Richard Cordray, who has been the head of the U.S. Consumer Financial Protection Bureau (CFPB) since 2012, announced Wednesday that he will be resigning before the end of his five-year term. His interim replacement will be self-described "right-wing nutjob" Mick Mulvaney.
Currently the Trump administration’s Office of Management and Budget Director, Mulvaney is a longtime politician who has tirelessly worked to dismantle regulations and, as CBS News notes, “a longtime critic of the agency.” Nominating Mulvaney, in other words, is functionally equivalent to eliminating the agency entirely.
This ominous sign is the latest example of the Trump administration’s determination to dismantle critical regulations of big business. And it illustrates how the executive branch now unilaterally makes public policy. Trump and a Republican Congress haven’t yet passed major legislation, but they can achieve a lot of policy objectives without doing so.
One of the most important components of the flawed but valuable Dodd-Frank Wall Street Reform and Consumer Protection Act was the creation of the CFPB. The bureau is empowered to regulate financial products and services to prevent the exploitation of consumers. What Trump, congressional Republicans, and the financial sector hated about Cordray is that he did his job. According to Ranae Merle of the Washington Post, “Republicans had become increasingly exasperated that Cordray… continued to press for aggressive rules disliked by the business community. Trump has on at least two occasions griped about Cordray in private and wondered what to do about his tenure.” When Trump said he would “drain the swamp,” he apparently meant that he would clear out anything that would impede Wall Street from exploiting consumers.
Wall Street and Republicans have tried to stymie the CFPB from the beginning. The lesson Republicans took from the disastrous 2008 financial collapse that was created in part by banks taking advantage of customers was that everything was just fine. Senate Republicans were determined not to let Obama nominate anyone to head the agency, and carried out a lengthy filibuster against Cordray, forcing Obama to install him as a temporary recess appointment. (Cordray was later confirmed for a full term.) They haven’t changed at all, and the idea that Trump would orient the party in a more anti-Wall Street direction has been revealed as the ludicrous fantasy it always was.
Congress acting against CPFB regulations may have been the reason Cordray was frustrated enough to leave early. Last month, with Vice-President Mike Pence casting the deciding Senate vote, Congress killed a new rule that protected the ability of consumers to file class action lawsuits against banks, rather than being forced into arbitration that generally tilts toward the interests of the corporation rather than the customer.
Still, because Senate Republicans don’t have the votes to break a Democratic filibuster and overturn or rewrite Dodd-Frank, there’s a limit to what Congress can do to eviscerate the CFPB. And that’s where Trump’s appointments come in. The Securities and Exchange Commission is now being headed by former Wall Street lawyer Jay Clayton, who is universally expected to treat his former employers much more kindly than his predecessor, Mary Jo White. In February, Trump’s Department of Labor stopped a rule that would have required financial advisors to act the fiduciary interest of their clients.
This illustrates a real dilemma for the Democratic Party. Without repealing any statutes, Republicans can severely undermine public interest regulation. Both parties, but especially the GOP, have in recent years begun to use every legal lever at their disposal to enact their will, violating past political norms. Instead of nominating a permanent appointee to run CFPB, which would require a Senate vote, Trump has put an acting director – who will keep running OMB – to dismantle the agency without even needing Senate approval. These days, a Consumer Financial Protection Bureau headed by a Republican appointee is likely to ignore corporate malfeasance and act to undo any strong rules put into place.
This problem is hardly confined to one area of governance. Scott Pruitt’s Environmental Protection Agency is busily acting to dismantle major environmental regulations. The Voting Rights Act is toothless with Jeff Sessions, seen by civil rights activists as a staunch supporter of vote suppression, as Attorney General. And this is the problem with trying to regulate in the interests of ordinary people while one of America’s major political parties is staunchly opposed to such efforts. The Democratic Party can’t protect the public merely by passing laws establishing regulatory agencies: when a Democrat isn’t in the White House, Republican presidents can seriously damage enforcement even if they can’t get legislation repealed. Elections tend to focus on what new laws can be passed, but there needs to be more focus on how existing laws are implemented.
Scott Lemieux is a lecturer in the Department of Political Science at the University of Washington. @LemieuxLGM
The views expressed in this article are not those of Reuters News.