By Michael Fryzel
There is an old saying that free advice is worth exactly what you pay for it. President Trump has received much of that type of advice on every subject from healthcare to taxes to the Consumer Financial Protection Bureau (CFPB).
What the President does with the advice he receives is often closely watched. For individuals and businesses that have been impacted by actions of the CFPB, it is especially important to them that the advice he follows is the best course of action.
Since the CFPB is an independent, autonomous federal agency governed by one individual, every decision that is made and every regulation that becomes law is the result of that one person’s sole discretion and prerogative.
The current Director, Richard Cordray, has headed the bureau since its creation as part of the Dodd-Frank legislation. Much of what he has done while in that position has been criticized by bureau opponents as an overreach of his authority and an effort to create an enormous bureaucracy at the expense of taxpayers. Those opposed to the CFPB see it as an agency out of control, unconstitutional, obsessed with assessing fines and negatively impacting the business community. They dislike the fact that one person can hold so much authority and be accountable to no one. Others on Capitol Hill who helped create the bureau see it as the guardian of consumer rights and point to the abuses that have been uncovered and the fines assessed. Many of its actions have significantly impacted the financial services industry.
Since it is but one person in charge, the Director, Richard Cordray, is the target of those advocating and calling for change at the CFPB.
When An Administration Changes
When a new administration takes over the reins of government, the terms of individuals appointed by the President end and those people leave. Others on boards and commissions whose terms have not expired stay on as the law requires a balance of individuals from each political party.
Mr. Cordray’s term does not expire until June of 2018. There is no board structure at CFPB. He is the only one there and he is in charge.
Knowing that President Trump would like him to leave, you might think it feasible for Mr. Cordray to submit his resignation. Most individuals would. The Director has not and refuses to do so.
Mr. Cordray is from the state of Ohio where he has served as the State Treasure and Attorney General. In 2018, Ohio will elect a new Governor. Mr. Cordray wants to be the person elected.
Individuals wanting to run for high office benefit from getting their name repeatedly in the media. Some say it does not matter if he coverage is about something good or bad as long as they spell your name right. As head of CFPB, Mr. Cordray gets attention for whatever he does. He can issue a statement, propose a regulation, assess a fine, make a speech or just take a stroll to the Capitol and his face will be on the news and in papers across the country including Ohio. So, it is clearly of benefit for him to stay as head of CFPB for as long as he is able.
Five Options
To handle the Cordray dilemma, President Trump has been advised as follows:
1. Fire Richard Cordray on Inauguration Day. That didn’t happen.
2. Fire Richard Cordray because the legislation creating a one person bureaucracy is unconstitutional. That action would result in a drawn out court fight.
3. Support legislation that would change the structure of the CFPB. Various bills have been introduced, but by the time they would become law, Mr. Cordray could be long gone.
4. Merge the CFPB and perhaps NCUA and other financial regulators and place them under the authority of the Treasury Department. This would create the super-sized financial regulator that some individuals have advocated be done.
Numbers 1 and 2, many agree, would make Mr. Cordray look like a martyr at the hands of the President. The press would have a field day and the Director would use the President’s action in his campaign for governor.
Number 3, while feasible, could actual impair the ability of the Republican successor to the CFPB to do the job that needs to be done.
Number 4 is one that Treasury Secretary Mnuchin would certainly welcome. It would put him in charge of the entire financial spectrum with the exception of the Federal Reserve. To prevent that from happening banks and credit unions would have to come together, join forces and work as one. That in itself would be a rarity.
Some Advice
Here’s my advice:
Mr. President, unless Director Cordray does something so egregious that would warrant immediate termination, you should do nothing. Concentrate on job creation, infrastructure, tax relief, immigration reform, health care and the other issues on which you campaigned. Mr. Cordray will, sooner than later, leave on his own. He has to declare his candidacy, meet filing dates, raise money, formulate a campaign and be visible in Ohio.
Do not put forth at this time any legislation relating to the CFPB. When Cordray is gone put in the person of your choice. Let that person objectively review the operations of the bureau and the regulations that have been promulgated. Let them keep what works and make changes where needed. Once the improvements are in place, look at the structure of the bureau and then legislate its future.
Consider this a doable and realistic solution that should accommodate everyone’s concerns on both sides of the aisle. And although free, it is advice at least worth considering.
Michael Fryzel is a former chairman of NCUA and now in private practice in Chicago.