American Elephants


The Consumer Financial Protection Bureau Mishandled Their Budget —And Lost the Documentation! by The Elephant's Child

Richard-Cordray

The ever-compassionate liberals in the administration felt that those dumb Americans out there needed a government agency to protect them from being defrauded by financial institutions. They created the brand new Consumer Financial Protection Bureau (CFPB) to look into abuse complaints filed by consumers. Money matters are hard.

Therefore, you should not be surprised that the aforenamed Bureau developed to help consumers with matters financial —  has just been investigated over mishandling of their budget. They decided to renovate the CFPB headquarters in Washington D.C., but a report from the Inspector General for the Board of Governors and subsequently released by the House Financial Services Committee on Oversight and Investigations, said that the CFPB failed to secure funding approval. The report concludes that the entire renovation project has “no sound basis” at all. With updated costs calculated, the project is expected to total $215 million dollars, amounting to $120 million dollars in purely excess spending.

CFPB didn’t follow its own guidelines for obtaining approval for the renovation, and the Inspector General was unable to locate any documentation on the decision to renovate the bureau’s headquarters at all. The square footage of the CFPB renovations are calculated to cost $590 per square foot, which can be compared to $334 per square foot for the Trump World Tower, and $330 for the Bellagio Hotel and Casino in Las Vegas. And like the IRS and the EPA, the CPFB has also lost their documentation. It seems to be a communicable disease around Washington.

When the Dodd-Frank Act passed, Democrats in Congress and the White House made the CPFB unaccountable to taxpayers and to Congress. The result of that boneheaded decision is that you now have a Washington bureaucracy spending as much as they want on whatever they want.

The head of the CFPB, one Richard Cordray, was appointed during a “Congressional Recess” when Congress was in session, so the agency had to have a do-over by court order. In only two years the CFPB grew from zero to 900 employees. They devised a 1,099 page proposal to streamline the mortgage process. The creation of the blueprint for a more “consumer-friendly” mortgage is described in a 533-page report titled “Evolution of the integrated TILA-Respa disclosures.” They found the most effective way to reduce confusion surrounding the APS (annual percentage rate) was to add the simple statement “This is not your interest rate.” They hired an outside organization to redesign the mortgage documents at a cost of nearly $900,000. For the next year, 2013, they requested a 32% budget increase to $448 million.

This has been another milestone in Congress’ ceaseless quest to protect us from ourselves, Congress in 2009 compelled credit card companies to confirm an applicant’s ability to pay before approving an account. Lawmakers apparently decided that Visa, MasterCard, Discover and others somehow lacked the incentive to manage their own credit risk (as opposed to the elected officials who had racked up $1.2 trillion added to the national debt that year).

In the name of consumer protection, the CFPB, in a stunning repeat of the conditions that led to the mortgage crisis, has demanded that Banks forget prudent banking rules and expand fair lending —or else! They have put out a 48-page “Fair Lending Report” which urges banks to review home, automobile, business and student lending data for “racial disparities in pricing  and underwriting. It also advised banks to put staff through racial sensitivity training and to aggressively market loans in recession-torn urban areas. The report mentions “discrimination” no fewer than 51 times, and warns lenders that CFPB regulators, with federal prosecutors, will be launching reviews of their lending practices. I’m so glad we have a financially sophisticated agency to help poor dumb consumers obtain loans that they will not be able to afford to pay off, but I worry that they are not financially sophisticated enough to know that we have been through this all before.

CFPB chief Richard Cordray says he is coming up with new rules to crack down on creditors and their-party debt collectors who “hound” black borrowers more frequently than white ones. The agency solicited more than 30,000 complaints that allegedly prove creditors are abusing debtors. But they just took borrowers’ word that they don’t owe what they owe. A recent federal study shows that more than 96% of such complaints are “frivolous.”

Redistributing wealth by letting debtors and deadbeats off the hook for their debts is not helpful for the economy, for blacks, nor for the national polity.

The Dodd-Frank bill was widely criticized as a response to the financial crisis, because it did nothing to deal with “Too Big to Fail” bailouts. The famous “toxic assets” we heard so much about were loans made to people who could not afford to repay them, because of Democrat demands that bankers ignore the rules of prudent banking, and overlook minimum credit scores in order to increase home ownership among minorities.

The American Bankers Association has issued a “fair lending toolbox” to its 5,000 members to help them avoid disparate impact probes. Credit Unions are also worried. The CFPB is about perceptions, not facts. I don’t know if they have their own SWAT team yet.

If minorities have trouble getting loans, the response should be to give them help in raising their credit scores and living within their means — not forcing banks to make riskier loans. We’ve been there and done that, and it didn’t work out well for the taxpayers or for minorities.




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