- President Donald Trump’s naming of Mick Mulvaney as interim chief of the Consumer Financial Protection Bureau has set off a legal battle.
- Regardless of the outcome, the appointment of a critic of consumer protection to head the agency signals a big push for deregulation.
- Wall Street has welcomed the move, while critics worry it is simply laying the groundwork for another financial crisis.
President Donald Trump has a knack for naming men to head agencies they previously wanted to destroy.
There’s Rick Perry at the Department of Energy, Scott Pruitt at the Environmental Protection Agency, and now the latest – the president has appointed his own budget director, Mick Mulvaney, to head the Consumer Financial Protection Bureau after Richard Cordray stepped down as its chief.
Mulvaney is a man who, while a member of Congress, told a House hearing: “I don’t like the fact that CFPB exists, I will be perfectly honest with you.”
Beyond a political row that’s going to court over whether Trump even gets to name the interim chief, rather than the position being filled by a deputy, the move is a clear sign that Trump views postcrisis consumer protections as superfluous.
“The consequences of that for the American people will be devastating,” Dennis Kelleher, the president of Better Markets in Washington, told Business Insider.
The CFPB was the brainchild of Elizabeth Warren, the Massachusetts senator who argued that financial products that could cause vast social harm should be tested before being widely offered in the way food and pharmaceutical products are.
“The CFPB is vital for the protection of investors and consumers as well as for financial stability,” he said. “While everyone understands the imperative to protect consumers and punish lawbreakers, few understand that predatory conduct is often the springboard for financial instability and crashes. This is what happened in the years before the 2008 financial crash.”
Wall Street loves this, which is not surprising given that Trump has surrounded himself with bankers as advisers, including the former Goldman Sachs bankers Steven Mnuchin, now Treasury secretary, and Gary Cohn, the head of the National Economic Council.
Before the financial crisis, banks were shoveling out mortgages with little focus on risk-assessment and credit monitoring, because Wall Street was making far too much money to be asking any hard questions. Regulators, including the Federal Reserve, let it happen.
“Financial predators ripped off unsuspecting and unprotected mortgage consumers who were victims of egregious fraud,” Kelleher said. “The risk of that happening again, albeit in a new and different form, is virtually assured as the Trump administration on behalf of the financial industry is almost certainly going to cripple the CFPB.”
Isaac Boltansky of Compass Point reaffirmed that sentiment in a research note to clients:
“Under new leadership, the CFPB’s rulemaking efforts will grind to a halt and its enforcement agenda will dramatically diminish.”
Unfortunately, we’ve seen this movie all too recently – and few people enjoyed the ending.