Why the CFPB Is A Critical Step, In One Delicious Article

This piece, entitled “Republicans: CFPB’s funding ‘recipe for disaster’,” from CBS’ MarketWatch is notable for a number of reasons, all of them having to do with demonstrating, vividly, why the current Dodd-Frank construction of the CFPB’s funding and accountability structure is so critical to its mission: helping homeowners and consumers of other financial products.

Start with the title: Republicans making dire-sounding warnings that a government agency is a “recipe for disaster.” It’s not as if we haven’t heard that song and dance before from the GOP. But usually, it’s a more general complaint against the evils of “big government” (read: “ANY government”), full stop. However, that’s not what the GOP’s worried about here. As the rest of the article demonstrates, along with several choice quotes from a few highly-placed Republicans in Washington, what the GOP means this time when they say “recipe for disaster” is: “we don’t have any authority over it (the CFPB), which means we can’t cripple it, and we’re cranky about that.”

As anyone who’s been following the tortuous road the CFPB has taken, from conception and implementation by Elizabeth Warren up to today already knows, the CFPB was defined in the Dodd-Frank bill specifically to have a funding structure that was outside of the traditional congressional appropriations process. There was a VERY good reason for that, namely: one of the ways congress (especially this obstructionist GOP congress of the past four years or so) can kill a thing they don’t like is financially. The way it’s supposed to work, of course, is: you get enough members of your caucus to vote for something, it passes. If you can’t, it doesn’t. But with the GOP in full rout and in the minority in both houses of congress during the first two years of the Obama administration (and the preceding two years as well, to a lesser degree), they’ve had to turn increasingly to parliamentary parlor-tricks like the filibuster in order to force their will-of-the-minority upon the rest of congress and the American people.

One of these tactics/tricks congress has at its disposal is the power of the purse, as it’s called. Even if a given party or faction in congress lacks the votes to stop something which they truly oppose from passing due to its popularity with the majority and/or the American people, a committed minority can often thwart the will of the majority by jamming up that initiative’s funding later. Congress has the power to tax and spend, and even if a majority passes a bill to do this or that, funds must be appropriated to pay for it, usually separately. And without money to execute a mandate, of course, it matters little what the law permits or authorizes.

Since 2006, when the GOP entered the minority in both houses of congress – and especially since 2008 when Barack Obama was elected President – congressional Republicans have used this sneaky, backdoor-veto repeatedly. In fact, they’ve either used or tried to use it virtually everywhere they could, on any item they did not like, from funding for high-speed rail to medical aid to 9/11 first responders to using TARP funds to extend unemployment insurance to their old standby, defunding Big Bird. Sometimes, they’re not successful, many times – especially when all it requires to work is defeating a funding measure, rather than having to pass a measure (which requires more votes) – they’ve been quite successful indeed.

All of which is why the Dodd-Frank legislation very carefully specified the CFPB as an entity within – and, crucially, funded through – the Federal Reserve, which is one of the few places into which congress is prohibited by law from extending it’s financial tentacles. To be clear, in general, it’s good that congress is the place in which the power of the purse resides. If it resided in the executive, the balance of power would shift too heavily in that direction. But with a rogue GOP in congress which is increasingly about proving its points and getting its way at all costs, and about the technical letter rather than the spirit of the law, many of the assumptions upon which the regular rules are based are simply no longer operable.

I know, that sounds like it could be the lead-in sentence to all sorts of horrible authoritarian suggestions, or worse. And it’s true: down that road lies totalitarianism, fascism, and other horrors of the recent past. So I don’t say these things lightly. It’s critical to push back against the ubiquitous GOP attempts at deck-stacking in ways which still safeguard the essential balance of power and respect for tripartite rule inherent in our system, no question about it. But one of those very careful ways is exactly what was employed quite deliberately in the creation of the CFPB as written in Dodd-Frank. Putting the funding for the CFPB within another normal channel – the Fed – but outside the reach of congressional meddling ensures its autonomy and ability to function without having to either worry whether it will be de-funded, or make political compromises (with a GOP who are on record repeatedly stating they wished it never existed at all) in order to remain in existence. A CFPB subject to the funding whims of a GOP-controlled congress is a defanged and ineffective CFPB which becomes little more than another example for Republicans to use of ineffective government programs. It’s the modern GOP way, in fact: break, hobble or otherwise render ineffective as much government as you can, then complain that government doesn’t work so we should abolish or privatize as much of it as possible.

