There Is Only One Number One (even if for just one week)

At the risk of spraining our elbows whilst patting ourselves on the back, BB&R is proud to report that we were this week's Practising Law Institute's top ranked Corporate and Securities Blog, as reported here.

How we caught the attention of PLI's corporate and securities group is anyone's guess, but if this means that someone believes that we have something worthwhile to say, then we'll take it. In that regard, we'll also keep trying with what promises to be an interesting post later today or tomorrow that will be dedicated to our litigation-minded readers. Thanks, PLI.

CFPB Hires Industry Insiders

Well, alright, maybe not exactly "best friends" in the vein of a boy and his dog, but it appears that Elizabeth Warren doesn't intend to completely exclude industry insiders from the ranks at the Consumer Financial Protection Bureau. As reported here, yesterday Ms. Warren announced two significant hires, Rajeev Date, a former Deutsche Bank and Capital One executive, and Elizabeth Vale, a former Morgan Stanley executive, to the respective positions of Associate Director for Research, Marketing and Regulations and Liaison to Community Banks and Credit Unions.

These hires follow a spate of hires in January, which saw the implementation team surpass 100, and may be viewed by the industry as tempering Ms. Warren's choice of Richard Cordray as the Bureau's Director of Enforcement. However, neither hire should be surprising. Neither Mr. Date nor Ms. Vale is actually running a Bureau division, and one of the first things that Ms. Warren did after her appointment as Special Assistant to the President was to extend an olive branch of sorts to the finance industry. The ability of that olive branch to withstand the weight of regulation and enforcement is yet to be determined.

Not So Fast: Today's Post Part Deux

It seems that Elizabeth Warren too has also noted all the budget talk this week, and has taken particular umbrage to some talk out of House Members of revamping Dodd-Frank so as to move the Consumer Finance Protection Bureau into Treasury and thereby avoid the pesky problem of its independence and untouchable Federal Reserve based funding.

Our take: This was destined to be discussed, especially when microphones are in the vicinity, but what is being discussed is not a tweak so much as a fundamental change to the law that would require approval in the House AND Senate. Moreover, the President would have to approve. Now, the House has spent time this year reading the Constitution aloud and voting to repeal the health care law, so who knows what it may do, but the Senate and White House? Uh, not so much.

Budget Time But Will The CFBP Be Touched?

The Super Bowl is over; in Egypt the street cleaners are out in force; the rest of the Middle East is smoldering; Iraq and Afghanistan are relatively quiet for the moment; and credit card debt jogged up a bit more in January than expected while defaults dropped. In other words, the news cycle is wide open, which can only mean that its budget time! Ahh, yes, the wonderful week long buffet of pundits and politicians talking all money all the time (Google is showing 71 news articles available in real time right now).

Of course, one of the main topics of any "cut" conversation is the Dodd-Frank Act and the House majority's intent to preclude implementation-related spending, which Bloomberg reports could reach as high as $6.5 billion.

Much of this cut-related clamour is fairly focused on Dodd-Frank provisions that extend beyond consumer finance regulation. However, it is fair to say that the Consumer Finance Protection Bureau is in the cross-hairs...or is that really even possible? Current estimates are that the 2011-12 budget for the Bureau will be around $450 billion (give or take $50 billion), which is calculated as a set 10% of the Federal Reserve operating budget. That means the CFPB's budget is likely beyond direct Congressional control, except that Dodd-Frank does contain a provision allowing for the CFPB to request a couple hundred million more from Congress in budget appropriations starting in 2013 (so the House could whack those requests, assuming that the party in control doesn't change in 2012). The CFPB's allotted percentage is set to increase to 13% in fiscal year 2013, by which time the1,225 "new" hires at CFPB should be in place and working to propound, investigate and enforce a new world of rules and regulations. And, yes, this budget dwarfs other consumer protection-related budgets such as those enjoyed by the FCC and SEC, but then the CFPB assumes responsibility for regulating, investigating and enforcement for several existing federal agencies, including the FDIC, FCC, OCC, HUD and other reasonably important agencies.

What is interesting is this: As with several of the most important hires to date, many, if not most, of the rank and file at the CFPB will undoubtedly be moving over from existing posts at existing agencies whose consumer protection responsibilities will be assumed. Many of those agencies, such as the SEC and FDIC are clearly affected by other Dodd-Frank provisions, but we have not seen word one about any offset associated with the fact that so many at the CFPB will not really be "new" federal hires. In fact, at this point it is a bit unclear just how "new" the Bureau will be when juxtaposed against its amalgamative characteristics. Curious.

