Banks, consumer groups stir up backlash against potential CFPB pick
WASHINGTON — National Credit Union Administration Chairman J. Mark McWatters has not even been announced as President Trump's pick to run the Consumer Financial Protection Bureau, but his potential nomination already is uniting several diverse groups in opposition.
Since news of McWatters’ potential pick first broke in American Banker in December, banking industry representatives have criticized the idea of appointing him to the CFPB post over concerns that his past backing of the credit union industry poses a problem. As NCUA chairman, McWatters has publicly stated support for credit unions getting preferential regulatory treatment over banks, due to what he suggests is a safer business model.
“I would plead with anyone who has even the slightest concern about the ever-expanding power of the fourth branch of government to reject the idea of appointing an activist agency head like McWatters to lead the most unaccountable agency ever created," said Utah Bankers Association President Howard Headlee. "I can’t think of a more disastrous combination, not just for community banks, but for the American economy.”
The focus on McWatters sparked opposing op-eds in American Banker, from a community banking spokesman blasting the idea and a credit union representative defending McWatters. Camden Fine, chief executive officer of the Independent Community Bankers of America, said, "The CFPB should not be led by the head of an agency that has acted as a cheerleader for the industry under its oversight."
"Rather," Fine said, "it requires an even-handed official with experience in the broader commercial banking sector."
But Dan Berger, president and CEO of the National Association of Federally-Insured Credit Unions, shot down that notion in another op-ed, calling McWatters “more than qualified.”
“The suggestion that he would prefer credit union interests over those of banks as director of the Consumer Financial Protection Bureau, as the Independent Community Bankers of America suggests, is just fantasy,” Berger wrote.
The central basis for community banks' opposition is their concern that McWatters could favor a regulatory regime that benefits credit unions. For example, in a July 6 letter to former CFPB Director Richard Cordray, McWatters argued that credit unions' not-for-profit status should afford them an easier regulatory burden.
“As not-for-profit, consumer-owned and -controlled financial institutions," McWatters wrote, federally insured credit unions "serve a unique, positive role for consumers in today’s financial services marketplace. I believe that role can and should be distinguished from the role played by for-profit, investor-owned and -controlled financial institutions.”
So far, opposition to McWatters has not come from any specific banks. In addition to the ICBA, representatives of the American Bankers Association have privately expressed concerns about McWatters, although none have gone on the record. Groups representing just large banks have appeared to stay silent.
Yet progressive groups have also come out against McWatters, criticizing his past legal work as a finance and tax lawyer at an international law firm, as counsel to an international hedge and private equity firm, and for his work at the NCUA. That industry experience is in contrast with Cordray, who was previously Ohio attorney general before running the bureau.
“You can’t expect somebody like McWatters is going to come into the CFPB and work vigorously to hold the people he used to represent accountable,” said Karl Frisch, executive director of Allied Progress. “He has been an advocate for industry in his current post and there is no reason we shouldn’t think he would be an advocate for industry if he is nominated and confirmed.”
It is unclear if the administration is intent on nominating McWatters. But for banks that oppose him, it could be critical to scuttle the nomination before it is sent to the Senate. Since only a majority is needed to move the nomination, the bar is high for rejecting any nominee.
According to sources, McWatters is seen by some as more measured and moderate than other names that have been floated as CFPB director, suggesting he could be easily confirmed. However, others also suggested that some Republicans on the Senate Banking Committee would prefer a more conservative pick who would go further to reverse regulations.
Opposition to McWatters has also surfaced on the far right. An article in Breitbart last week criticized McWatters for being too moderate and willing to compromise. That prompted House Financial Services Committee Chairman Jeb Hensarling, R-Texas, to issue a statement rebutting the story. (McWatters is a former aide to Hensarling, and the two are friends.)
“Having worked closely with Mark in the past, I know him to be incredibly smart, a real free market conservative and an effective reformer,” Hensarling said.
Some observers dismissed opposition to McWatters as an effort being led by a few special- interest groups.
“He’s a highly regarded financial regulatory lawyer eminently qualified to be CFPB director,” said J.W. Verret, a banking law professor at George Mason University's Antonin Scalia Law School and former senior counsel at the House Financial Services Committee under Hensarling.
“I would characterize any opposition as not coming from industry itself," Verret said, "but rather from Washington lobbyists manufacturing controversy where none exists.”