Banking Law

Last week, the Treasury Department issued a press release that announced the appointment of the General Counsel for the Consumer Financial Protection Bureau and the GC's Deputies. All members of the group graduated from top law schools (where, I'm sure, they excelled academically) and all seem to have experience somewhere in the federal regulatory bureaucracy at some point in their careers. Finally, all of the Deputies have the word "litigation" sprinkled throughout their job histories.

Interestingly, nowhere in the descriptions of the work histories of the General Counsel or any of his deputies do the words "consumer" or "financial" appear. None have any banking or financial institution experience, or consumer credit experience. The GC does have an excellent work history in the telecommunications industry and the FCC, and his deputies have a great deal of experience serving as lawyers to legislative committees of the US Congress, and as civil and criminal litigators and enforcement specialists in private practice. Ms Warren proclaimed that this "team...understands the economic pressures facing consumers across the country and is dedicated to leveling the playing field between lenders and families and bringing commonsense solutions to complex problems." Parsing their resumes, I don't see the words "economic," "lenders," or "families," either.

Although it is too soon to tell how well these obviously bright people will function in a bureau whose primary mission is to regulate consumer financial products and services (and while their at it, to "level playing fields"), a logical preliminary prognostication might be that the choice of these people out of gate, which we assume was made "de facto" if not "de jure" by "Special Advisor" Elizabeth Warren, indicates that Ms. Warren wants to set the agenda on what consumer laws mean as far as the CFPB is concerned, and she doesn't want dissenting voices from the bureau's legal department who might have the actual experience and knowledge of consumer regulatory law to challenge her. She wants investigators, enforcers, and litigators to carry out the mission as she (and her fellow true believers) defines it, and to carry it out with the skill that people with such experience possess, but not to tell her to wait a minute because she might be on shaky legal ground.

Ms. Warren has spent a great deal of time since Dodd-Frank was passed and the president decided to circumvent a confirmation hearing for Ms. Warren, by publicly and privately "reaching out" to bankers and other financial industry representatives. She wants them to believe that she will take into account their "legitimate concerns" in formulating, interpreting, and enforcing consumer laws and regulations. She could have made a definitive statement in this regard by picking as the CFPB's first general counsel a partner from a national law firm with extensive experience in consumer financial law and regulation, or someone from one of the federal or state regulatory agencies with extensive experience and industry credibility for fairness. In other words, someone with actual consumer financial regulatory experience who is known to be credible when stating that he or she understands the consumer financial industry's concerns. I could have given her a few names. That she did not is not going to give the opponents of the CFPB, who are legion, any reason to consider calling off their jihad to destroy the agency with one sword stroke or a thousand cuts administered over time.

I think these appointments also support what I concluded when Richard Cordray was made head of the CFPB's Enforcement Division: "There will be blood."

On the other hand, you can take any of my predictions (or fears) as a mere flip of a coin. Last April, I got all doe-eyed over the fact that the new Banking Commissioner in Colorado, Steve Strunk, came out of the banking business. I said at that time that "he's probably going to do well at the state level." In December, it was announced by the Colorado Department of Regulatory Agencies, which oversees the Colorado Banking Department, that Mr. Strunk was leaving "to return to the private banking industry." In private conversations, Colorado bankers told me that they were very glad to see the return of acting commissioner Fred Joseph. Based upon that excellent prediction of mine, I assume most blog readers will assume that the CFPB will completely understand the concerns of the financial industry, be moderate and judicious in its regulatory and enforcement decisions, and usher in a new era of peace and prosperity not merely for consumers and consumer lenders, but for the world at large.