I don't think I've ever received as much comment via email and telephone to any trade press article as I did to one in last Friday's American Banker with the totally biased headline "The Myth of the All Powerful CFPB" (paid subscription required), nor comment that contained so much personal invective. Those who comment on my writing usually save the personal invective for me.
The article's editorial writer (although it isn't labeled as an opinion piece), Victoria Finkle, is described as the paper's Capitol Hill reporter. Whatever her actual job description might be, as commenter "George Bailey" observed on the paper's web site, Ms. Finkle is clearly "not a banker."
It is easy for those who do not work in the industry to sit back and applaud the CFPB. They are clueless as to what is actually happening compared to us who work in the industry.
Ms. Finkle allegedly points out some of the concerns that opponents have about the structure of the bureau, including "the fact that the agency runs under a director, not a commission, and that its budget is not subject to congressional appropriations as evidence that it is able to act as it pleases, unbeholden to lawmakers, taxpayers or anyone else." Note the straw man argument that critics purportedly assert that the CFPB can "act as it pleases...unbeholden to anyone else." Serious critics do not believe that the CFPB could violate the U.S. Constitution without, ultimately having the U.S. federal court system intervene, or that, ultimately, an out-of-control bureau wouldn't offend Congress sufficiently to prompt some legislative response. Yet, critics are concerned that the structure of the bureau makes the risks of abusive behavior more likely than would be the case with a board, rather than a single director, controlling the bureau. They are also concerned that as structured, the CFPB could do a lot of damage to the banking industry and other segments of the financial system before its abuses could be reigned in by Congress or the court system.
These objections are based upon the same skeptical views of human weakness and the corrupting influence of great executive power as "The Founders" possessed when they established a political system of checks and balances, especially at the federal level. To the bureau's critics, the structural problems pose unacceptable risks of abuse that should be addressed by changes to that structure. Lord Action's assertion that power corrupts, and that absolute power corrupts absolutely, still has believers. At least, it does outside of the pages of the American Banker.
Even disbelievers in traditional rationales for checks-and-balances on federal executive power ought to listen to the father of the modern political monstrosities of both the right and the left, Friedrich Nietzsche.
[Anything which] is a living and not a dying body... will have to be an incarnate will to power, it will strive to grow, spread, seize, become predominant - not from any morality or immorality but because it is living and because life simply is will to power... 'Exploitation'... belongs to the essence of what lives, as a basic organic function; it is a consequence of the will to power, which is after all the will to life.
The CFPB isn't run by angels, it's run by mortals. Just a reminder.
Ms. Finkle's response to these concerns is to argue that because the former acting Director and the current Director of the CFPB haven't abused their power during the first two year's of the CFPB's existence, the critics' concerns are baseless.
Yet time and again the CFPB acts much like other regulators, including listening to Congressional and industry concerns and compromising on key issues.
So far, however, the agency has made deliberate efforts to incorporate multiple points of view into its rules. For example, the CFPB announced several amendments to its controversial qualified mortgage rule last week, winning praise from industry officials and consumer advocates alike. The revisions also reflected feedback from lawmakers, who had raised concerns the qualified mortgage rule was too narrowly defined and would stifle access to credit.
"So far." Yes, that's a decisive rebuttal to the legitimate concerns of the bureau's critics. "So far."
The article mentions that the CFPB is attempting to define "abusive" through enforcement actions rather than the rule-making process. That puts a chink in the armor worn by former CFPB big-wig Raj Date, who argues that the CFPB is restrained by the necessity to follow the APA in formulating its rules. In addition, as was recently pointed out, federal statutory requirements haven't been an impediment to the CFPB in turning public meetings into private ones and barring financial industry representatives from attending.
Toward the back of the article, The Cato Institute's Mark Calabria is allowed to express a view with which many agree, albeit the "many" do not, apparently, include the article's author.
"The first few years were always going to be a question about their long-term viability," said Mark Calabria, director of financial regulation studies at the Cato Institute. "They always wanted to get themselves to a spot where they weren't a target anymore. How they have behaved so far is not in my opinion the best indicator of how they will behave in the future."
I happen to agree with Mark, but it doesn't matter to me how they have acted thus far from the standpoint of the structure of the bureau or how they might intend to act following the end of the honeymoon period. The structure of the bureau is flawed. The actions of its representatives are irrelevant.
After a brief nod to the opposition, Ms. Finkle finishes with a rehash of her main theme.
In the meantime, however, many in Washington are likely to keep arguing that the CFPB is out-of-control, despite its behavior to date.
"It truly feels to me that the concerns on Capitol Hill have their own life force beyond the concerns of financial lobbyists," said [policy analyst Isaac] Boltansky. "Once the talking points are learned and are committed to memory, then it's easier to retrieve them. This fight has been going on for so long that it's very easy for lawmakers to continue it without any catalysts in the covered financial sectors."
Again, the framing of the main argument of the CFPB's critics is stated falsely ("out of control") and the main counter-argument presented (the CFPB has not yet acted like it is out of control) is both unresponsive and unpersuasive to rebut the legitimate argument that its structure lacks sufficient restraints to mitigate the opportunity for it to abuse its power.