Ron Rubin, a lawyer and writer who used to work for the Consumer Financial Protection Bureau, discusses the nature of the federal agency with The Daily Signal’s Genevieve Wood. What follows is an edited transcript.
Wood: There’s been a lot of controversy around this Consumer Protection Financial Bureau. The head of this agency, the director, Mr. [Richard] Cordray, stepped down right before Thanksgiving. He appointed someone on his team to come in and take his place, but the president had other ideas and made OMB Director Mick Mulvaney, who we actually just saw leaving the building, the acting director instead. Ron, we’ve got a lot we could talk about here. First let me ask you: What do you think the legitimacy is of Cordray’s making the appointment he did versus Donald Trump’s appointment?
Rubin: There’s no question from a legal point of view that President Trump was correct. The Vacancies Act is what dictates who will ultimately be the acting director. It’s just a very simple question.
And instead of going into the deep legal analysis, I’ll just say that the CFPB’s own general counsel came to that conclusion and issued a memo. So did the Justice Department, so did the president and the White House. Basically, the only people who are arguing the legal argument are [CFPB Deputy Director] Leandra English and [Sen.] Elizabeth Warren and [former Rep.] Barney Frank.
Wood: Sen. Elizabeth Warren was not the original director here, but she was kind of the first head of it because when they were first forming the agency, she was a presidential appointee before she became a senator. So she’s got a lot of stake in this. In an article you wrote for the National Review, which viewers can find online, you say Elizabeth Warren built a political battleship, referring to the CFPB, and Richard Cordray deployed it. What do you mean by that?
Rubin: Well, it’s very interesting. The only organizations that I can think of where the external affairs of the media/press office is the most powerful office in an organization is a political organization. So [in] senators’, congressmen’s offices, the media office is very important and a lot of times gives the orders. And that’s what pretty much goes on at the CFPB, it’s very indicative of that.
I’ve never forgotten that one of my friends, who’s a senior rulemaking person there even now, told me that they would come up with rulemaking proposals and the media people would say to them, “No good. We can’t get a good headline out of that. It’s not a good press release.” So, even people who are Democrats, who believe in consumer protection and the mission of the bureau, would be outraged by something like this, saying, “Well, the media team is dictating what rules you’re going to write?”
Wood: But you outline in here how many millions of dollars were paid to PR firms, media advocacy firms, which primarily did advocacy for Democratic causes and campaigns. But the CFPB paid them to do advocacy for them and was kind of guiding them in terms of, as you said, what they did and didn’t do in terms of rulemaking.
Rubin: Well, that was the money they gave to outside media companies. They also have internally a huge external affairs media division. So both internally and externally, there are hundreds of advertising companies and firms in the country who they could have gone to. They didn’t go to one other firm for the last three years. Every dollar of $60 million that they’ve spent advertising themselves went to this one firm. Which, at the moment, basically the only other client that this firm has is the Clinton Foundation and Clinton-related entities.
Wood: If you’re doing a good job and you’re truly protecting the consumer, why do you need to hire a PR firm to tell everybody, or convince everybody, of that in the first place?
Rubin: You don’t. And that’s the whole point, that the big goal of this organization, the way it has been operated, is to get good PR for Elizabeth Warren, for the Democrats, and themselves, and it really should not be that way.
Wood: Let’s talk about why this was founded. We had the financial crisis of 2008. Coming out of that, you had the Dodd-Frank legislation that came forth, and within Dodd-Frank was basically the creation of what is the Consumer Financial Protection Bureau: CFPB. That was intended to supposedly protect people from greedy banks and Wall Street and all these terrible things. A lot of folks don’t think it should have ever been created. But where did it go off the rails in terms of doing any kind of good?
Rubin: I have to admit that I didn’t see what a lot of the Republican critics saw right from the beginning. Which was creating an agency where only the president can fire the director once he’s been confirmed by the Senate. And the funding goes through the Federal Reserve Bank, so Congress can’t change the funding, which means Congress basically has no way of meaningfully reigning in this agency.
Wood: And no other agency has that kind of thing, right? The Department of Education has to lobby for their dollars before Congress, all the agencies have to go before Congress and make a budget, but CFPB does not.
Rubin: I’m not 100 percent sure that there might not be some very minor agencies through the government, but nothing with the kind of powers that this agency has. The simplest explanation is absolute power corrupts absolutely. And even the best-intentioned people, given the ability to have no oversight, will end up going off the rails and covering up things that they do wrong. When finally Mr. Mulvaney and Republicans take over, you’re going to see what’s been going on inside this agency for the last six years.
Wood: Let’s talk about that briefly, because you also bring this up in your article you wrote for National Review. And you talked about the fact that they’ve been hiding the bureau’s failure. Interesting, we’re right down the street here from a Wells Fargo branch, and there was a scandal going on there not too long ago. The very kind of thing that CFPB was supposedly created to discover, yet they didn’t.
