Since today is the “day after” Richard Cordray’s confirmation as CFPB Director, it is perhaps fitting for me to be writing about a book that provides some history of the CFPB. During my recent summer vacation at the New Jersey shore, I read Larry Kirsch’ s and Robert N. Mayer’s recently-published book “Financial Justice: The People’s Campaign to Stop Lender Abuse.” While not exactly beach reading, the book nonetheless tells a compelling story from a consumerist perspective of how the CFPB was created. Many other books have been written about the economic meltdown that began in 2008. Those other books focus on the factors which led to the near total collapse of our economic system and do a lot of finger pointing at Wall Street, typically claiming it was the alleged greed of investment bankers that led to the creation of exotic mortgages that consumers were unable to repay during a soft real estate market.
What sets “Financial Justice” apart from all the other books is its laser-like focus in chronicling the history of how a group of consumer advocacy groups spearheaded by a newly-created organization called Americans for Financial Reform used the economic meltdown to lobby for the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act. While the Dodd-Frank Act consists of 16 titles and covers a wide range of topics having little or nothing to do with consumer protection, “Financial Justice” discusses only the two titles of the Act—X and XIV—which involve the CFPB.
As an industry lawyer, I admit that I had not previously considered the pivotal role played by consumer advocacy groups with limited financial resources and often varying priorities. The book explains how these groups were able to organize themselves so effectively to lobby for the CFPB’s creation. I had naively assumed that with a Democratic President and a House and Senate controlled by Democrats, it would be very difficult, if not impossible, for the industry to prevent the CFPB from being created. I was clearly wrong. Even under those circumstances, it still took a massive effort by Elizabeth Warren (who the authors call a “policy entrepreneur”), Heather Booth (a much lesser-known community organizer) and scores of other consumer activists to create a lobbying force that was able to counter the opposition of business groups. While the consumer groups were able to retain in the final bill almost their entire “wish list,” they were unsuccessful with respect to two things which the authors describe in much detail – abolishing National Bank Act preemption of many state laws and blocking an exemption for auto dealers.
Messrs. Kirsch and Mayer have written an exhaustively researched (with more than 54 pages of endnotes) and readable book that should be of interest not only to persons like myself who read practically anything and everything related to the CFPB, but also to consumer advocacy groups interested in a blueprint on how to organize an effective lobbying effort.
The authors spend very little time describing how the CFPB was stood up after the enactment of Dodd-Frank. The book does not describe the tortuous path taken by President Obama to obtain Senate confirmation of Richard Cordray as CFPB Director. (What has puzzled me is why President Obama delayed in nominating anyone as the first Director. It certainly would have been easier to have obtained Senate confirmation of a Director shortly after the enactment of Dodd-Frank on July 21, 2010.)
Also not discussed in the book is why consumer advocacy groups failed to lobby for a more effective provision in Dodd-Frank dealing with how the Bureau would be managed in the absence of a Director. As we have previously noted, Section 1066 of Dodd-Frank conferred on the Secretary of the Treasury or his delegate the responsibility of managing the Bureau if there was no Director. However, probably through a drafting glitch, the Act does not empower the Secretary or his delegate to supervise, investigate or initiate enforcement actions against non-banks.
Fortunately for Democrats and the CFPB, as a result of Republicans having relented on Mr. Cordray’s nomination, any potential consequences of this glitch may be moot. Now the question is whether Republican Senators will continue to press for structural changes to the CFPB and additional oversight, including making the CFPB subject to the appropriations process. Perhaps, the outcome will provide fodder for a sequel to be written by Messrs. Kirsch and Mayer. If that happens, I know what my beach reading will be during my next summer vacation.