he did versus Donald Trump’s appointment?
Rubin: There’s no query from a authorized standpoint that President Trump was right. The Vacancies Act is what dictates who will in the end be the performing director. It’s only a quite simple query.
And as a substitute of going into the deep authorized evaluation, I’ll simply say that the CFPB’s personal normal counsel got here to that conclusion and issued a memo. So did the Justice Department, so did the president and the White House. Basically, the one people who find themselves arguing the authorized argument are [CFPB Deputy Director] Leandra English and [Sen.] Elizabeth Warren and [former Rep.] Barney Frank.
Wood: Sen. Elizabeth Warren was not the unique director right here, however she was sort of the primary head of it as a result of after they had been first forming the company, she was a presidential appointee earlier than she turned a senator. So she’s acquired a number of stake on this. In an article you wrote for the National Review, which viewers can discover on-line, you say Elizabeth Warren constructed a political battleship, referring to the CFPB, and Richard Cordray deployed it. What do you imply by that?
Rubin: Well, it’s very attention-grabbing. The solely organizations that I can consider the place the exterior affairs of the media/press workplace is probably the most highly effective workplace in a company is a political group. So [in] senators’, congressmen’s workplaces, the media workplace is essential and a number of instances offers the orders. And that’s what just about goes on on the CFPB, it’s very indicative of that.
I’ve by no means forgotten that one among my mates, who’s a senior rulemaking particular person there even now, instructed me that they might provide you with rulemaking proposals and the media individuals would say to them, “No good. We can’t get a superb headline out of that. It’s not a superb press launch.” So, even people who find themselves Democrats, who consider in shopper safety and the mission of the bureau, can be outraged by one thing like this, saying, “Well, the media staff is dictating what guidelines you’re going to write down?”
Wood: But you define in right here what number of hundreds of thousands of had been paid to PR corporations, media advocacy corporations, which primarily did advocacy for Democratic causes and campaigns. But the CFPB paid them to do advocacy for them and was sort of guiding them when it comes to, as you mentioned, what they did and didn’t do when it comes to rulemaking.
Rubin: Well, that was the cash they gave to outdoors media firms. They even have internally an enormous exterior affairs media division. So each internally and externally, there are a whole bunch of promoting firms and corporations within the nation who they might have gone to. They didn’t go to 1 different agency for the final three years. Every greenback of $60 million that they’ve spent promoting themselves went to this one agency. Which, in the intervening time, mainly the one different shopper that this agency has is the Clinton Foundation and Clinton-related entities.
Wood: If you’re doing a superb job and also you’re actually defending the patron, why do it’s worthwhile to rent a PR agency to inform everyone, or persuade everyone, of that within the first place?
Rubin: You don’t. And that’s the entire level, that the massive purpose of this group, the way in which it has been operated, is to get good PR for Elizabeth Warren, for the Democrats, and themselves, and it actually shouldn’t be that means.
Wood: Let’s speak about why this was based. We had the monetary disaster of 2008. Coming out of that, you had the Dodd-Frank laws that got here forth, and inside Dodd-Frank was mainly the creation of what’s the Consumer Financial Protection Bureau: CFPB. That was meant to supposedly shield individuals from grasping banks and Wall Street and all these horrible issues. A whole lot of of us don’t assume it ought to have ever been created. But the place did it go off the rails when it comes to doing any sort of good?
Rubin: I’ve to confess that I didn’t see what a number of the Republican critics noticed proper from the start. Which was creating an company the place solely the president can fireplace the director as soon as he’s been confirmed by the Senate. And the funding goes by way of the Federal Reserve Bank, so Congress can’t change the funding, which implies Congress mainly has no means of meaningfully dictating something to this company.
Wood: And no different company has that sort of factor, proper? The Department of Education has to foyer for his or her earlier than Congress, all of the businesses should go earlier than Congress and make a price range, however CFPB doesn’t.
Rubin: I’m not 100 p.c positive that there may not be some very minor businesses by way of the federal government, however nothing with the sort of powers that this company has. The easiest clarification is absolute energy corrupts completely. And even the best-intentioned individuals, given the flexibility to haven’t any oversight, will find yourself going off the rails and overlaying up issues that they do improper. When lastly Mr. Mulvaney and Republicans take over, you’re going to see what’s been happening inside this company for the final six years.
Wood: Let’s speak about that briefly, since you additionally convey this up in your article you wrote for National Review. And you talked about the truth that they’ve been hiding the bureau’s failure. Interesting, we’re proper down the road right here from a Wells Fargo department, and there was a scandal happening there not too way back. The very sort of factor that CFPB was supposedly created to find, but they didn’t.
Rubin: No, and it’s onerous to say which is worse: the truth that they didn’t do their job or the truth that they tried to take credit score for different individuals doing their job. They had their examiners going into Wells Fargo virtually from the day they opened for enterprise in 2011. For virtually two years they didn’t discover something. And then there was an enormous exposé within the Los Angeles Times in December of 2013.
