You would think that, of all institutions, Big Banking would be glad to see the Consumer Financial Protection Bureau in their rear-view mirror. This was the unaccountable, unconstitutional brainchild of Senator Elizabeth Warren (D-MA). Senator Warren, we might note, on a scale of economics knowledge ranging from AOC (D-NY) at zero to Thomas Sowell (National Treasure) at 100, comes in at 1/1024th.
The CFPB has been sticking their bureaucratic noses into everything the nation’s banking concerns have been doing since they got started. So why would the big banks feel the need to preserve the CFPB today?
Competition.
For years, American financial companies have fought the Consumer Financial Protection Bureau — the chief U.S. consumer finance watchdog — in the courts and media, portraying the agency as illegitimate and as unfairly targeting industry players.
Now, with the CFPB on life support after the Trump administration issued a stop-work order and shuttered its headquarters, the agency finds itself with an unlikely ally: the same banks that reliably complained about its rules and enforcement actions under former Director Rohit Chopra.
That’s because if the Trump administration succeeds in reducing the CFPB to a shell of its former self, banks would find themselves competing directly with nonbank financial players, from big tech and fintech firms to mortgage, auto and payday lenders, that enjoy far less federal scrutiny than Federal Deposit Insurance Corp.-backed institutions.
So competition is now bad, according to these banks? A return to a system that, before CFPB started up in 2011, seemed to be working just fine? Oh, it wasn’t perfect. It’s still not perfect. It never will be perfect because there is no perfection in a world run by imperfect people. But it worked — and we didn’t have an arguably unconstitutional, unaccountable government bureaucracy sucking up taxpayer money.
But here’s the part that should really jump out:
“The CFPB is the only federal agency that supervises non-depository institutions, so that would go away,” said David Silberman, a veteran banking attorney who lectures at Yale Law School. “Payment apps like PayPal, Stripe, Cash App, those sorts of things, they would get close to a free ride at the federal level.”
The shift could wind the clock back to a pre-2008 environment, where it was largely left to state officials to prevent consumers from being ripped off by nonbank providers. The CFPB was created in the aftermath of the 2008 financial crisis that was caused by irresponsible lending.
Did you get that key sentence? Here it is again:
The shift could wind the clock back to a pre-2008 environment, where it was largely left to state officials to prevent consumers from being ripped off by nonbank providers.
Bulls-eye. State officials handled this, and that’s precisely how it should be handled.
See Related: Acting CFPB Director Freezes Funding for the Agency
Judge Blocks Trump Admin From Mass Firings, Restrains Acting CFPB Director Vought From Doing Job
Forget the payday loan places. Forget the cash apps. Forget the other “nonbank providers,” who the big banks are suddenly worried they’ll have to compete with on the same playing field that was in place before 2011. Look at the Constitution. Neither Congress nor the executive branch has any enumerated power to regulate the voluntary offering of or acceptance of loans between banks and private parties. The states, arguably, can do so. That’s where the Trump administration’s efforts, by accident or by design, would send the CFPB’s role back to — and that’s where it belongs.
Federalism. It’s a great thing.
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