Paul Bland, Public Justice
The people who would like to see large banks unleashed, without any meaningful regulation, want Donald Trump to fire Rich Cordray, the terrific director of the Consumer Financial Protection Bureau, or CFPB. Under the law, Trump could only remove Cordray for “inefficiency, neglect of duty, or malfeasance in office.” Banking lobbyists, who are leading the campaign to oust Cordray, say Trump would have reason to do so.
The actual reason Wall Street wants Cordray gone is pretty transparent: Under his strong leadership, the CFPB has been incredibly effective at stopping banks from cheating American consumers, and at making them give back money when they’ve taken it illegally.
As a result, Wall Street is pushing back with a well-funded campaign that hasn’t been seen since the “Swiftboat” attacks of 2004. They are pressuring conservatives in Congress, who receive tons of industry money and have no career history of working on or caring about civil rights issues, to push strained allegations that Cordray is supposedly racist. This attack against a man who has effectively enforced the Fair Housing laws, and who is strongly defended by every major civil rights group in the country, reverses the actual facts.
And while it may fly in the echo chamber of people who love banks and hate every public servant who would regulate them, it’s not going to fly with the public. Such blatant lies will not lend any air of respectability to any industry-driven take down of Cordray or his agency.
But that hasn’t stopped lobbyists from taking an infamous page from a corrupt President’s playbook.
In the weeks following the election, there has been much talk about how some of Trump’s policies and proposals, if implemented, would be “unprecedented.” But if Trump caves to pressure from banking lawyers and lobbyists — and right wing columnists — and fires Cordray, there is precedence for such a move: Richard Nixon’s firing of Archibald Cox.
For those of you who weren’t around in the 1970s and haven’t read this history, Richard Nixon was embroiled in severe scandals involving gross corruption and illegal conduct. Archibald Cox had been appointed as an Independent Special Prosecutor to look into Nixon’s illegal actions, and he was unraveling Nixon’s lies and getting to the bottom of the scandal at a rapid pace. (I had the good fortune of having Cox as a professor many years ago, and he was an incredibly smart, honest and tough man. It’s not at all surprising that he was extremely effective in pursuing Nixon’s corrupt actions.)
Faced with a watchdog who was doing his job and doing it well, on October 20 1973, President Nixon fired Cox, in an act that became famously known as the Saturday Night Massacre.
Firing Cox for effectively rooting out corruption didn’t work too well for Nixon. If President-elect Trump follows the advice of bank lobbyists and similarly fires Rich Cordray for being too effective, this illegal abuse of power won’t go well for Trump, either.
Now, some of you might be thinking, “well, the Watergate Special Prosecutor was an incredibly big deal, but I’ve never even heard of the CFPB.” So let me give a little more background.
Throughout the 2000s, a mixture of massive fraud by banks and lousy and coopted federal regulators combined to trigger a huge financial crisis that crashed the U.S. economy. In response, and over the objections of lobbyists and Congressional supporters of the big banks, Congress passed the Dodd-Frank Act, which put some badly needed limits on a system that encouraged and rewarded wide-scale fraud.
As I’ve explained before, if Donald Trump were to repeal Dodd-Frank, it would betray his promise to voters that he would side with regular Americans against Wall Street lobbyists.
The part of Dodd-Frank that has worked out most successfully has been the creation of the Consumer Financial Protection Bureau. In its first five years of operation, the CFPB has recovered more than $11.7 billion for consumers who were cheated by banks or other lenders, and has brought enforcement actions that have stopped illegal scams. It was the CFPB, for example, that put an end to Wells Fargo opening two million phony accounts for consumers without their consent.
Repealing Dodd-Frank is going to be a heavy lift. It is nearly certain that every Democratic member of Congress will fiercely fight any attempt to do so, and a number of Republicans in the House and Senate don’t want to cast a vote that blatantly sides with big banks and against consumers. While getting rid of the CFPB is very popular among large banks and their lawyers and lobbyists, it is not even slightly popular among actual Republican voters. Last week, a survey of Trump voters found that only 7% of them want the CFPB eliminated.
This statistic shouldn’t be a surprise. A whole lot of people who cast votes for Donald Trump did so because he promised that he was going to fight against banks and other lenders who cheat or overcharge consumers. In fact, on the same day that South Dakota voters overwhelmingly voted for Donald Trump, 75% also voted to ban payday lending. Few of the people who voted for Donald Trump also wanted him to let banks and payday lenders run wild.
So bank lobbyists have come up with a Plan B: Fire Rich Cordray and replace him with someone who will stop fighting to keep banks honest. After all, Trump’ has proposed putting a guy in charge of the Environmental Protection Agency who is completely in the pocket of oil companies. So why can’t Wall Street also have a regulator who will do what they want and look the other way when banks like Wells Fargo engage in massive fraud?
The suggestion that Trump should fire Cordray mirrors Nixon’s Saturday Night Massacre, and is just as dumb. The only real grounds banks have for firing Cordray is that he has been too effective, too tough and too honest, and he’s making it uncomfortable for people who want to cheat consumers. If Donald Trump jumps at the command of the banking industry lobbyists and fires one of the best public servants America has seen, he will be making a huge mistake.
Not only would such a move be plainly illegal, it would also send the same signal as trying to repeal Dodd-Frank: Trump is putting the wishes of the big banks ahead of the best interests of voters — including Republicans like those who voted to reign in payday lending in South Dakota — who oppose gutting the CFPB.
The betting here is that Trump is too smart to make this huge mistake. But if he isn’t, every American who cares about consumer protection, and opposes having co-opted and corrupted agencies side with huge corporations, needs to raise their voice loudly and clearly.
Firing Archibald Cox went pretty badly for Richard Nixon, and any dishonest move against Rich Cordray should produce a similar firestorm.
Reprinted with kind permission of the author; originally published in Daily Kos.