CFPB – A Bad Case of Mission Creep

OctopusOne of the most notable bi-products of the foreclosure disaster, was another disaster – the 2010 Dodd-Frank Act; a 2300 page tome bearing the names of two of the primary beneficiaries of the Lender Lobby, Chris Dodd, charter member of the “Friends of Angelo” [as in Angelo Mozilo, CEO of Countrywide] who gave sweetheart loans to his political cronies, and the irascible Barney Frank, whose distinction lies in the fact that while heading the Financial Services Committee in 2006, he patently ignored the credit and housing bubbles, while taking campaign money from one of his two largest contributors, the American Bankers Association.  And both men – in what can best be described as “biting the hand that fed them” – co-authored the uber-regulatory bill that bears their names, then promptly retired from the Senate, leaving the bureaucrats to write the 400 rules interpreting this wildly aspirational set of laws.[1]

The spawn of Dodd-Frank, the Consumer Finance Protection Bureau or “CFPB”, – headed by a single political appointee, whose own future is in question[2] – is a mega agency that seeks to regulate “…unfair, deceptive and abusive practices” in financial products and services.  That’s a pretty broad mission statement, the breadth of which is certainly open to interpretation.  According to a Heritage Foundation article, here:

“Concerns about arbitrary enforcement are not assuaged by [the appointed director Richard] Cordray’s testimony to lawmakers [footnote omitted] that the term abusive in the statute is ‘a little bit of a puzzle because it is a new term.… We have been looking at it, trying to understand it, and we have determined that that is going to have to be a fact and circumstances issue; it is not something we are likely to be able to define in the abstract. Probably not useful to try to define a term like that in the abstract; we are going to have to see what kind of situations may arise.’”

Hmmm. So the CFPB can’t define “abusive”, but the apparently they “will know it when they see it.“[3]  To date, the bureau’s authority appears entirely open-ended.  So far, they have sought to regulate banks, non-banks, financial companies, credit unions, securities firms, payday lenders, mortgage servicers, foreclosure relief services, debt collectors, mortgages, mortgage brokers, credit cards, debit cards, student loans, and other financial companies.  Believing that when it comes to consumers, nothing is too big or too small to regulate, the CFPB has officially opened a Complaint Department that allows consumers to complain about credit card companies, mortgage companies, student loans, auto loans, consumer loans and banking services. You see, that way, they don’t have to “walk the beat” looking for perps.  Instead, they just go to their Bad Boy List, throw a dart, send a cease and desist letter, then issue a press release touting their value to the consumer who needs their protection.

So, in the largest case of “mission creep” since the United States first sent “advisors” to Vietnam in the 1950s, Dodd-Frank has spawned a regulatory Leviathan that appears destined to regulate every aspect of human financial endeavor.  An interesting example of this cradle-to-grave mission, is found in a recent CFPB publication, “The Graduate’s Guide: Your First Job.’’  In it we find pithy tips for teenagers:

“School’s behind you. Now it’s time to put everything you’ve learned to work. Your first couple of days on the job will likely include filling out forms that will require you to make a flurry of key financial decisions. Use this guide to be ready, so you can focus on making a good impression.” [Based on what I read, unemployment among American youth, ages 16 to 24, is 16.2%. Perhaps a handbook focusing on getting a job might be a better use of taxpayer money.  But what is the CFPB even doing in this arena, anyway?  Was the banking crisis caused by kids who couldn’t fill out their employment forms? I kinda thought it was caused by rapacious Wall Street Banks – that still exist and thrive – and unethical mortgage brokers who washed out of business years ago.]       

Bring required I.D. Before showing up, find out what forms of identification your new employer would require. If you take your Social Security card or passport, be sure to take them out of your wallet or purse when you get home and keep them somewhere safe to reduce your risk of identity theft.” [Whew! Thank goodness for that tip!  I can’t tell you how many times I’ve had job applicants tell me they forgot to bring any identification on their first day of work. And by the way, rather than focusing on social security cards and passports, what’s wrong with mentioning a good old driver’s license – or would that offend those who failed their driver’s exam?  This tip, from the boyish looking Mr. Cordray, an undefeated five time Jeopardy champion, is sure to resonate with the new graduate for the rest his or her life. But…what’s this got to do with the housing and credit crisis?]

