Symposium | Trump Vs. Democracy

Destroying Middle-Class Protections

By Richard Cordray

Tagged CFPBDemocracyDonald Trump

Our democracy has been built, crucially, on the foundations of a strong and expansive middle class that aspires to financial wellbeing. Approximately two-thirds of the American public today self-identifies as “middle class.” Stopping financial companies from abusing and mistreating people in the marketplace is a central means to help people fulfill this aspiration.

Protecting the middle class is important not only from an economic perspective, but also because it fortifies a stable democracy. If the middle class withers—leaving only the stark inequality of the rich confronting the poor—or if it is radicalized by the resentments fostered by rampant abuses by corporate America, then the crucial ballast in our political system could be lost. Yet this pillar of democracy is at risk from the Trump Administration, whose solicitude for powerful special interests has supplanted any concern to look out for ordinary people in serving the broader public interest.

As President Kennedy once noted, we all are consumers. In using household financial products and services, we deserve basic protections and effective law enforcement against predatory financial practices. The Consumer Financial Protection Bureau (CFPB) was created by Congress to be the one agency solely focused on protecting consumers; hence the name. Its job is to rebalance the scales against the financial industry, which exerts its clout and influence in Washington notoriously and in plain sight.

Democracy is always threatened by economic fragility. Heavy margin trading that fueled the stock market crash led to the Great Depression, which shattered the country for a decade and jeopardized the stability of the political order. The financial crisis of 2008, brought about by irregular and irresponsible mortgage lending, caused heavy job losses and millions of home foreclosures in a wave of misery that lasted almost as long as the Depression itself. In the wake of these disasters, we have come to recognize that economic fairness can be as important to our society as political inclusion. Just as defending every citizen’s right to vote is the bedrock of our democracy, enabling consumers to make economic choices free from exploitation and fraud is essential to a functioning marketplace that sustains their quality of life.

Yet the Trump Administration has consciously set out to reverse this approach. Its first appointee as director of the CFPB was former Congressman Mick Mulvaney, a darling of the Tea Party movement. He was on record as calling the agency “a sad, sick joke,” and while serving in Congress he sought to abolish it altogether. He contended that the agency should no longer “push the envelope” to help consumers and should make more efforts to advance the interests of the financial companies themselves. His anti-government philosophy called for the agency to abandon the project of rebalancing the marketplace, leaving it in the sway of the financial companies with nobody focused on protecting the interests of consumers.

This deliberate retreat from the agency’s core purpose of reining in the power of special interests also raises suspicions of outright corruption. The moneyed interests that fuel campaigns—and the financial industry is the largest source both of campaign contributions and of spending on lobbyists—often seek and expect a return on their investments. Mulvaney gave credence to these concerns by embracing a pay-to-play culture in a speech to the American Bankers Association, where he noted in a matter-of-fact statement: “We had a hierarchy in my office in Congress. If you’re a lobbyist who never gave us money, I didn’t talk to you. If you’re a lobbyist who gave us money, I might talk to you.” It is thus no coincidence that financial companies have been able to secure key policy changes from Donald Trump’s CFPB.

In its oversight of consumer finance, the Trump Administration also subverts democracy by flouting Congress through bizarre interpretations of the law that are designed to avoid fulfilling its avowed purposes. In creating the CFPB, Congress declared that it shall ensure that “all consumers have access to markets for consumer financial products and services” that “are fair, transparent, and competitive.” This is to be done by ensuring that consumers “are protected from unfair, deceptive, or abusive acts or practices and from discrimination” and that these markets “operate transparently and efficiently to facilitate access and innovation.”

Rather than apply the law broadly in light of these purposes, however, Mulvaney and his successor, Director Kathy Kraninger, have construed it narrowly at every turn to avoid having to take actions that would protect consumers, in public view, as Congress directed. They have ignored the will of Congress by largely dismantling fair lending enforcement to prevent discriminatory practices, truncating public reports to omit mention of any issues not explicitly spelled out by the statute, and resisting the law’s mandate that the director must testify before Congress at least four times each year (Mulvaney insisted that the statutory term “appear” could be fulfilled by traveling to Congress and being physically present without actually speaking).

The Trump leadership of CFPB has also wasted time and resources on other strange projects that do not advance the interests of consumers. For months, they sought to shroud complaints against financial companies from public view before finally conceding that doing so would run afoul of the Freedom of Information Act. Mulvaney tried to implement a bizarre name change for the agency—aimed at emphasizing the “bureau” as a bureaucracy rather than its core mission of “protection” for consumers—which was abandoned after it became clear that the initiative would impose as much as $300 million in needless costs on the marketplace. Both directors have said they cannot supervise lenders for compliance with the Military Lending Act (a law that protects servicemembers and their families) because they lack statutory authority to do so—even though they have broad supervisory powers and have been given express authority to enforce the Act.

In so many ways, both big and small, the Trump Administration has undermined the CFPB’s purpose of keeping people from being abused and mistreated in the financial marketplace. We must reverse course to restore needed protections for the public and basic respect for the law.

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Richard Cordray was the first director of the Consumer Financial Protection Bureau and is the author of the book Watchdog about the CFPB and its work to protect consumers.

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