For Mick Mulvaney, the tables have turned.
Photographer: Zach Gibson/Bloomberg
Back when he was a South Carolina congressman, Mulvaney eagerly joined other Republicans in making a pinata out of Richard Cordray, the Barack Obama-appointed head of the Consumer Financial Protection Bureau. Cordray’s trips to Capitol Hill were rife with partisan attacks, as GOP lawmakers regularly accused him of ducking oversight and burdening banks with rules that crimped lending.
The hearings will likely resemble a role reversal of the Cordray era. Instead of beating up the CFPB’s director, Republicans are almost certain to praise Mulvaney for taking steps to defang the agency, which was created to crack down on abuses that fueled the 2008 financial crisis. And this time around, the outraged lawmakers will be Democrats who are expected to scold him for putting consumers at risk.
Photographer: Andrew Harrer/Bloomberg
A highlight will be Mulvaney’s faceoff with Senator Elizabeth Warren, the financial industry’s most vocal congressional critic and the CFPB’s biggest defender. Since Mulvaney took over in November, Warren has scrutinized everything from his hiring of GOP congressional aides to his decisions to drop enforcement actions. Mulvaney’s Thursday appearance before the Senate Banking Committee will be the Massachusetts Democrat’s first chance to spar with him publicly.
While analysts and banking lawyers expect lots of theatrics, they don’t expect to learn much about what Mulvaney’s doing behind the scenes to overhaul the embattled agency.
“His time will be consumed by rhetoric and political debate more than substance,” said Quyen Truong, a former CFPB official who now practices law at Stroock & Stroock.
Here’s a look at what Mulvaney has been up to and what to expect lawmakers to home in on when he testifies:
Mulvaney has promised to stop “pushing the envelope,” a term he uses to make the point that under Cordray the CFPB used questionable legal strategies to go after financial firms.
Days after he took the helm, Mulvaney put a freeze on all enforcement actions. He’s since dropped a few cases, including investigations into South Carolina-based lender World Acceptance Corp. and Ohio mortgage company Nationwide Biweekly Administration. Other investigations have stalled, lawyers say.
“The slowdown has been a relief,” said Maria Earley, a former CFPB enforcement lawyer who now represents financial firms at Reed Smith. “It gives companies more room to breath.”
Yet risks remain for companies that have been investigation targets. Some states, particularly those with Democratic attorneys general, are champing at the bit to pick up the CFPB’s slack.
“Don’t forget, state attorneys general can enforce CFPB rules,” said Joe Jacquot, a former deputy attorney general in Florida and now a partner at Foley & Lardner. “There is certainly a segment of AG’s who are concerned about a pullback in enforcement at the CFPB.”
Mulvaney has laid the groundwork to make lasting changes. Key political hires include chief of staff Kirsten Sutton and senior adviser Brian Johnson. Both previously worked for House Financial Services Committee Chairman Jeb Hensarling, a Texas Republican who has sponsored legislation that would rescind much of the CFPB’s powers.
Mulvaney also has pulled the agency’s fair-lending staff out of its supervision and enforcement team. Instead, the group is now part of the office of equal opportunity. That means staff may not have the same tools to investigate companies suspected of discriminating against borrowers.
Mulvaney has sought public input on everything from enforcement to specific rules to the CFPB’s processes for collecting consumer data. Analysts say the industry’s responses could provide a road map for how Mulvaney and his permanent successor to rein in the CFPB.
Advice to Lawmakers
Last week, Mulvaney proposed legislative changes that would strip away much of the CFPB’s independence.
He wants Congress to require that the CFPB get its funding through congressional appropriations rather than from the Federal Reserve. He also urged lawmakers to make clear that the CFPB director is directly accountable to the president, giving the White House more power to oust the agency’s leader. In addition, he argued that Congress should have final say over major CFPB rules, a situation that would make it unique among financial regulators.
Such revisions aren’t likely to happen because few if any Democratic lawmakers would likely back them.
Mulvaney has made a few symbolic changes to show there’s a new sheriff in town.
The CFPB has long been known for its bright green logo consisting of a spotlight motif that showcases “efforts to illuminate the financial landscape and foster transparency in the marketplace.” Last month, the agency unveiled a new seal that features an eagle spreading its wings across a blue field to reflect “American imagery and references to the nation’s founding documents.”
The CFPB’s fellowship program for law students has been renamed in honor of Joseph Story, a conservative Supreme Court Justice. It was previously named after Louis Brandeis, a Supreme Court Justice known for taking on banks.
Warren, who conceived of the CFPB, is eager to grill Mulvaney. In a recent letter, she called him out for not adequately answering her questions about what he’s doing at the agency.
Mulvaney blamed his unresponsiveness on Democrats, arguing that they insulated the CFPB from virtually any accountability when it was created in the 2010 Dodd-Frank Act.
“I can understand your frustration,” Mulvaney wrote in an April 4 note to Warren. “I hope very much that, together perhaps, we can
A Mulvaney and Warren collaboration might be the most unlikely outcome of all.