I hate to say it, because I wasn’t a fan, but this never would have happened under George W. Bush. There was a president who got what he wanted. “You don’t like this war? Not only am I going to make it happen by hook or yellow-cake crook, I’m going to start another one just to spite you. Protest all you want. This isn’t a popularity contest.”
President Obama might want to take a look at W’s playbook, because if we ever needed him to stick a landing, now’s the time.
Last week, a three-judge panel of the U.S. Court of Appeals in Washington unanimously sided with Republican lawmakers who opposed the 2012 appointments to the National Labor Relations Board on the grounds that they were unconstitutional.
Unbeknownst to many Americans, that decision could easily bring about another recession — or worse, an economic depression the likes of which this country hasn’t seen since the 1930s. The reason: there was another recess appointment made on the same day as the three NLRB members. President Obama also nominated Richard Cordray to be the director of the Consumer Financial Protection Bureau. And unless I’m mistaken, last week’s decision sets a precedent for a full spectrum assault on the best thing to happen for consumers since mandatory seat belts.
The bad news for the GOP is that you can’t get the toothpaste back in the tube. While I suspect many Americans still don’t know much about the CFPB, there are plenty who do. They are not alone in believing that banks should be obliged by law to clearly spell out the terms of the credit cards and mortgages they peddle in language human beings can comprehend, and lenders shouldn’t be able to gouge college students without consequences, mortgage servicers shouldn’t be allowed to foreclose on families without due process, debt collectors should conduct business in a legal manner and that predatory practices in the payday loan industry must be uniformly dealt with across the land. In fact, I wonder if the Republican lawmakers would be so openly opposed to the CFPB if their constituents (all of whom are consumers) were more aware of what the agency actually does.
Unfortunately, by the time they find out, consumers may once again find themselves virtually unprotected against the financial scams that sent millions of Americans into foreclosure and caused the Great Recession of 2008.
There is a historical precedent here. This year will mark the 80th anniversary of the Glass-Steagall Act. When it was enacted in 1933, you didn’t need to visit a soup line or one of the thousands of Hoovervilles around the country to find an American who thought banks needed to be regulated. By the time it was repealed in the ’90s — four wars and several thousand hedge funds later — you’d be lucky to find someone on the street who could tell you when the Great Depression happened, much less anything about the subsequent legislation designed to safeguard America from it happening again. The current assault on the CFPB is similar to the repeal of Glass-Steagall because, in both instances, Americans on Main Street don’t really understand the legislation (much less why it is necessary), however, the Chamber of Commerce, the American Bankers Association and their Congressional retainers know all too well.
No matter what happens, from now until the case reaches the Supreme Court there will be continued uncertainty for consumers and the financial services industry. This will only serve to slow the recovery further.
In other words, if you liked the obstructionists in Obama I, you’re just going to adore the obstructionists in the sequel, where the opposition finds new (not terribly creative) ways to drive Americans off the road, thereby ensuring the “corporations are people” people stay in the business of electoral politics.
Here’s why the recess appointment became the target: Under the Dodd-Frank Act, the Consumer Financial Protection Bureau was created to enforce old laws regulating traditional financial institutions, like banks. This happened the day the Bureau opened its doors on July 21, 2011. However, it cannot write new rules, enforce new laws (like Dodd-Frank), or provide regulatory oversight to non-bank financial companies like debt collectors, payday lenders, mortgage brokers or credit reporting agencies without a permanent director. There’s the kicker.
President Obama nominated Richard Cordray, the former Ohio attorney general, who built a national reputation suing big banks that defrauded consumers during the mortgage boom. Republicans, strengthened by millions of dollars in campaign contributions from their cronies in the financial services industry, declared they would block the appointment of Cordray, or any permanent CFPB director — unless and until the president would agree to modify the organizational structure, accountability and funding process for the agency. They used a filibuster. So Obama waited, appointing Cordray as well as three members of the National Labor Relations Board when Congress left town on winter recess.
The appointments drove Republicans insane. Senate Republican leader Mitch McConnell and a number of his GOP colleagues declared the move “unconstitutional.” It was disingenuous since neither Senator McConnell nor any other Republican leaders opposed the 105 recess appointments made by President George W. Bush. Republicans used a parliamentary trick called “pro-forma” sessions (to be fair, this “pro forma” trick was invented by Democrats) whereby once every three days, some unfortunate lawmaker had to leave his family and fly to D.C. to gavel Congress into session — each session lasting between one and three minutes — and then fly home. Ironically, some argue that had Obama made the appointments the day before, they would have fallen between sessions, and thus been unassailable. To his credit, the president ignored the pro forma sessions and made his appointments anyway. Now he needs to take ignoring his enemies to a new level and pull a W: “You don’t like those appointments? I’ve got twenty more where they came from.”
The good news seems to be that the White House shows every intention of appealing the NLRB decision to the Supreme Court, but this is where the real risk lies. The bad news is that the opposition is not waiting for a Supreme Court decision. The vultures are already circling.
David Rivkin of Baker Hostetler (best known for leading the 26-state assault on Obama’s affordable healthcare act) told American Banker that financial institutions should ignore all the rules written by the Consumer Financial Protection Bureau, since “all of the things that only a director can do basically have no legal force.” Get it? Because there is no director…
Not so fast, Mr. Rivkin. The first round of a heavyweight judicial boxing match is the only thing that’s been decided. There are more rounds to come. But if the GOP opposition to the CFPB continues to win, consumers will lose.
Consider everything the bureau has accomplished in just its first year with a permanent director. It proposed easy-to-read summaries for mortgages and credit cards, a goal that has eluded older federal agencies for decades. It cracked down on tricks — like lost paperwork and “dual tracking” of foreclosures and mortgage modifications — that mortgage servicers used to reap extra fees by pushing homeowners into premature foreclosure. It banned banks from paying kickbacks to mortgage brokers in exchange for gouging home buyers, and stopped the bank practice of reaping billions of dollars in fees by writing mortgages that were designed to fail.
Up next: payday loans, debt collectors and credit bureaus. Strong pro-legitimate business, pro-consumer regulations are needed in those areas, but it’s not going to happen unless this obstructionist nonsense ends.
Richard Cordray and the Consumer Financial Protection Bureau have won over a number of of their toughest critics, including bank industry lawyers, credit unions lobbyists and mortgage industry trade groups who say the bureau has impressed them with the depth of its knowledge and the fairness of its decisions. A scurrilous lawsuit could end all that.
Republicans and the financial industry’s diehards worked tirelessly to kill the Consumer Financial Protection Bureau before it was even born, because they know voters don’t understand. It’s a win-win for them. They can pose as populist defenders against the Socialist scourge in the White House, while, in fact and deed, protecting their gravy train courtesy Citizens United.
Mr. President: The time to push back is now.
Originally posted in the Huffington Post.