CFPB--and Misinformation

One of the risks of creating a regulatory, investigatory and enforcement agency such as the Consumer Financial Protection Bureau, and of founding it in connection with a complicated set of new financial reform laws is the proliferation of misinformation. From time to time, we at BB&R run across such misinformation, which often emanates from industry sources where the otherwise unindoctrinated go to edify themselves...or so they think. Here is one such example, an auto dealer blog in which the contributor is allowing as to how rough the CFPB is going to make the lives of auto dealers, and how quickly the regulations are going to fly. Of course, because the blog entry makes no mention of the fact that auto dealers are specifically excluded from the CFPB's jurisdiction, we infer that perhaps the contributor may have overlooked that fact. Now, this is not particularly unusual and it would not have even caught our attention but for the fact that there is a robust series of "comments" following the blog entry. Several who appear to be affiliated with the auto dealer industry lament the coming regulations and enforcement and theorize that the CFPB's main purpose is to protect the military, and themselves opine that if auto dealers are careful to stay within regulations then they will be safe. Some of which is true. If auto dealers stay within existing regulations, then they should be able to do their business without molestation by the government. Of course, those rules and regulations have nothing to do with the CFPB, and if auto dealers look to the CFPB as their regulator, then they do so in error. Also, while the military is certainly one aspect of the CFPB focus, protecting the military is by no means the vanguard mission...though based upon how quickly these commentators became concerned about the military angle implies, and we sort of infer, that those in the military might do well to be wary of auto dealers.

The message is this: As with everything else in life, don't believe everything that you read in connection with the new world of financial regulation and enforcement. Yes, the world is changing, and, yes, it is going to be more challenging to live in the consumer finance industry in 2011 than it was in 2006, but thriving will not be made impossible. That said, blind faith in people who simply don't know what they are talking about will put you in a pretty good position to fail.

Director Search Begins In Earnest

First, a plug. One of the many things that writing a blog brings into focus is that there are many, many "news" outlets whose primary goal seems to be talking, even when there is apparenlty nothing to say. It takes some time, but the real leaders, those with foresight and access, and those who actually say something when they talk, can be found. Boomberg Businessweek at www.businessweek.com is one of those outlets. Here at BB&R, we have linked to Bloomberg more often than to any other single outlet. And we recommend that you read it, assuming that you have time after reading us.

Of late, Bloomberg recently reported that Elizabeth Warren has begun the search for a Consumer Finance Protection Bureau Director. While the early reports are that no job offers have been extended, and the White House has been quick to indicate that it is nowhere near ready to announce a nominee, Ms. Warren's first meetings have been with three prominent State Attorneys General, including Roy Cooper of North Carolina, Tom Miller of Iowa and Martha Coakley of Massachusetts. The word is that Ms. Warren was seeking counsel on the type of experience or qualificationst that a CFPB director should have.

As we said, Bloomberg is a great news outlet, but it is exactly that...a news outlet. That means that the good reporters there get tips, confirmations, quotes and report the facts. We are not encumbered by such an onerous process. And, while Bloomberg is relegated to saying that the "implication [of such meetings] is that an attorney general could be a leading candidate," we say... Really? No kidding? A law is passed that specifically contemplates, and effectively requires, communication and cooperation between a new federal agency and the offices of 50 State attorneys general; enforcement is one of the agency's primary missions; and we are to believe that a State Attorney General could be a good candidate? Perhaps even at least as qualified as a Harvard law professor or a former member of Congress? And, to think, this notion seems to have arisen even after Ms. Warren tapped Richard Cordray as the Bureau's chief enforcement officer? To this notion we say...uh, yeah. Assuming that the politics will work, it would be entirely consistent with all that has happened to date if President Obama were to nominate a State attorney general to run the agency. Further to that thought, it is naieve to believe that Ms. Warren: (a) did not take Generals Cooper, Miller and Coakley's temperature on their willingness to serve; and/or (b) seek their opinions as to who should be nominated (i.e. who they believe that they can work with effectively).

If nothing else, Ms. Warren's recent meetings, and the others that she is sure to have in coming weeks and months, is continuing evidence of a concerted enforcement coordination effort. So, while we cannot see the tidal wave just yet, it sure does appear that the waves are breaking a bit farther out than normal. It may be time to start looking for high ground.

