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When the American Banker broke the news last week that the CFPB, a proponent of hammering banks and other financial services businesses with the "disparate impact" doctrine in order to find discriminatory effect where no discriminatory intent, was itself allegedly guilty of disparate treatment of minority employees of the CFPB, a number of readers wrote me to ask when I was going to jump on the bandwagon of focusing a spotlight of snark on one of my favorite punching bags. I think the facts, and the numerous statements of current and former employees cited by Rachel Witkowski are sufficiently eloquent without need to embellish the damnation they provide. As one industry observer quoted in the article stated, everyone will be jumping all over the CFPB's hypocrisy. Why jump on the dog pile when its already teeming with pitbulls?
My problem with the CFPB's conduct isn't that it's filled with hypocrites. After all, I'm a lawyer, one who toiled for years in the cesspool of Big Law, where, in many firms, hypocrisy is not only common, it may be an asset. At least, it may be an asset if your end game is to be the largest road apple in a bushel basket full of them. Not that every big law firm is full of them, but a number of them are. And you road apples know who you are.
The CFPB is full of those grossly flawed creatures known as human beings. They have biases, prejudices, and blind spots, just like the rest of us. They also make occasional misjudgments due to the fact that they're not gods, like, for example, Zeus or Alec Baldwin. Like any other federal bureaucracy, the CFPB will, from time-to-time, be governed by people who, like Anita in West Side Story, want to "stick to their own kind," even when they don't consciously acknowledge that bias, even (or perhaps most especially) to themselves. There even will exist (as some anonymous employees allege) "bullies" at the senior levels, the kind of guys who the jocks used to stuff into their lockers in high school, and who are spending the rest of their neurotic lives taking their nerd-like rage out on the rest of the human race, especially upon those lower than they are in the organizational food chain.
No, my problem isn't with the hypocrisy or other character defects of human beings. Rather, my problem is related to something that one employee quoted by Ms. Witkowski touched upon.
Employees give the agency credit for addressing some employee complaints. It has, for example, resolved concerns involving out-of-pocket travel expenses. However the prevailing sentiment among the dozen employees and former staffers who agreed to talk is that the CFPB's senior staff still lacks necessary checks and balances.
"I joined this agency because I wanted to do good and help the community, but it didn't turn out that way, and now people are just trying to save their hides," says the third employee. "Yeah, it's a new agency and will have some growing pains, but they [supervisors] do what they want, and I do think they need to have someone watching over them."
Yes, the entire agency needs someone "watching over it." However, Elizabeth Warren, the self-proclaimed originator of the concept of the CFPB, and her enablers, deliberately concocted the structure of the Bureau so that it did not have effective checks and balances. The idea for an oversight commission to run the Bureau instead of a single director who can be removed only for cause was rejected, and the scheme consciously removes the budget from normal Congressional appropriation processes. These characteristics are intended to limit any outside influence on an "agency" that would be run by people who were committed to the goal of protecting "fog brained" American consumers from predations of the inherently evil financial services industry, predations that the "fog brained" are too befuddled to discern, even with the clearest of disclosures. Unlike any other federal government financial services agency, this entity was intended to rule effectively unmolested by the elected representatives of the people.
What we're seeing in the CFPB is what we've seen in other agencies. The people running it aren't any better, albeit not any worse, than the people who run other agencies or, tellingly, than the people who run the businesses that are subject to the CFPB's regulatory oversight. However, in the case of the CFPB, where are the "checks" to curb the abuses of the Bureau that are applicable to both "the regulated" and to the other financial services regulatory agencies of the federal government?
[sound of crickets chirping]
No, I expect the CFPB managers will suffer from character flaws, hypocrisy included. What concerns me is what concerned James Madison when he wrote The Federalist #51 226 years ago: the need for checks and balances on the branches of the federal government.
Ambition must be made to counteract ambition. The interest of the man must be connected with the constitutional rights of the place. It may be a reflection on human nature, that such devices should be necessary to control the abuses of government. But what is government itself, but the greatest of all reflections on human nature? If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself. A dependence on the people is, no doubt, the primary control on the government; but experience has taught mankind the necessity of auxiliary precautions.
In the case of the CFPB, the "auxiliary precautions" are notably absent, or, at least they don't exist in sufficient number or strength to reign in the failings of its ruling class. Until they do exist, much mischief is possible from these less-than-angels.
