Why are we fighting over the Consumer Financial Protection Bureau? Because the bureau was purposely designed to have more independence from politicians than other agencies regulating finance.
A circle in hell has been set aside for financiers who fleece ordinary folks. This hot place has long rung with demands of death to the agency that protects working Americans from their pillage. President Donald Trump is on the case as he tries to kill the Consumer Financial Protection Bureau by putting its enemies in charge.
Established in the rubble of the economic meltdown, the bureau’s job is to go after the financial rackets that target the working class — abusive mortgages, student loans created to fail, credit-card trickery and payday loans charging 400 percent annual interest. It even gets money back for some people.
But milking the economically vulnerable has become a very big business for the highest names in American finance, as well as the lowest. The less sophisticated the borrowers the easier to trap them in a sea of small-print legalese, the outrageous terms carefully hidden.
The consumer-focused agency’s existence, of course, drives Wall Street nuts. “Wall Street hates it like the devil hates holy water,” Sen. Dick Durbin, D-Ill., said.
For much of the financial industry, the prized “customer” is a working stiff who has a job and a steady trickle of income to siphon off. Credit-card companies, for example, love the borrower who racks up big balances and rolls them from month to month at interest rates often exceeding 20 percent. Some of the biggest names in U.S. finance — Bank of America, JPMorgan Chase, Citigroup and Wells Fargo — are making billions off unpaid credit balances.
Unfortunately, many financially strapped Americans are using plastic to pay for basics. And the numbers keep getting worse. Working-class Americans now spend a bigger chunk of their paychecks on servicing debt than they did three years ago, according to the Federal Reserve. Outstanding credit-card debt broke a record this year, passing the $1 trillion mark.
Some are simply sucked in by promises of easy money. Scott Tucker, a payday lender in Kansas City, preyed on more than 4.5 million people, charging as much as 700 percent. One of his outfits was named 500FastCash.
A payday loan is an advance of cash to be paid back when the borrower gets the next paycheck. This is a $40 billion-a-year business that makes $7 billion in fees alone, never mind the astronomical interest charges.
The first head of the Consumer Financial Protection Bureau, Richard Cordray, recently finalized some rules taming this industry. They included limiting the number of repeat loans and requiring lenders to verify that borrowers have a prayer of paying them back.
So Cordray had to go. Trump announced last week that he would replace him, putting Mick Mulvaney temporarily in charge. The White House budget director, Mulvaney has called the bureau a “sick, sad joke.”
Not so fast. Cordray resigned first, which he and others say automatically makes his deputy the new acting director. The lawyers are battling it out.
Why are we having this fight? Because the bureau was purposely designed to have more independence from politicians than other agencies regulating finance. Truck drivers and floor sweepers generally can’t afford teams of lawyers and lobbyists to change laws in their favor. Wall Street can.
Trump paired his decision to defang the bureau with one of his habitually batty claims, that “financial institutions have been devastated.” In the fact-based world, bank profits and stocks are soaring. (Financial companies are now four of the top 10 stocks held by hedge funds, according to WalletHub.)
You’d think that with the economy transferring hand-over-fist wealth to Wall Street, most politicians would at least tolerate a defender of the little guys.