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How The Consumer Financial Protection Bureau Came Into Creation


We now have another development in the dramatic situation that has unfolded at the Consumer Financial Protection Bureau. A federal judge says President Trump's pick for acting director of the agency can for now keep doing the job he first showed up for yesterday.


UNIDENTIFIED REPORTER #1: The new guy showed up early today - Mick Mulvaney, carrying a bag of donuts, convinced he has the legal authority to take over.

MCEVERS: Mick Mulvaney is also the White House budget chief. He was named to step in at the CFPB after its director, Richard Cordray resigned on Friday. But Cordray had named a different acting director - his deputy, Leandra English.


It was English who took this to court. She wanted a temporary restraining order to block Mulvaney from the Job she says is rightfully hers. The person who is at the agency, even in the interim, is important. He or she could affect all kinds of financial companies and their customers. So we're going to spend some time now to understand how this watchdog came to be.

MCEVERS: NPR correspondent Chris Arnold has covered the bureau since its creation. Hey there.


MCEVERS: All right, so tell us about this bureau. How did it come to be?

ARNOLD: All right, well, you probably remember a few years back this thing called the financial crisis.


UNIDENTIFIED REPORTER #2: Right now breaking news here - stocks all around the world are tanking.

UNIDENTIFIED REPORTER #3: It was a historic day with Wall Street shaken to its very foundations.

UNIDENTIFIED REPORTER #4: And the government take over Fannie Mae and Freddie Mac. That sent the stock market on a wild ride.

ARNOLD: This was scary. You had, like, major banks failing. That led to a recession. You had millions of people losing their jobs and their homes. It was a foreclosure disaster.


BARACK OBAMA: We are in the most serious financial crisis in generations.

ARNOLD: And there was a lot of anger in Washington about this and soul searching. And how did this happen? And how do we make sure it doesn't happen again? And so the plan became under what we call the Dodd-Frank Act. It's - the full name of it's actually the Dodd-Frank Wall Street Reform and Consumer Protection Act, consulting with people like Elizabeth Warren, who back then was a professor at Harvard. She wasn't even a senator yet. The president got behind this. And they were trying to protect the world from Wall Street, essentially.


OBAMA: So all told, these reforms represent the strongest consumer financial protections in history.

ARNOLD: And it was out of this that the CFPB, the Consumer Financial Protection Bureau, was born.


OBAMA: And these protections will be enforced by a new consumer watchdog with just one job - looking out for people, not big banks, not lenders, not investment houses - looking out for people as they interact with the financial system.

MCEVERS: All right, so that was the plan. And then what was the reality? How did it play out?

ARNOLD: Well, the bureau started going after companies that it thought were doing wrong to customers. You know, so it went after mortgage lenders, Wall Street banks, payday lenders. They were making rules, suing companies. They took action more recently against a big company that the CFPB said was cheating people who had student loans. And you add that all up, and the CFPB says it put $12 billion back into the pockets of American consumers so far. For the most part, like, Wall Street watchdog groups and consumer groups and Democrats - they say Director Cordray and the CFPB have done a really good job. And they're sad to see him go, and they're wincing a bit about what happens next.

MCEVERS: Right, so consumer groups like the bureau. Democrats like the bureau. Of course Republicans do not. I mean, this is something that has been contested basically from its start. Walk us through that.

ARNOLD: Right. So from the very beginning, the bureau was created. Democrats really liked it. Republicans were nervous. You can see that in just how long it took to get the bureau's first director, Richard Cordray, confirmed.


OBAMA: I first nominated Rich for this position two years ago this week.

ARNOLD: That happened in 2013.


OBAMA: And for two years, Republicans in the Senate refused to give Rich a simple yes or no vote.

ARNOLD: From the very beginning, this has been a fight sort of at every step of the way.

MCEVERS: So why are Republicans so opposed to it?

ARNOLD: Well, there's a lot of rhetoric and other reasons and things that fly around. But, you know, I think the biggest problem that Republicans have with this bureau is that it is just - it's very powerful and independent. Congress does not control its funding. That comes through the Fed. It has a single director. And then you add to that the current situation where the Trump ministration came in on a deregulation mission, you could say, and President Trump has put business-friendly people in charge of the EPA and other agencies. And there was Cordray being a holdout and plugging away and making rules. And it would have been very tough politically and legally to fire him. And for a long time now, that's just been infuriating Republicans.

MCEVERS: What do the Republicans say about this agency and about Cordray?

ARNOLD: Well, you know, it's interesting. I mean, we've all seen a lot of hearings in Washington, right? But every six months, Cordray would go before Congress and have to give, like, a report.


JEB HENSARLING: Today we receive the testimony of Richard Cordray as he presents again the semiannual report of the CFPB.

ARNOLD: And these hearings just became, I mean, almost ridiculous - right? - where you would have just so much vitriol coming from Republicans.


HENSARLING: Today Mr. Cordray and his CFPB don't just act as a cop on the beat. They act as legislature, prosecutor, judge and jury all rolled into one.

ARNOLD: You had Jeb Hensarling, who was the chair of the House Financial Services Committee. Every single one of these hearings, he would call for Cordray to step down, claiming he'd broken the law, in some terms or another saying basically he was ruining America.


HENSARLING: This tyranny must end and the people's constitutional rights returned to them.

ARNOLD: And then you'd have Democrats get up and say, you know, like, I salute you, Sir, for being a hero of America. You know, I am so proud of you.


MAXINE WATERS: I am delighted that you're here. I am so honored that you have done the work that you have done despite unyielding Republican efforts to impede your work.

ARNOLD: Those were just hearings where you could just see how divided the Congress was over this agency.

MCEVERS: So explain now. Let's get to the present tense, and explain how that plays into what's going on now - this fight - right? - over who succeeds - who comes after Cordray. Will it be the person that he chose, or will it be the person who President Trump chose?

ARNOLD: Right. And I think what's at stake here is ultimately the current president will be able to appoint a new head of the agency, right? So why are we having this big, crazy circus, you know?


ARNOLD: What happened with the interim appointment from President Trump is that he put in Mick Mulvaney. Now, Mick Mulvaney is with the administration now. Before, he was a member of Congress. And he was one of these guys who was very vocal about how much he hated the CFPB. I mean, he called it a joke.


MICK MULVANEY: It turns up being a joke. And that's what the CFPB really has been in a sick, sad kind of way because...

ARNOLD: He introduced legislation to dismantle it. And so, you know, you've kind of sent the hatchet man in to run the agency. And the danger that supporters of the current CFPB see is that you put in someone like Mick Mulvaney on an interim basis - well, interim could go on for a year or two, right? And meanwhile, a lot of damage gets done.

MCEVERS: All right, NPR's Chris Arnold, thank you so much.

ARNOLD: Thanks, Kelly.

(SOUNDBITE OF SLUM VILLAGE SONG, "FALL IN LOVE") Transcript provided by NPR, Copyright NPR.

NPR correspondent Chris Arnold is based in Boston. His reports are heard regularly on NPR's award-winning newsmagazines Morning Edition, All Things Considered, and Weekend Edition. He joined NPR in 1996 and was based in San Francisco before moving to Boston in 2001.