LET’S TALK TURKEY: TOP THREE POST-MIDTERM ELECTION STORIES

In the weeks leading up to November 2, 2010, the financial related ranker and hyperbole achieved a fevered pitch. Whether the topic was foreclosure, banking, Dodd-Frank, or the CFPB, no one near a microphone was ever seemingly in need of oxygen. On November 11, here at BB&R, we reported on the election results and provided some perspective on their relevance to consumer finance investigation and regulation. Now that the world, and airwaves, have calmed a bit, we have taken a collective breath and with Thanksgiving in our rear view, the Lame Duck session underway and the “holidays” upon us, we pause to review the top three post-election stories that have legs.

1. Republicans are Gearing Up: Judging, as I believe my professors often did, by the sheer weight of the printed pages that we have read here at BB&R, the top post-election story is, ironically, the one with the least chance of meaningful impact. Article upon article has reported upon the GOP’s dizzyingly quick pronouncement of its intention to repeal significant portions of Dodd-Frank and change the very genetic makeup of the CFPB. Of course, the GOP has next to no chance of repealing any portion of Dodd-Frank that the Senate and White House support, and insofar as the CFPB falls under the ambit of the Federal Reserve, it will enjoy a level of independence that many in the House of Representatives will have a hard time accepting. Because the Fed is self-funded, its purse strings are not as subject to being pulled as many in Congress are accustomed. Of course, Congress will flex its muscles in connection with key appointments and some appropriations, which could affect rule making, but in the end Dodd-Frank survives and the CFPB is reality. Good money will follow bad over the next eight or nine months in a futile effort to avoid that reality, but its coming.

2. Whistling is Cool: Dodd-Frank’s new “whistle-blower” rules expand potential bounty from merely tattling about insider trading to information resulting in judicial or administrative action brought by the [SEC] under the securities laws and resulting in monetary sanctions exceeding $1,000,000. Which brings me to this: Wow! $1,000,000 is not a particularly high bogey to meet. This is one of those Dodd-Frank goodies that could well get rolled back a bit in terms of the prerequisite sanction amount necessary to trigger financial rewards for whistle-blowing but, for now, if Congress wanted an expanded whistle-blower rule with teeth, Dodd-Frank certainly seems to have accomplished that end. Just one word of caution to all you would-be whistle-blowers. In addition to being cautious of lip fatigue, remember, this is the government, which means that there are forms and deadlines. Be aware of them, or bringing down your employer (or former employer) may have to be its own reward.

3. CFPB Posts are Filling…or Are They?: Elizabeth Warren’s dance card remains perpetually crammed with high level industry meetings, speeches, events and interviews Thus, it would appear that the captains of consumer finance are making peace with the fact that she will have a role in their future. However, the buck may not stop with her after July 21, 2011. In fact, mid-November brought a new name, Melissa Bean, as a possible nominee for CFPB Directorship. Due, in part, to well-publicized links between soon-to-be former Congresswoman Bean and the financial community, the idea did not seem to get much traction. That said, no appointment has yet been made. Meanwhile, a few critical CFPB positions have been filled. Peggy Twohig and Steve Antonakes will, respectively, supervise non-depository and depository institutions. Ms. Warren has publicly supported their hiring and acknowledged that they “will play a critical role in helping to level the playing field between banks and non-banks,” which is a core CFPB mission. Additionally, UConn Law School professor, Patricia McCoy has been tapped to direct the CFPB division that will focus on protecting consumers against mortgage fraud, an issue that rings a bell from some recent reports.

Though the GOP, Dodd-Frank whistle-blower measures and CFPB evolution have likely sucked the most post-election ink, no “list” like this could be complete without a nod to the States Attorneys General as the biggest late-2010 winners. Consumer protection is squarely in the expertise wheelhouse of many Attorneys General, and Dodd-Frank’s strike against federal preemption will almost certainly result in a significant expansion of State-level financial regulation and enforcement through consumer protection laws. So, not only are the States Attorneys General front and center in the current foreclosure paperwork debacle (which is just getting started), if Dodd-Frank survives, industry leaders will soon become as familiar with their names as with Elizabeth Warren’s.