OPINION: It’s Time To End Cronyism In The Consumer Financial Protection Bureau
Milton Friedman famously said, “There is nothing so permanent as a temporary government program.” It’s funny because it’s true and sad for the same reason.
A tax passed in 1898 to help pay for the Spanish-American War wasn’t repealed until 2006. The war lasted just shy of four months, the tax lived for 108 years.
Government programs — either those designed to be temporary or permanent — always expand well beyond their original mission. Which is why reining in the Consumer Financial Protection Bureau (CFPB) is so important.
The CFPB was created by the Obama administration in the wake of the financial crisis of 2008. It was supposed to function as a watchdog for consumers against “big banks” and protect Americans from “predatory lenders.” It has morphed into an unaccountable bureaucratic monster which, like most everything in Washington, became fertile ground for cronyism.
New director of the CFPB, Kathy Kraninger, has a chance — and the obligation — to rein in this behemoth.
Under the guise of “consumer protection,” the CFPB has the potential to justify nearly any action, new regulation, or fine. That’s why who runs the CFPB is so important.
The last director of the CFPB was Richard Cordray, who used his position as a resume-fluffer to position himself for a run for governor of his home state of Ohio. The Democrat ran in 2018 and lost.
As part of his positioning himself for a run for governor, Cordray used his job to appease liberal power brokers, granting extraordinary favors to “friends” in the build-up to his campaign. One area of particular interest to me and of importance to tens of millions of Americans is the student loan industry.
Every month, I still cut my check to repay my student loans. It’s not always been easy. For millions of Americans, especially during the Obama economy, it was impossible.
Those eight years lead to massive numbers of defaulted loans. And while it may be hard to have much sympathy for someone who won’t live up to their responsibilities, the way the CFPB, which has assumed a leading role in the student loan industry, handled those defaults is more troubling.
As I wrote here back in September of 2017, “…The idea of others profiting on the backs of defaulted loans is something I find particularly annoying. Why should a wealthy hedge fund manager gain at the expense of others? Move over, why should anyone profit with the help of a government agency ostensibly created to protect Americans from rip-offs?”
Yet that is exactly what Cordray did.
As director, Cordray granted extraordinary favors to Donald Uderitz, a politically connected hedge fund manager with an enormous investment in student loans. Defaults were hurting his bottom line, as his company had purchased a fortune’s worth of the student debt.
Student loan debt is administered by the National Collegiate Student Loan Trusts (NCSLT), which bundles the debts and sells them to investors. Those investors then become responsible for collecting on those debts. But the Federal Government has more tools at its disposal to collect debts from individuals than private companies do, naturally.
While the government can withhold tax refunds, garnish wages, etc., private companies can basically only sue individuals. And with the bulk of the student loans in default being old, many more than 10 years old, proving in court the loans were actually taken out after the debts had been packaged and sold and repackaged and resold would be a Herculean task.
So Uderitz took a different tactic – he got his friend running the CFPB to grant him authority to act on behalf of the NCSLT to collect the debts his and other companies owned and pocketed a hefty administration fee in the process.
That’s a pretty sweet deal. It’s also cronyism at its worst. The Uderitz deal and any and all deals close to it should be reversed by Kraninger. The CFPB shouldn’t be picking winner and losers and no director should be rewarding their friends.
There may be nothing as permanent as a government agency, temporary or otherwise, except maybe the idea of cronyism existing in a massive government bureaucracy. That doesn’t mean they can’t be changed — that this back scratching can’t be ended.
But it will take bold, fearless leadership from within, from Director Kraninger, to declare an end to it. In fact, when it comes to cronyism in the federal bureaucracy, that’s just about the only way it can be changed.
Derek Hunter is a contributing editor for The Daily Caller, author of “Outrage, INC: How the Liberal Mob Ruined Science, Journalism, and Hollywood,” and host of “The Daily Daily Caller Podcast.”
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.