Future of CFPB?

Posted by kevin on May 12, 2015 under Foreclosure Blog | Comments are off for this article

I do not know what the future of the Consumer Financial Protection Bureau will be. Clearly, a lot depends on who wins the next presidential election. But, I do know the the CFPB is necessary.

I love to listen to Larry Kudlow on the radio and watch him on CNBC. He is a Reagan republican who worked for Bear Stearns for awhile. He believes in free trade, smaller government, and less regulation. He believes in the free market. He is articulate and energetic. I agree with a lot that he says, except when it comes to governmental regulation of financial institutions.

Well, I do believe in free markets to an extent. But I do not believe that we should be living in a “caveat emptor” society. Believe me, I have seen enough chicanery (over my entire 35 year career but especially in the last 8-9 years) to come to the conclusion that regulation is necessary to not only protect taxpayers but also to protect the players on Wall Street and the too big to fail banks from themselves.

There is something perverse going on here, however. You would think that after the $25 billion settlement and other multi-billion dollar settlements, the players would understand that they have to fly right. But every month or two, there is a new scandal, investigation, settlement. Just this past week, Ocwen entered into a $150 million settlement of a class action in Florida which alleged kickbacks on force placed insurance. The class members got $140 million which comes out to a less than princely sum of $350 per claimant, and Ocwen denied any liability.

The CFPB went after Wells Fargo and JP Morgan Chase and Genuine Title Co. Over 100 Wells Fargo employees took kickbacks from Genuine to get the title work associated with the loans. WF had to pay $24 million in penalties and another $11 million to consumers. JPMC engaged in the same behavior but at a lesser magnitude.

Obviously, monetary penalties are not stopping the players from playing. What will? Short of jail terms and long term suspensions from the industry, the only other method is enforcement of strong but fair regulation of the industry. Lord knows judges in judicial foreclosure states are not stepping in to fill the void.

Not just regulation, but regulation and enforcement. It does no good to have the regs on the books if the enforcement is weak or intermittent. The SEC dropped the ball. The Fed has eviscerated Truth in Lending by drafting regs and especially staff commentaries that are so pro-industry that you have to shake your head. But let’s be practical. Do you really expect an SEC staff attorney or Fed examiner making $75,000 per year coming down hard on Wall Street or Too Big To Fail Banks when that regulator is probably looking at the regulated class for his or her next job at $150-200K per year. I don’t think so.

So, maybe you just throw up your hands and blather about the conflicts of interest and inherent corruption of the system. Or maybe, you do something about it. At this point, the CFPB may be one of the few regulators who have remained untainted, at least at this time. Therefore, it must stay in business.