Occasional guest poster Pat Dalrymple has a new "Banker's Hours" column in which he advises those waxing ecstatic about the prospects that the new Trump administration, in partnership with a Republican-majority Congress, will "gut" the CFPB and run King Richard out of town on a rail, might want to ask a friend to hose them down with cracked ice.
He first notes, with tongue only partly in cheek, that Donald Trump and banks have traditionally gone together like fish and bicycles.
Donald Trump isn’t a particular friend of bankers: They’ve turned him down for loans too often.
And when they haven't turned them down, they've done dastardly things to him, like demanding that he repay his loans within the time frames and in the manner he initially agreed. Nothing bugs The Orange Lord more than people reminding him of his express commitments. Those "commitments" often fly in the face of alternative facts that he creates with the frequency that Supreme Court Justice Anthony Kennedy creates "rights," both of which are, apparently found in the penumbras of the emmanations radiating from "actual" facts or rights.
While I encourage you read the column, here's the Reader's Digest list of points why we ought to be cautious about assuming that the gelding of the CFPB is not a done deal.
- Much of the American voting base of all types believes that "the banks" caused the recession and are, therefore, the types of heinous fiends that deserve the perpetual scourging inflicted by a monstrosity that only a crazed Native American warrior princess like Lizzie Borden Warren could conjure from the seventh level of hell. While a much smaller base of business donors might favor pouring gasoline on the CFPB and setting it ablaze, many Senators and Congressman will have to carefully balance principle against their prime directive: perpetual reelection.
- Big banks (and the trade associations that represent them), while publicly bemoaning the unjust pain inflicted upon them and their little sisters of the poor in the community banking community, have purportedly been privately observing that the crush of regulatory burdens inflicted upon the all financial institutions has perversely given a solid competitive advantage of the biggest banks, which can afford the legions of compliance officers and lawyers needed to comply, and which have the financial heft to take a licking and keep on ticking (if fines are assessed) to a much greater extent than smaller banks and credit unions do. We talked about this "entry barrier" issue in another context a few weeks ago. When it comes to crushing the CFPB, driving it before you, and hearing the lamentation of its women, the big banks are likely not to line up as enthusiastically as one might have hoped.
No one thought — least of all Messrs. Dodd and Frank, and Massachusetts Sen. Elizabeth Warren — that re-regulation would benefit Big Banking, and give it a competitive advantage, but that’s the way it’s worked out.
His final point is one I cannot second, not because I don't agree with it, but simply because, unlike Pat, I haven't been a chief executive officer of a community bank and don't have my ear as close to the ground as he does when it comes to determining whether a bank CEO might actually use the CFPB as a scapegoat for management's lack of performance. On the other hand, Pat's speculation does not strike me as being completely unreasonable.
And the truth is that there are a lot of small bank execs that secretly bless Dodd-Frank: It can be a great excuse for nonperformance. There are quite a few CEOs who say to directors and stockholders, “We can’t make money because over-regulation keeps us from making loans and doing business.” It’s a convenient way to justify a 50 basis point (one half of one percent) return on assets instead of the standard criterion of one percent.
Pat advises all interested parties to "stay tuned." You can count on that. In the meantime, don't place heavy bets on either side of the CFPB "hamstrung-or-not-hamstrung" line.