No one should need confirmation at this point that the Trump-Goldman junta is anything but a giant fuck-you to consumers and a big pink valentine for Wall Street. But if you’re still in doubt, just look at the Consumer Financial Protection Bureau’s coddling of payday lenders.
We all know what the payday racket is about: finance-industry bottom-feeders who extract astronomical interest rates from vulnerable people who often don’t understand the devil’s bargain they’re making. The predatory nature of payday lending is beyond dispute to anyone not in its employ: It traps the financially unsophisticated in an endless cycle of debt, then milks them for interest rates that can run in the hundreds of percent.
If a state cracks down, payday lenders simply reincarnate themselves as “mortgage,” “title” or “installment” lenders, or ally themselves with an Indian tribe to exploit its immunity, and they're back in business. Think regulatory Whac-A-Mole.
It was the housing crash and its collateral damage that prompted the Obama administration to create the CFPB, part of the Dodd-Frank regulations that Wall Street started chafing against before the ink was dry. Richard Cordray, a recess appointment as its first director, quickly became Wall Street’s Public Enemy No. 1, depicted as an unaccountable tyrant waging a war on Big Finance, something like the wars on coal and Christmas. In its first five years the CFPB recovered $11 billion in damages for 27 million victims of financial malpractice, according to the Center for Responsible Lending.
When Mr. Cordray announced his departure from the CFPB in November he left hanging several initiatives that payday lenders weren’t too happy about: a rule that would tighten restrictions on payday loans, a suit against Kansas lenders allegedly charging astronomical rates, and a probe of South Carolina-based World Acceptance Corp.
Enter Mick Mulvaney, a former South Carolina congressman and now Donald Trump’s budget director. Trump made him acting director of the CFPB, a hotly contested move since the law already designated Mr. Cordray’s deputy, Leandra English, as his successor. (Ms. English is challenging the appointment in court.) Whatever Mr. Mulvaney’s legitimacy, the payday rule is now on hold, the Kansas case has been dropped and the World Acceptance probe has disappeared. World Acceptance’s NASDAQ-listed shares jumped 6 percent the day the investigation was dropped. Let freedom ring.
Wall Street is heavily invested in what might appear to be local or regional operations, and Mr. Mulvaney is one of its more obvious puppets, having taken campaign money from World Acceptance, among other financial interests. This is typical of Republicans who make financial-services rules. House Financial Services Committee Chairman Jeb Hensarling, who is to Dodd-Frank what Superman is to Kryptonite, is swimming in Wall Street campaign contributions. Republicans generally receive the bulk of Wall Street’s campaign money.
Payday apologists say these “alternative financial services” are essential to “underbanked” communities, which may be true but contradicts the libertarian assurance that unfettered markets infallibly provide what consumers want, namely decent services at reasonable prices. In reality, banks, though taxpayer-supported in numerous ways, don’t want customers in poor communities, for the same reason that for-profit health insurers don’t want the chronically ill.
That leaves underbanked folks to the mercies of the usury machine, which finds it easier to exploit them from behind sanctimonious if easily refuted rationales like these.
If those don’t do the trick, there’s always that ultimate faux-populist trope: “Do we trust people to make their own financial decisions?” Yes, just as we trust people to make their own recreational drug decisions. How is it that one predatory racket is legal and another is not? Here’s an idea: Wall Street puppets who defend the right of payday lenders to “serve” the underbanked must also defend the right of heroin dealers to serve the undermedicated. Mr. Mulvaney, your thoughts?
Nothing the Trump regime does to please Wall Street should surprise anyone. This is the most pro-business administration since William McKinley’s, more so even than Reagan’s. When the team owners write the rules, don’t expect a level playing field.
Follow the author on Twitter @cgayNYC.