Kristian Rouz — In his most recent push for deregulation of the US economy, President Trump took aim at the "disastrous" Consumer Financial Protection Bureau (CFPB), an institution created by the Obama administration in order to keep banking practices in check.
Originally, the CFPB's mission was to oversee credit cards, auto loans, mortgages and student loans and make sure only qualified borrowers get their credit approved. However, as US household indebtedness is ballooning and delinquencies rise across all four segments of household debt, the CFPB has apparently failed its mission.
President Trump said Friday he would appoint budget director Mick Mulvaney as the provisional head of the CFPB, replacing Richard Cordray, who was appointed by Obama back in the day. President Trump said he seeks to ease the regulatory burden imposed on the banks by the CFPB in order to boost credit issuance in the higher-rate environment.
"The President looks forward to seeing Director Mulvaney take a common sense approach to leading the CFPB's dedicated staff, an approach that will empower consumers to make their own financial decisions and facilitate investment in our communities," the Trump administration said in a statement.
In the Obama years, the Federal Reserve's near-zero rates supported bank lending despite excessive regulation. However, as the rates are currently increasing, the government's involvement in the open market must decrease in order to decreases regulatory costs for businesses.
By doing so, President Trump expects to resuscitate the banking sector and spur real economic investment in the near term.
The Consumer Financial Protection Bureau, or CFPB, has been a total disaster as run by the previous Administrations pick. Financial Institutions have been devastated and unable to properly serve the public. We will bring it back to life!
— Donald J. Trump (@realDonaldTrump) 25 ноября 2017 г.
The Justice Department's Office of Legal Counsel said it approves President Trump's appointment of Mulvaney as the CFPB's head. Democrats, meanwhile, were trying to get the CFPB's deputy director to become the agency's new provisional head, by pointing to the provisions of the Dodd-Frank Act of 2010.
"And we've been in conversations with the offices of Sens. Brown and Warren on exploring ways to ensure the line of succession, as drawn up in law, is adhered to," Matt House, spokesman for Senate Minority Leader Chuck Schumer said.
Whilst Democrat sought to ensure succession, the DOJ's ruling means President Trump has won, and it also provides the president with more options to deal a final blow to Dodd-Frank.
"It was a little arrogant that Cordray believes he could pick his own successor," Richard Hunt, president of the Consumer Bankers' Association, said.
The Trump administration sees the Dodd-Frank restrictions on the banking sector, including high reserve requirements for smaller lenders, as reasons behind the weak post-Great Recession recovery in the US economy.
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Favored by many Democrats, the "goofy" Sen. Elizabeth Warren in particular, the CFPB has become notorious in recent years with its abundant and stifling rules imposed on smaller Main Street lenders.
Meanwhile, the CFPB has allowed many Wall Street banks to get away with certain types of wrongdoing. Many argue the bureau has encouraged bank investment in financial instruments, whilst discouraging investment in the real economy.
"The CFPB has eroded freedom, trampled due process and killed jobs. It must go," the chairman of the House Financial Services Committee, Jeb Hensarling, wrote back in February.
Mulvaney previously advocated the elimination of the CFPB altogether, as the effects of its work to the economy have been controversial. The agency, which employs some 1,000 people, has been criticized for being unaccountable, largely useless in terms of actual consumer protection and harmful to the banking system, as it has been fast to slap penalties on financial institutions.
However, Mulvaney is now expected to reform the agency rather than disband it. He will also continue to serve as the director of the Office of Management and Budget.
