Wednesday, September 15, 2010

Appointing a Director to the CFPB

Commentary: by Jonathan Foxx

Jonathan Foxx, former Chief Compliance Officer of two publicly traded financial institutions, is the President and Managing Director of Lenders Compliance Group, the first full-service, mortgage risk management firm in the country.

Many clients and colleagues have asked me why it is that a Director for the newly legislated Consumer Financial Protection Bureau (CFPB) has not been appointed by this point. After all, the financial reform legislation became the law of the land on July 21, 2010. It is now over two months later and there is still no appointment to that post.

The reason for the delay can be given in one word: politics.

At this point, there really is no excuse for the usual cover story that explains such delays - "getting it right" in finding the most qualified person.

Would you think that the person is qualified who actually initiated the concept of the CFPB and has advocated for its implementation all along - before the politicians got their hands on the idea? Would somebody who has been a consistent public voice for consumer protection advocacy be qualified?

How about an individual who has published numerous scholarly articles, and teaches contract law, bankruptcy law, and commercial law at Harvard Law School - and has taught law at several top law schools - is that a decent enough credential? Indeed, somebody whose legal expertise and experience have led to being considered a nominee to serve as a Supreme Court Justice, for the position previously held by Justice John Paul Stevens (and now held by Justice Elena Kagan) - that kind of legal skill and integrity - would that qualify?

Given the "mortgage meltdown" and Wall Street's financial fiasco, what about choosing the person who actually is the chair of the Congressional Oversight Panel, charged with investigating the Troubled Asset Relief Program (otherwise known as "TARP," and otherwise known as the "Bailout")? Maybe somebody willing to challenge the U. S. Treasury Department's handling of the Bailout and demanding more accountability?

Maybe a mature person of 61 years of age, somebody who is not an ivory tower scholar, having grown up in Oklahoma, attended non-Ivy League colleges, and received a JD from Rutgers University? Think about a person who has been the Vice President of the American Law Institute as well as a former Sunday School teacher.

That person is Elizabeth Warren.

Only one problem: politics. Inscrutable politics.

For instance, the retiring Senator Christopher Dodd (D-CT), who led the Senate's work on the financial reform legislation, has been making statements that indicate an unwillingness to understand or accept his own law. That law, eponymously named after him and his cohort in the House, Barnie Frank (D-MA), provides for an Interim Director, appointed by the Treasury Secretary - and the appointment does not require the Senate's approval. Yet Senator Dodd has said that such a power is not in the new law and the Senate's approval is required. Maybe he should read what he signed!

The Dodd-Frank Act's Title X, Subtitle F - "Transfer of Functions and Personnel; Transitional Provisions," Sections 1066 (a) and (b), inter alia, specifically state that the Treasury Secretary is "authorized to perform the functions of the Bureau" and may provide "administrative services necessary to support the Bureau before the designated transfer date" of the many regulatory authorities to it.

In other words, the Treasury Secretary runs the Bureau until such time as the Bureau runs itself as an agency within the Treasury, and therefore the Treasury Secretary has the authority to appoint an Interim Director. An Interim Director appointment would likely lead to a permanent Director position, but, given the spectacle of DC politics recently, that may also lead to yet another partisan blockade or filibuster.

So why not get started right now?

Meanwhile the public is waiting and wondering.


So, What Do You Think?

I would welcome your comments and views.

Please feel free to email me at any time.

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Lenders Compliance Group is the first full-service, mortgage risk management firm in the country, specializing exclusively in mortgage compliance and offering a full suite of hands-on and automated services in residential mortgage banking.