That’s why the comments in this MarketWatch piece are so hilarious, if you know the back-story:

“We have a rogue director in charge of a runaway budget for an agency whose mission is still unclear. This is a recipe for disaster that will only hurt our economy,” said Rep. Francisco Canseco, a Republican from Texas, at a hearing of the House Financial Services Committee.

Have you SEEN Richard Cordray? Or heard him speak? Does he either sound or look like a “rogue” to you? That’s because he isn’t. He’s a dedicated public servant who was Elizabeth Warren’s right hand man during the setup of the CFPB, and a defender of Ohio’s consumers and citizens prior to that. His record is lengthy and public and shows no trace whatsoever of any symptoms of being a dangerous, power-hungry “rogue.” Quite the opposite: the man’s record shows him to have been a leading scholar at Oxford University, the editor of Law Review at University of Chicago where he attended law school, and then a vigorous defender of average citizen’s rights against trampling by large financial institutions as Attorney General of Ohio. Representative Canseco knows this, so rather than impugn the man’s credentials – which would be nigh on to impossible (and which, in turn, would be why he would sail through any up-or-down confirmation vote) – Canseco simply makes vague, ill-defined fear-mongering statements about “runaway government.” And it leaves Canseco sounding like a near-paranoid, worrying about some ill-defined “rogue” that doesn’t exist in reality.

But my favorite quote in the MarketWatch piece? The one near the end, from Alabama Republican Spencer Bachus, current chair of the Financial Services committee (who famously said just before he began his chairmanship that the role of Washington should be “to serve the banks”):

Cordray and the panel’s chairman, Rep. Spencer Bachus, clashed over whether the bureau could spend frivolously. “The truth is [Cordray] could tell us the CFPB spent $100 million on paper clips last year and there is nothing Congress could do about it. Nothing,” the Alabama congressman said.

Paper clips. No, really. That’s what he said. $100 million on paper clips.

Just step back a moment, take a deep breath, and ponder the lunacy of the public spectacle of a serving U.S. Representative, one of only a handful of the supposedly wisest old heads in Washington and the rest of the country, a member of a body which is empowered to declare war and control the country’s finances, actually having no better or less-risible argument than worrying that Richard Cordray might spend $100 million on paper clips. That’s what they’re reduced to here, folks: trying to fear-monger about the waste of taxpayer funds…on paper clips.

To be more fair to Bachus than he probably deserves, he was probably being hyperbolic, intentionally choosing a ridiculous example to demonstrate his larger point that he and the rest of congress couldn’t do  anything about it if Cordray DOES misuse taxpayer funds. And in this, he’s quite correct; congress would be mostly powerless. But that doesn’t mean there’s NO constraints on Cordray and the CFPB, just – and this is the crucial part for understanding the Republicans’ pique on this issue – no congressional constraints. And that’s what really chaps Bachus, Canseco and the rest of the congressional GOP.

The real reason Bachus and Canseco and others are worried, of course, isn’t that they truly believe Cordray will be buying paper clips by the oil-tanker-load, or even that he’ll waste taxpayer money in more common, less spectacular ways. It’s because one of the main tools the GOP would expect to be able to deploy for tree-spiking pro-citizen, pro-consumer legislation which will massively benefit the average person but will do so by reining in some of the worst excesses and abuses of financial institutions, is not available to them in this particular case, due to the prescient way Dodd-Frank was authored. I imagine Barney Frank chuckled rather loudly if he read this MarketWatch article or was at the hearing in question.

Yes, it’s quite sad – and maddening – that the truth of things in America, 2012 is that today’s GOP would rather “serve the banks” than their own constituents (the real people, not the corporations) but that’s been the reality of things for quite several years now. They are intent on blocking progress at every turn, returning us to the days of gas guzzlers, incandescent light bulbs, no contraception or abortion, and – they fondly imagine – the days of unquestioned American supremacy. For once, the spectacle of watching some of the GOP’s worst offenders wax apoplectic about their impotence in this case is some very high-grade schadenfreude, for many reasons.

What? Worst offenders? Why yes, I do mean that literally, as a matter of fact: as the MarketWatch article points out immediately following his quote, Spencer Bachus is currently under investigation for having cashed-in on insider knowledge in the middle of the Lehman collapse and ensuing financial meltdown.

And THESE are the guys who wish us to take their concern for “rogue actors” wasting taxpayer dollars on late-night paper clip binges seriously? Please…