You would assume at that time they might begin doing an investigation. But they went off and so they had been doing issues that they shouldn’t have been doing, which was attempting to manage auto sellers, which is the one factor that the Dodd-Frank Act forbids them from doing.
So they’re off losing their time doing that, and so they let the Office of the Comptroller of the Currency and the Los Angeles metropolis attorney do investigations. And then they are available on the finish and mainly negotiate an enormous nice as a result of the legislation permits them to nice virtually something. And for all of the world it seems to be like they’re the heroes.
Wood: But they didn’t do the onerous work?
Rubin: No. And not solely did they not do the onerous work, however within the yr … because it’s come out that if they’d finished an investigation beginning even in 2013, there have been a complete lot of different issues that Wells Fargo had finished improper that they didn’t detect. And within the final yr, Wells Fargo has been self-reporting issues. So not solely did this all go on for that lengthy, however their very own settlement didn’t adequately cowl what it ought to have lined.
Wood: You talked about how they have put fines on many a financial institution and monetary establishment. What occurs to these after they come again into CFPB? Do these go to all of the customers who’ve been harmed by monetary establishments? Wright here does that cash go?
Rubin: That’s sort of the attention-grabbing factor. Technically, you may say they gave that cash, the $12 billion, they preserve saying that they gave it again to customers who’re harmed. But actually what occurs, for instance, within the case of Wells Fargo, the restitution portion was $3 million after which there was $100 million in civil penalties. Wells Fargo victims most likely didn’t get that cash.
What occurs is on the finish of the yr all of it goes right into a fund. They’re allowed to present it to a trustee. I’m positive it’s a Democratic trustee, and trustees make some huge cash from the cash they distribute. And then they’ll look and discover another victims in different CFPB issues who they really feel weren’t adequately compensated and provides the cash to them. So they’re allowed to say that they gave the cash again to customers. But, for instance, most likely little or no of that $100 million made its means again to precise Wells Fargo victims.
Wood: You know Mick Mulvaney made the remark when he first acquired into the constructing, “I’ve been going by way of the recordsdata right here and my duties in my job description, and it might scare most individuals on the market to know the way a lot energy I’ve.” They have the flexibility to not solely nice these establishments however then resolve who they wish to give the cash to.
Rubin: Right. You know the cliché is choose, jury, and executioner, and likewise distributor of the fines that they accumulate. There’s by no means been something like that in the complete U.S. federal authorities.
Wood: When you speak concerning the failures on Wells Fargo, you speak about how they wish to regulate automotive sellers, put fines on them; the inspector normal admonishments they’ve gone into; the oversight investigations that Congress has tried to try this the CFPB has held off of. You say there’s even some sexual harassment fees in opposition to CFPB managers that will now come to mild. Is that why you consider Cordray was so intent on appointing his deputy? He hoped that individuals wouldn’t discover this stuff out?
Rubin: When I labored for the House Financial Services Committee, I simply know the issues that they had been requested for, like paperwork. For instance, within the Wells Fargo case, they had been requested for paperwork explaining how they did their investigation. And if there was one doc that was related it was referred to as the motion memorandum. Basically, the enforcement division’s memorandum to the director of why they needed to promote this mantle matter for $100 million. And that was one doc they didn’t flip over as a result of it was very damning. Finally, he took a yr to get it.
But you noticed, for instance, that the enforcement legal professional mentioned you possibly can have gotten as much as $10 billion settlement as a substitute of $100 million. And it was very clear from the doc that they did little or no within the investigation, which was opposite to what Director Cordray testified to in entrance of Congress. So there’s simply an terrible lot of issues which are going to come back out.
Wood: What do individuals have to learn about it? Maybe the historical past and the place you assume this should all play out? And some individuals are calling for abolishing the bureau itself. But the place does it go from right here, and what do individuals have to know?
Rubin: I believe an important factor is, nevertheless this performs out, there must be guardrails in place in order that one thing like this could by no means occur once more. I get so offended at mainly the argument from Elizabeth Warren and Barney Frank and the Democrats on the opposite aspect, [Rep.] Maxine Waters, is that by some means Republicans all love banks, and so they can’t be inside this company, they don’t like legislation enforcement, they’re comfortable to have customers get ripped off. And that’s simply nonsense.
Traditionally, Republicans had been the occasion of legislation enforcement. And all Republicans are definitely not billionaires, virtually all of them are usually not millionaires. But they’re all customers and none of them wish to get ripped off. So that is simply nonsense about the one individuals who can do shopper safety are Democrats. It must cease. It’s insulting.
Wood: I’ve seen you say in different interviews that almost all of individuals working at CFPB have been Democrats. And when you’re a Republican, you didn’t actually wish to increase your hand and say something.
Rubin: I believe Fox this morning mentioned that 537 workers donated to Democrats and one donated to Mitt Romney’s marketing campaign. I didn’t make any contributions to that marketing campaign. I’m nonetheless attempting to figure out who the one particular person was.
Wood: Ron, thanks very a lot. You’ve actually come out and shed a number of mild since you’ve been contained in the company and many individuals haven’t. So thanks very a lot for speaking with us.
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