CFPB Enforcement Chief Talks to the Wall Street Journal

In an interview published in the February 9, 2011 edition of the Wall Street Journal (Jean Eaglesham), the chief of enforcement for the Consumer Financial Protection Bureau, Richard Cordray (former Ohio State Attorney General), stated that the Bureau intends to use its enforcement powers “immediately” once the designated transfer debt is reached. The designated transfer date is July 21, 2011. The article quotes Mr. Cordray as stating that his new responsibilities are “in many ways doing on a 50-state basis the things I cared most about as a state attorney general, with a more robust and a more comprehensive authority.” The article further quotes Mr. Cordray’s response to the question of how soon the Bureau would bring enforcement actions, that he “would see to it that we will be ready with some of our priorities immediately.” The article states that Mr. Cordray identified as high priorities on his enforcement agenda mortgages, credit cards, and student loans. However, the article states that Mr. Cordray stated that the Bureau will set its “priorities accordingly.”

As this blog has been reporting, the CFPB continues to emphasize preparation for enforcement. The Bureau entered into memoranda of understanding with state mortgage regulators and the Conference of State Bank Supervisors establishing state and federal coordination and cooperation for the supervision of providers of consumer financial products and services. Professor Elizabeth Warren, White House special advisor, appointed Mr. Cordray to head up the enforcement arm of the Bureau. While the consumer financial services industry has heard this promise of increased enforcement before, any past subtlety is gone in favor of promises of quick and aggressive enforcement, perhaps on the model of the EPA, which launched investigations and enforcement actions almost immediately following its empowerment and subsequent to passage of the Clean Air and Clean Water Acts. Of course, this is not to be confused with rule-making, which will likely be slowed to some degree by the "speed bump" provision requiring an SBA panel to review any new rules that will have broad impact on a significant portion of the industry. So, industry participants should clearly be investing time and focus in the coming months to ensuring that their policies, procedures and the terms of their agreements meet existing federal and State statutory and regulatory requirements. To the industry we say, heed this not at your peril, because Mr. Cordray does not have a reputation or history of being slow to act.

-- contributed by Stephanie Shaw

CFPB Is Now A "Thing"

Well, the Consumer Financial Protection Bureau has officially become a "thing" within our culture. The clearest evidence of that fact, besides the newly launched website, which you can read about here, is that it now has a devoted Wikipedia page. Of course, similar to the website, the CFPB's Wikipedia page is pretty thin right now. One cannot be terribly perplexed by this, insofar as the Designated Transfer Date is still approximately five and a half months hence. However, to get a taste of what may become of the CFPB's Wikipedia page, take a look at the pages devoted to the Environmental Protection Agency, the Securities Exchange Commission, the Federal Deposit Insurance Corporation or the FCC.

Consumer Finance Protection Bureau Launches Website: Ms. Warren wants your thoughts

"OPEN FOR SUGGESTIONS" are the words that appear across the first page of the Consumer Financial Protection Bureau's new official Beta website, which was launched late last week at: http://www.consumerfinance.gov/. Special Assistant to the President, and chief architect of the Bureau, Elizabeth Warren has been quoted as saying that the website has been launched primarily as a mechanism for "starting a conversation" with the public. In many respects, at this point, and superficially its primary function appears to be that of an electronic suggestion box. As with many things about the Bureau, appearances are deceiving, and drawing that one is a mistake, which (in prime time soap opera fashion) we will reveal at the end of this post. As one might expect at this point in the Bureau's evolution, the website does not contain particularly detailed information, and it is clearly aimed more at members of the general public than at the entities and industry that it was created to regulate. For instance, there is a time line at the bottom of the first page, which will help the unindoctrinated catch up with the general history of the agency, though not nearly as completely as if you read past entries on this blog. It also contains some responses to initial suggestions and questions, as well as an open letter from Holly Patreaus that more or less introduces and outlines the mission of the Office of Service Member Affairs. We will be watching the development of the website as it too evolves from its current fluffy public relations appearance into what we anticipate and expect will be a site full of real time information that can be accessed and utilized by regulated entities. And, we will clearly not be the only ones watching. The launching of the website, even in its current marshmallow flavor has received substantial notice and comment in such news outlets as: the L.A. Times, Huffington Post (or is it AOL?), The Hill, and, according to Google, over 108 other related articles. While we have not read them all, the Huffington Post article, which discusses the Bureau's real intent in "starting a conversation" with the public, which is to begin its data mining and trend identification, is insightful and worth perusing.