Trump's Consumer Victory Officially Makes a Joke of Financial Reform
By Matt Taibbi, Rolling Stone
02 December 17
Nearly a decade after the crash, Trump makes a mockery of one of the few
meaningful checks on the financial services industry
Earlier this year, when researching a story on Donald Trump's executive
appointments, I talked to current and former Hill staffers about Mick
Mulvaney. The humorless debt truther from South Carolina was the man His
Orangeness wanted to put in charge of the Office of Management and Budget,
and the mention of Mulvaney's name generated a lot of adjectives.
"Dumb even by congressional standards," was one description. "A moron's
moron."
Mulvaney was most famous for wanting to solve the national debt by deploying
his sweeping ignorance of global economics as budget policy. Putting him in
charge of the OMB was therefore like putting the Baader-Meinhof gang in
charge of Lufthansa.
Like the rapturist preachers who spend their Sundays rooting for the end of
the world, Mulvaney believes in a paradise that apparently rests somewhere
just beyond the smoldering catastrophe that would follow a default on the
national debt.
"I have yet to meet someone who can articulate the negative consequences [of
defaulting]," he said during the debt-ceiling debate in 2010.
Congress is home to a lot of third-rate lawyers and between-jobs bowling
buddies of regional rich folk who got pushed into public service almost by
default.
Even in this crowd, Mulvaney has always been thought of by his peers as
overmatched. When Trump made him OMB chief, the move was widely interpreted
on the Hill as a Bannonite sabotage ploy, a short-cut to crushing government
from within.
Now this same policy cooler is going to be put in permanent charge of the
Consumer Financial Protection Bureau. This, after a Trump-appointed judge
denied the request for an emergency restraining order against his
appointment sought by deputy CFPB Director Leandra English.
Donald Trump, for one, is happy!
Mulvaney is a ghoulish pick for the CFPB post for a variety of reasons, the
worst probably being that he appears to be an enthusiastic supporter of the
payday lending industry. Payday lenders are the exact reason you need an
agency like the CFPB.
They are pure human scum. Even by the rock-bottom standards of the American
service industry, the payday-loan profit model is indefensibly exploitative.
Your average flasher or school-zone meth dealer wouldn't be caught hanging
out with a payday lender.
The payday loan business depended for ages upon the absence of any
requirement that such lenders investigate the borrower's ability to repay.
The typical payday operation set up shop in low-income, impoverished areas,
forking out small cash loans, ostensibly against their destitute customers'
next salary checks.
While federal bank examiners practically live in bigger banks, ruthlessly
examining the viability of the bank's portfolio of loans, payday lenders
have traditionally not had to run so much as a credit check on borrowers.
There were new rules coming - from the old head of the CFPB - that that
would have forced payday lenders to run credit checks. It took the CFPB five
years of research to come up with the new system. But who knows what will
happen to that effort now.
Incidentally, the reason payday lenders didn't want to have to check on
borrowers' repayment ability is that that information was irrelevant to
their business model. These outfits didn't really want the small profits
that came when the customer actually repaid the "payday" loan on time.
The real money was earned when borrowers got stuck rolling the loans over
once, then twice, then over and over in an endless loop of killer fees. Once
borrowers fall into that particular blender, they can find themselves paying
far more interest than principal, hit with rates as high as 350 percent.
In a civilized country such "debt traps" would be illegal, but in America
they're barely even disreputable. Why, the new head of the Consumer
Financial Protection Bureau, Mulvaney, can accept $26,000 in donations from
such people in just the 2016 election cycle alone - and not even feel
embarrassed about it! And when talking to the previous CFPB chief in a House
hearing about payday lenders, Mulvaney in 2014 could offer this opinion
without shame:
"I share your understanding that small-dollar lending serves an important
function for many borrowers, especially those who may not utilize
traditional banking services, and hope the Bureau will work to ensure the
continued viability and availability of these products," Mulvaney said.
The dark irony of Mulvaney being put in charge of the CFPB by, of all
people, Donald Trump, is that it shows how totally we've bullseyed the
worst-case scenario that could have been imagined, when the country was
considering a policy response to the financial disaster of 2008.
The formation of the CFPB was one of the key features of the Dodd-Frank Act,
crafted in the wake of that crash. The reform was designed at a time when
taxpayers had just shelled out a fortune to rescue the economy from
larger-scale versions of payday-style financial predation.
Many subprime loans were no-money-down pipe dreams pushed on similar
populations of economically vulnerable people, particularly minorities and
the elderly. As with payday loans, subprime borrowers were often sucked into
years of spiraling penalty payments by unscrupulous lenders.
A government agency dedicated to spotting and preventing such snake-oil
consumer scams might have been able to prevent the 2008 crash. That none
existed was amazing to begin with. Government officials came to similar
conclusions after the 1929 crash, when they created agencies like the SEC to
help protect until-then unprotected investors.
That was the thinking behind the founding of the CFPB. Most of the financial
regulatory system until then had been focused on larger economic questions
like soundness and liquidity, and there was virtually no one on the beat to
protect individual consumers.
Still, it took a fierce fight during the Dodd-Frank negotiations just to get
the CFPB at all, as Republicans were fiercely opposed to its creation and
especially anxious to prevent Elizabeth Warren from heading it.
Now the agency is being taken over by a politician subsidized by predatory
lenders, and nominated by as infamous a scam artist as has ever graced the
halls of the White House. Giving the founder of Trump University and
projects like Trump SoHo the power to nominate the head of the nation's
leading consumer protection agency is a punch line stupid enough to make
even Dennis Miller groan.
As Trump always finds a way to up the media ante, the next step is surely
something like putting someone like Angelo Mozilo in charge of HUD. Whatever
the worst move you can imagine might be, it's coming. What a joke this
country has become.
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