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Future of CFPB in Play as Warren Digs In

WASHINGTON — Sen. Elizabeth Warren, D-Mass., delivered a blunt message to fellow Democrats on Monday, warning them not to support efforts to restructure the Consumer Financial Protection Bureau.

But whether the progressive Democrat can hold the line with her colleagues — or stave off Republican attempts to rejigger the agency using filibuster reform and other unusual legislative actions — remains to be seen.

At the very least, Warren's comments are a dose of reality for the banking industry, whose representatives were beginning to predict that CFPB reform would be swiftly embraced by Democrats.

"Let me be clear: It's foolish for any Dem to think that weakening support for the CFPB is good for the country or good for us as a party," Warren said in a message on Twitter. "Anyone in Congress — GOP or Dem—who votes to weaken the CFPB will declare loud and clear they represent giant banks, not working families."

Since President-elect Donald Trump's victory last week, and GOP retention of the House and Senate, industry lobbyists have seen CFPB reform as a top priority, predicting that they can successfully replace its single director with a five-member commission.

"There is a great opportunity for the Republicans on the Senate Banking Committee to join forces and vice versa with the moderate Democrats on the committee to craft bipartisan commonsensical solutions," said Richard Hunt, president and chief executive officer of the Consumer Bankers Association. "I think A No. 1 is a bipartisan commission for the CFPB. That is a no-brainer."

Industry observers believe that Democrats may be willing to deal given an unfavorable electoral map in 2018 and fears over what will happen to the agency once Trump appoints his own director of the agency.

But Warren is a major player in Democratic ranks, and her influence appears to only be growing following Hillary Clinton's loss. With some progressives calling for Sen. Chuck Schumer, D-N.Y., not to run as Senate minority leader, Warren's message not to compromise on the CFPB may resonate.

That does not mean that CFPB restructuring is off the table, however. There is growing talk in Washington that Republicans intend to do away with the filibuster.

As the system currently stands, Republicans would need at least eight Democrats to join them in efforts to overcome a filibuster and pass CFPB reform. But if the GOP takes away that right, they would not require any Democratic support.

"The filibuster is more in doubt today than it has ever been in its entire history," said Ed Mills, a managing director and analyst at FBR Capital Markets. "It is hard to see how Donald Trump does not get his agenda passed because of an arcane rule of the Senate that has largely been supported by the Washington establishment."

Republicans can even argue that Democrats made the first move. Republicans used filibusters to block President Obama's nominees during his first term, which led Senate Majority Leader Harry Reid, D-Nev., to scrap the filibuster for nonjudicial nominations. GOP leaders are contemplating going much further, however, and possibly getting rid of it altogether.

"I don't necessarily think they do away with it immediately," Mills said. But in a fight over Obamacare, an appointment or a fight over Dodd-Frank where Democrats are motivated to dig in, he said, "Republicans will say Democrats set that precedent" of changing the filibuster rules.

Warren may have an incentive to dig in because she believes CFPB Director Richard Cordray can fulfill the rest of his term, which ends in July 2018. Under normal rules, a new director would also have to be approved by the Senate Banking Committee, where the Massachusetts Democrat has substantial influence with her colleagues.

But Cordray may not be able to hold on for that long. An appeals court ruling last month said that a CFPB director could be dismissed by the president for any reason. If that ruling stands — and the CFPB is widely expected to appeal soon — it would enable Trump to immediately fire Cordray upon taking office.

That could help persuade Democrats to support efforts to restructure the agency, fearing that a single agency director could undo everything the CFPB has done up until now.

"CFPB is a single-director agency, so who the director is means a lot," said Justin Schardin, director of Bipartisan Policy Center's Financial Regulatory Reform Initiative. "If the director changes, then what the agency does and what happens to the rules that have already been implemented, that could change a lot."

Industry representatives argue that restructuring the agency helps both political parties, giving each a voice on a board. Hunt says Democrats erred in not supporting the move earlier.

"Now you have the CFPB being a political football and its livelihood is now at stake because the Democrats were reluctant to take the offer" to change it to a commission, Hunt said. "Had you created a five-person, bipartisan commission, the CFPB would be in existence for as far as the eye can see."

But with so many moving pieces — a reform bill in play, a pending court fight and filibuster changes — it's challenging to see the endgame. Some have even suggested the CFPB could be disbanded, though that seems unlikely given its popularity with the public.

"It would be horrible politics and optics to get rid of an agency that was established to protect the little guy," Ian Katz, a director and analyst at Capital Alpha Partners, wrote in a note to clients.

Still, the battle over the CFPB is shaping up to be one of the most critical fights.

"The CFPB has always been seen as one of the most secure pieces of Dodd-Frank," Mills said. "Now it is one of the areas most in jeopardy."

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EscrowJim. Clearly from your perspective the CFPB hasnt helped. But the agency has clearly helped drain the financial swamp of predators of the sort that put people in mortgages with 60% back-end ratios. The QM has prevented the reemergence of subprime scum. And in areas like mandatory arbitration and other areas, consumers have clearly benefited from the CFPB. Given the modest staff size, it is arguably the most effective federal agency. It has saved consumers billions in a very short period of time.
Posted by idiw | Wednesday, December 07 2016 at 11:19AM ET
"Anyone in Congress — GOP or Dem—who votes to weaken the CFPB will declare loud and clear they represent giant banks, not working families."

This couldn't be more wrong. (I work in the title insurance industry, so my comments are specifically geared towards that, but I'm sure they cross over to other facets of this discussion as well.) Frank-Dodd and the CFPB have done more to run the small local banks out of the mortgage business than anything that had ever come before. Now the little guys are afraid to lend under CFPB regs and many don't have the resources to even try to keep up with the new technology and processes required for the new Closing Disclosure. Guess who that leaves? Big banks. F-D and CFPB are the most big bank friendly things that have ever been done. Yes, I realize that the CFPB is coming down hard on those big banks with their oversight, but it has already put everyone else out of business!

How has it helped working families? I don't know. I haven't seen a single stat that reflects that the CFPB has helped anyone on the mortgage lending side of things. I haven't had a single person come into our office to purchase a home who has indicated that any of the new processes have been helpful. The 3 day advance CD was supposed to be a huge game changer, but borrowers ignore it like they do everything else in the stack of docs they receive in advance.
Posted by EscrowJim | Wednesday, November 16 2016 at 1:00PM ET
Rather than ad hominem attacks with condescending and sexist overtones, as the first comment about this article does, let's have some more thoughtful and constructive comments. The structure of CFPB leadership indeed poses a challenging dilemma for the Democrats, particularly if Mr. Cordray is forced out: then it will be a case of "be careful what you wish for" (in this case, arranged for--a single-director structure). At the same time, though, recall the populist tone of the Wells Fargo hearings--those senators and representatives, regardless of party affiliation, did not appear eager to placate industry interests. Trump, meanwhile, has positioned himself as a populist, so the jury is still out regarding whom he might appoint as head of the CFPB if he had the chance. Don't assume it would automatically be someone especially friendly to the industry. Interesting times.
Posted by D Frost | Wednesday, November 16 2016 at 12:30PM ET
Someone needs to remind Pocahontas that her party lost.
Posted by truecommunitybanker | Tuesday, November 15 2016 at 8:21AM ET
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