I wrote back in September about problems with the Consumer Financial Protection Bureau (CFPB), private student loan debt, and the corrupt bargain between then CFPB head Richard Cordray and a friend given domain over a large slice of that debt, a deal from which that friend could profit handsomely. With Cordray’s departure, the deal remains in place because, in Washington, “the swamp” remains fully un-drained.
Cordray, a partisan Democrat now seeking his party’s nomination for governor of Ohio, was looking for a feather in his cap to carry into that race when he turned his attention to student loans. As I wrote at the time, citing a report from the Washington Post:
In the case reported by the Post, Donald Uderitz, who owns a private-equity firm, will make out like a bandit thanks to the CFPB “taking on” banks who engaged in collection practices the CFPB didn’t like. Since his hedge fund owns some of the delinquent loans, the Post reports “his company receives any money remaining after noteholders are paid.” In addition, he gets to administer the settlement trust. And that doesn’t come free.
The settlement gives Uderitz some administrative control over the trust and he will have the ability to reallocate collections to pay his own fees for administering the account. It’s kind of like the mob skimming casino profits.
That a politician would shine the light of government favor on a friend is not shocking. And now, as then, I’m not accusing Uderitz of being a mobster. But the idea of someone being given governing power over something from which they have a vested interest and could benefit financially, while not unique to Cordray, is not something that should happen.
President Donald Trump ran on “draining the swamp” that is the federal government, and from a regulatory point of view, he has certainly siphoned off some water. But for every gallon drained, there are others pouring more in.
Now that Cordray has resigned, his parting gift should not be allowed to stand.
The new head of the CFPB is President Trump’s director of the Office of Management and Budget, Mick Mulvaney. It’s a new direction for the CFPB, or at least the opportunity for one. But on student loans and the power granted Uderitz, Mulvaney has not reversed that decision or removed him from his unelected position. At least not yet.
Back in November, the Washington Examiner called the appointment of Uderitz “a shady deal,” saying, “Such bureaucratic overreach undermines the rule of law, weakens protections of individual rights, and ultimately opens the door to cronyism. Let’s hope that the next CFPB director sheds some light on the bureau’s shady dealings to close Cordray’s chapter as director once and for all.”
This “shady deal,” has the opportunity to set a precedent, as with all government actions, that could become the norm not through legislation, but by the simple fact that that’s what the government has done in the past. Much of what the massive bureaucracy does is simply based on the fact that it’s what unelected bureaucrats decided to do and those who follow them in those positions simply continue to do it. There’s a deeper problem at work here that Congress must address – the fact that they write vague legislation that leaves the details, the methods and the limits on power up to the bureaucrats themselves. And if there’s one thing lacking in DC it’s bureaucrats willing to limit their reach. But that’s exactly what is needed for an extra-Constitutional agency like the CFBP.
While the student loans issue is one that hits me in my wallet as I write a check to pay off mine every month, the entire concept of the CFPB is one that needs to be reined in or, preferably, eliminated.
Elimination is unlikely – as President Ronald Reagan said, “The closest thing to eternal life on earth is a government program” – so scaling back is the most we can hope for. Mulvaney should remove Uderitz and eliminate the CFPB’s meddling in private student loans. It is, perhaps, a bridge too far to hope for an immediate and complete end to cronyism (though wouldn’t it be nice?), but a good step in the right direction would be to undo Richard Cordray’s campaign action while on the government dole and drain the swamp just a little more.
Derek Hunter is a Daily Caller contributor.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.