Rubin: No, and it’s hard to say which is worse: the fact that they didn’t do their job or the fact that they tried to take credit for other people doing their job. They had their examiners going into Wells Fargo almost from the day they opened for business in 2011. For almost two years they didn’t find anything. And then there was a huge exposé in the Los Angeles Times in December of 2013.
You would think at that point they would start doing an investigation. But they went off and they were doing things that they shouldn’t have been doing, which was trying to regulate auto dealers, which is the one thing that the Dodd-Frank Act forbids them from doing.
So they’re off wasting their time doing that, and they let the Office of the Comptroller of the Currency and the Los Angeles city attorney do investigations. And then they come in at the end and basically negotiate a big fine because the law allows them to fine almost anything. And for all the world it looks like they’re the heroes.
Wood: But they didn’t do the hard work?
Rubin: No. And not only did they not do the hard work, but in the year … since it’s come out that if they had done an investigation starting even in 2013, there were a whole lot of other things that Wells Fargo had done wrong that they didn’t detect. And in the last year, Wells Fargo has been self-reporting things. So not only did this all go on for that long, but their own settlement didn’t adequately cover what it should have covered.
Wood: You talked about how they have put fines on many a bank and financial institution. What happens to those dollars when they come back into CFPB? Do those dollars go to all the consumers who have been harmed by financial institutions? Where does that money go?
Rubin: That’s kind of the interesting thing. Technically, you can say they gave that money, the $12 billion, they keep saying that they gave it back to consumers who are harmed. But really what happens, for example, in the case of Wells Fargo, the restitution portion was $3 million and then there was $100 million in civil penalties. Wells Fargo victims probably didn’t get that money.
What happens is at the end of the year it all goes into a fund. They’re allowed to give it to a trustee. I’m sure it’s a Democratic trustee, and trustees make a lot of money from the money they distribute. And then they can look and find any other victims in other CFPB matters who they feel were not adequately compensated and give the money to them. So they’re allowed to say that they gave the money back to consumers. But, for example, probably very little of that $100 million made its way back to actual Wells Fargo victims.
Wood: You know Mick Mulvaney made the comment when he first got into the building, “I’ve been going through the files here and looking at my responsibilities in my job description, and it would scare most people out there to know how much power I have.” They have the ability to not only fine these institutions but then decide who they want to give the money to.
Rubin: Right. You know the cliché is judge, jury, and executioner, and also distributor of the fines that they collect. There’s never been anything like that in the entire U.S. federal government.
Wood: When you talk about the failures on Wells Fargo, you talk about how they want to regulate car dealers, put fines on them; the inspector general admonishments they’ve gone into; the oversight investigations that Congress has tried to do that the CFPB has held off of. You say there’s even some sexual harassment charges against CFPB managers that may now come to light. Is that why you believe Cordray was so intent on appointing his deputy? He was hoping that people wouldn’t find these things out?
Rubin: When I worked for the House Financial Services Committee, I just know the things that they were asked for, like documents. For example, in the Wells Fargo case, they were asked for documents explaining how they did their investigation. And if there was one document that was relevant it was called the action memorandum. Basically, the enforcement division’s memorandum to the director of why they wanted to settle this matter for $100 million. And that was one document they did not turn over because it was very damning. Finally, he took a year to get it.
But you saw, for example, that the enforcement attorneys said you could have gotten up to $10 billion settlement instead of $100 million. And it was very clear from the document that they did very little in the investigation, which was contrary to what Director Cordray testified to in front of Congress. So there’s just an awful lot of things that are going to come out.
Wood: What do people need to know about it? Maybe the history and where you think this ought to all play out? And some people are calling for abolishing the bureau itself. But where does it go from here, and what do people need to know?
Rubin: I think the most important thing is, however this plays out, there needs to be guardrails in place so that something like this can never happen again. I get so angry at basically the argument from Elizabeth Warren and Barney Frank and the Democrats on the other side, [Rep.] Maxine Waters, is that somehow Republicans all love banks, and they can’t be inside this agency, they don’t like law enforcement, they’re happy to have consumers get ripped off. And that’s just nonsense.
Traditionally, Republicans were the party of law enforcement. And all Republicans are certainly not billionaires, almost all of them are not millionaires. But they’re all consumers and none of them like to get ripped off. So this is just nonsense about the only people who can do consumer protection are Democrats. It needs to stop. It’s insulting.
Wood: I have seen you say in other interviews that the majority of people working at CFPB have been Democrats. And if you’re a Republican, you didn’t really want to raise your hand and say anything.
Rubin: I think Fox this morning said that 537 employees donated to Democrats and one donated to Mitt Romney’s campaign. I didn’t make any contributions to that campaign. I’m still trying to figure out who the one person was.
Wood: Ron, thank you very much. You’ve really come out and shed a lot of light because you’ve been inside the agency and many people have not. So thank you very much for talking with us.