“No health benefits? Ask your parents if you can stay on their plan. New rules may let you stay on your parents’ plan until you’re 26.”  [Mom and dad are sure to love this tip!  Next month Junior is going to be at their front door asking for his old room back because he’s one of the 16.2%.  I wonder if Chris and Barney ever envisioned the bill bearing their names was going to be used to create a Nanny State by the bureaucrats in Washington?]

“Start your retirement saving. Many employers offer a retirement savings plan at work. Find out your options and start saving as soon as possible–especially if your workplace offers a matching contribution. That’s free money!” *** [Sorry Dick. You’re talking to kids whose version of long-term financial planning is calculating how many happy hour drinks they can squeeze out of a twenty dollar bill on Friday night. I bet even Warren Buffet had better things to do at 18 than think about an IRA account. Besides, by the time these kids are old enough to retire, the politicians will have figured a way to tax their savings out of existence – especially if they worked hard enough to be a “one-percenter”.]

Conclusion. Know what? For Life’s Little Book of Lessons, I’d swap the CFPB’s silly “Graduate’s Guide” for the movie, The Graduate, in a heartbeat. Now there’s an instructional guide to last a lifetime.  Herewith some snippets [compliments of Fox News online]:

Mr. Braddock [Benjamin’s father]: Well would you mind telling me what these last four years of hard work was for? Benjamin [Dustin Hoffman]: You got me…


Room Clerk: Are you here for an affair, sir?
Benjamin: What?
Room Clerk: The Singleman party, sir?
Benjamin: Ah, yes, the Singleman party.


Mrs. Robinson: Benjamin.
Benjamin: Yes?
Mrs. Robinson: Isn’t there something you want to tell me?
Benjamin: Tell you?
Mrs. Robinson: Yes.
Benjamin: Well, I want you to know how much I appreciate this. Really.
Mrs. Robinson: The number.
Benjamin: What?
Mrs. Robinson: The room number, Benjamin. I think you ought to tell me that.
Benjamin: Oh, you’re absolutely right. It’s 568.
Mrs. Robinson: Thank you.
Benjamin: You’re welcome. Well… I’ll see you later, Mrs. Robinson.


Benjamin: Where did you do it?
Mrs. Robinson: In his car.
Benjamin: What kind of car was it?
Mrs. Robinson: Come on now.
Benjamin: No, I really want to know.
Mrs. Robinson: A Ford.
Benjamin: Goddamn, that’s great. So old Elaine Robinson got started in a Ford.


Benjamin: Mrs. Robinson, I can’t do this.
Mrs. Robinson: You what?
Benjamin: This is all terribly wrong.
Mrs. Robinson: Do you find me undesirable?
Benjamin: Oh no, Mrs. Robinson. I think, I think you’re the most attractive of all my parents’ friends. I mean that.


Benjamin: Listen to me. What happened between Mrs. Robinson and me was nothing. It didn’t mean anything. We might just as well have been shaking hands.
Mr. Robinson: Shaking hands? Well, that’s not saying much for my wife, is it?


Mr. McGuire: I want to say one word to you. Just one word.
Benjamin: Yes, sir.
Mr. McGuire: Are you listening?
Benjamin: Yes, I am.
Mr. McGuire: Plastics.[4]

[1] According to the Washington Post, only 38.4% of the necessary rules have been implemented.

[2] Richard Cordray, the governor from Ohio, was appointed by Mr. Obama to head the agency. However, in  December of 2011, a  Republicans’ filibuster blocked the nomination because the party insisted that the agency should be run by a 5-person panel.  In an end-run, Obama used his power to make a “recess appointment,” setting up Mr. Cordray as the head of the CFPB.  This gambit proved problematic, since technically, the Senate was still in Session.  In January 2013, the U.S. Court of Appeals for the District of Columbia – considered to be the second most influential court, behind only the U.S. Supreme Court – ruled that another recess appointment by Mr. Obama to the National Labor Relations Board, also done while the Senate was technically in Session, was unconstitutional.  The Dodd-Frank Act requires that it must first have a director before it may legally conduct business.  Thus, until the U.S. Supreme Court rules on the legitimacy of Mr. Obama’s use of “recess appointments” when the Senate is not actually in “recess”, everything the CFPB does is of questionable legitimacy.

[3] Supreme Court Justice Potter Stewart had the same trouble with defining “hard-core pornography” in Jacobellis v. Ohio, 378 U.S. 184 (1964): “I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description; and perhaps I could never succeed in intelligibly doing so. But I know it when I see it….”  [Italics mine.]

[4] This is perhaps the most quoted line of the movie, and prophetically dead on right at the time.