Two Years in Review for the CFPB and Dodd-Frank

Financial reform advocates have two birthdays to celebrate on Saturday. This weekend marks the one-year anniversary of the watchdog ""Consumer Financial Protection Bureau"":http://www.consumerfinance.gov/ (CFPB) and the two-year anniversary of the Dodd-Frank Act, the sweeping financial reform law that spawned it.

[IMAGE]

Their stories run parallel to each other ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô and rightly so. The consumer bureau squeaked past partisan gridlock this time last year, just one year after Democrats, then in the majority of both houses of Congress, cleared Dodd-Frank for the president's signature.

Stiff Republican opposition greeted the bill then, just as it does now, and remains a bulwark against both the law and consumer bureau today, even in the face of studies that suggest an overwhelming number of Americans agree with financial reform.

Need a refresher? We take a look back at the three most noteworthy achievements and precedents from the past two years.

*Credit Gets a Beat Cop*

Of all the changes to come out of Dodd-Frank, the CFPB is likely the best known ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô and arguably most controversial. The consumer bureau managed to open its doors in July last year despite a mudslide of hearings on Capitol Hill and calls from Republicans to rope the fledgling agency into their congressional appropriations process.

Acquiring the rulemaking authority for 18 consumer financial laws from seven regulatory agencies, the CFPB quickly moved to propose important new rules, with a Qualified Mortgage rule on the way sometime this summer that trade groups like the ""Mortgage Bankers Association"":http://www.mbaa.org/default.htm recently ""wrote"":https://themreport.com/articles/mba-warns-qm-rule-could-unduly-impede-lending-2012-07-13 could ""invite litigation, increase costs and cut off credit to too many qualified borrowers.""

But it doesn't take a disputed rule to garner press for the consumer bureau. Intellectual forebear and former Treasury special assistant ""Elizabeth Warren"":http://elizabethwarren.com/ lost her job in July last year when President ""Barack Obama"":http://www.whitehouse.gov/administration/president-obama sidelined the controversial Harvard prof for CFPB enforcement chief Richard Cordray.

The chief executive routed accusations that he gave into Republican lawmakers in January this year when he recess-appointed the former Ohio attorney general to the top job, earning the ire of Congress and kudos from many progressives. The move granted Cordray many of the powers first established under Dodd-Frank for a CFPB director, including the ability to sign off on orders and guidance for nonbank entities.

The backlash was severe and continues. The ""U.S. Chamber of Commerce"":http://www.uschamber.com/ vowed to take Cordray's recess appointment to court.

More ""recent litigation"":https://themreport.com/articles/bank-groups-sue-cfpb-over-constitutionality-2012-06-27 by two conservative groups and a Texas bank ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô headed up by

[COLUMN_BREAK]

none other than the former White House lawyer for the Bush administration ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô seeks to overturn the CFPB as a matter of constitutional principle.

*Dodd-Frank, Interrupted?*

Dodd-Frank has never had many friends.

Those on the left often refer to it in the best light by calling it a good start, much as Warren, currently running for Senate in Massachusetts, recently did with a statement that just one financial reform law ""doesn't work anymore."" Those on the right frequently bill it as the worst thing since the Embargo of 1808 by labeling it a jobs-destroyer that will shrink already tight credit and sink a slow but steady recovery.

That debate may be what leaves Dodd-Frank without many of its rules today. The law firm David Polk released a ""report"":http://www.davispolk.com/files/uploads/FIG/Mar2012_Dodd.Frank.Progress.Report.pdf in March that found regulators had missed more than 50 percent of their time-sensitive rulemaking deadlines for 400 rules. Of those, regulators slid past 70 percent, or 158, of their requirements, an astonishing number since 99 rules still need finalizing and 147 lay in wait.

A resurgence of interest spoke up in May when ""JPMorgan Chase"":http://www.jpmorganchase.com/corporate/Home/home.htm revealed an unflattering trading loss in the billions ($2 billion then, reportedly $4 billion or more now). Although some say that lawmakers soft-balled their approach to Chase CEO Jamie Dimon, those in favor of the law jumped on the opportunity to declare Dodd-Frank ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô and the Volcker Rule's ban on short-term proprietary trading ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô more needed than ever.

Tack on a recent ""damning report"":http://www.dsnews.com/articles/report-countrywide-used-vip-loan-deals-to-influence-lawmakers-2012-07-05 that now-defunct Countrywide Financial bought political access with hundreds of VIP loans, and many supporters renew their call for tougher financial reform.

""Mark Calabria"":http://www.cato.org/people/mark-calabria, director of financial regulation policy studies at the conservative-leaning ""Cato Institute"":http://www.cato.org/, dismisses calls for a stronger Dodd-Frank as those that come from ""proponents frustrated that it's getting mired in the regulatory process and├â┬ó├óÔÇÜ┬¼├é┬ª vast decision-making process that is delegated to regulators.

""You're going to grab whatever straw you can,"" he says. ""It's hard for me to see the JPMorgan Chase loss as an argument for more regulation.""

*What's Next*

With a recent ""Gallup poll"":http://www.gallup.com/poll/150743/Obama-Romney.aspx putting Obama ahead of GOP challenger ""Mitt Romney"":http://www.mittromney.com/ by only four percentage points, a difference of 48 percent and 44 percent, it's clear that nothing is clear about how the CFPB and Dodd-Frank will fare after the 2012 general election.

What is clear, some say, is that the agency and reform law will face an existential threat from Republicans that vow to defund and repeal financial reform from the past two years, just as most Democrats will continue to call for stronger regulation in the wake of Wall Street blunders.

As for the regulators and their missed deadlines? At least one analyst says that the Dodd-Frank rules will come in time, even with the fuss over politics and regulation.

""I think the regulators are doing exactly what they should do: don't worry about deadlines, worry about getting it right,"" ""CNBC"":http://www.cnbc.com/id/48260641 quoted Thomas Vartanian, chair of financial institutions for law firm Dechert, as saying on Friday. ""In my 35 years in government and Washington, I don't remember any [dire] consequence for a regulator not meeting a deadline, but there can be serious consequences in the marketplace for not getting the regulation right.""