Last week the Consumer Federation of America (CFA) held its annual Financial Services Conference in Washington, D.C. It was attended by more than 150 consumer advocates, regulators, industry representatives, researchers, and journalists.
The opening session, Election Implications for Financial Services, was moderated by Rachel Weintraub, Legislative Director and General Counsel of CFA, and paired Lisa Donner, Executive Director of Americans for Financial Reform with J.W. Verret, Associate Professor at the Antonin Scalia Law School – and Senior Scholar of the Mercatus Center – at George Mason University.
Weintraub’s first question foreshadowed one of the undercurrents of the conference generally… What will be the priorities of the new Trump administration?
The answer? Basically, it’s anybody’s guess. However, folks went ahead and took some guesses. On this panel:
J.W. Verret explained that many of Trump’s economic advisors, including David Malpass and Steven Moore, are Libertarians -- not “establishment” Republicans -- and are not supporters of big banks. They favor limiting their safety net, ending bailouts, and other elements of support House Financial Services Committee Chaiman Jeb Hensarling’s proposed .
Lisa Donner said she had no idea what Trump’s policy agenda will be, but noted the contradiction between Trump’s claim that he is both for the little guy and against Wall Street, yet would designate someone like Steve Mnuchin as Treasury Secretary.
She contemplated what kind of bills we might see move forward in Congress, and thought one candidate might be the bi-partisan supported re-introduction of the Glass-Steagall Act. She also said that, while it may be easy to predict where House members stand, the Senate has taken so few votes in this arena in recent years that we simply don’t have much of a voting record to review.
The next question for the panel was specifically about Paul Atkins, the former SEC commissioner who was named to the landing team for the CFPB (as well as the FDIC and Office of the Comptroller of the Currency). (Editor’s Note: A recent Wall Street Journal article says Atkins has been depicted as an ideological advocate of small government.)
Verret began his response by saying he took contract law in school from Elizabeth Warren, and he was excited about Atkins’ leadership. He noted Atkins’ dissent to the law requiring hedge fund registration, and commented that “bi-partisan agencies are much more predictable and steady. A new director at the CFPB (though he didn’t suggest that Atkins would be this new director) will have the opportunity to change course, especially for rules that haven’t yet gone through notice and comment.”
Donner noted that the landing team position is short-lived, so she wasn’t sure how much impact Atkins might actually have. She said “We [Americans for Financial Reform] obviously feel strongly that the single director structure has worked very well. The gaping failure of [the commission] structure allowed the [financial crisis] to happen.” She added, “With a single director structure we get clarity and accountability.”
Next question – What parts of Dodd Frank do you think the industry would want to keep?
Verret said that industry would likely want to avoid the cost of switching to yet another regime. They’ve made significant investment in complying with, for instance, the Volker rule, and likely wouldn’t want to have to pivot again.
He also said it may be important for regulators to ignore complaints about the cost of compliance, and to support the “Uberization of financial services through FinTech.”
Donner added that, based on the cost or benefits of a “lawful playing field,” different people view various parts of the rules differently, suggesting that business may see the latest rulemaking activity as a positive -- providing a more level playing field.
Finally, Weinberg asked the panelists what they thought would be the impact of the PHH case against the CFPB.
Lisa Donner said, “Perhaps very little,” adding that the En Banc review stays the decision as the court considers it.
J.W. Verret said the relevant short term consequence is whether Cordray will stay for another year. Notwithstanding the PHH case, Trump could state a cause for dismissal, or he could site PHH and dismiss Cordray “at will.” Cordray could dispute either way. But the relevant Supreme Court precedent, the 1935 Humphrey’s Executor v. United States, sought back pay, not reinstatement. He predicted it would be unlikely that the goal of a Cordray dispute would be to get his job back.
Donner simply added that Cordray’s removal under such circumstances would be “astounding.”