Republican lawmakers are investigating whether a senior federal official used knowledge of mortgage rules he helped create to profit through a consulting firm he founded only two months after resigning from his old position.
A recent letter from the House Oversight and Financial Services Committees urged the Consumer Financial Protection Bureau to provide documents detailing the communications between its former deputy director Raj Date and the bureau since Date founded his new firm in March 2013.
“It appears that former CFPB employees are now offering financial products in a market sector created by the very rules they were in a position to influence while working in senior leadership positions at the CFPB,” the letter reads.
“This conduct raises serious questions about the integrity of the CFPB’s rulemaking process and the conduct of some of its most senior former officials.”
Three other former senior CFPB officials, Gary Reeder, Chris Haspel and Mitch Hochburg, were also named in the letter. These individuals worked with Date in crafting new, stricter rules on qualified mortgage lending, leaving the Bureau soon after he did to join him at the new firm.
When Date left the CFPB in January of 2013, he claimed he was doing so to spend more time with his family. Within two months, he had founded Fenway Summer LLC, a consulting company that guides clients through the regulatory labyrinth he and his colleagues created.
“My real concern… is senior officials from a new agency leaving the agency to set up a single consulting firm and then banks believing they need to hire that firm in order to get on well with the agency,” said Richard Painter, a financial expert and former ethics counsel to the Bush White House, in an interview with The Daily Caller News Foundation.
Painter believes Raj Date and his colleagues created “an extortion racket in spirit, even if no law is violated.”
Other experts view the timing of the move as particularly suspect. “Two months seems highly unusual,” said John Berlau, a CFPB expert at the free-market Competitive Enterprise Institute.
While stressing that there is nothing inherently wrong with former government employees taking a related job in the private sector, Berlau told TheDCNF that “people usually wait at least a year, and usually there are rules requiring waiting at least a year for lobbying one’s agency after leaving it. There’s a ‘cooling off’ period.”
“It illustrates how the CFPB lacks mechanisms of accountability that most other agencies have,” Berlau said. “There should be further investigation of whether there is indeed favoritism towards clients of [former] CFPB staffers, and the CFPB really needs to get its rules in line with those of other agencies on its former employee lobbying and consulting activities.”
While most senior federal employees are required by law to wait one to two years after retirement before lobbying in a related industry, it’s unclear whether the CFPB falls under the same framework. The Bureau has been criticized for being immune to many of the rules restraining other agencies, and many argue that it is largely unaccountable to either the president, Congress or the courts.
After a contentious two-year standoff over the bureau’s lack of oversight, Senate Republicans finally confirmed CFPB Director Richard Cordray last month in order to avoid a threat by Senate Majority Leader Harry Reid to change Senate filibuster rules.
The lawmakers’ letter gives the CFPB until August 14 to turn over the relevant documents, which also include records on the drafting of qualified mortgage regulations and information regarding the conception and design of Fenway Summers LLC.
But Berlau worries the Bureau may simply ignore the request. “They don’t get their appropriations from Congress, so they can take their own sweet time in replying or not reply, and Congress has very limited options,” he said.
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