Two recent presentations by CFPB Director Richard Cordray strike me as being “blog-worthy.” First, Director Cordray reported to Congress that the CFPB received $180.2 million of funding from the Federal Reserve System in fiscal years 2010 and 2011 and received an additional $94.3 million in the first quarter of fiscal 2012 (the final quarter of calendar 2011). That is a considerable amount of money, although a mere pittance compared to the $500 million-plus of annual funding to which the CFPB is entitled without separate Congressional appropriation.
Second, according to the Independent Community Bankers of America, Director Cordray advised that the CFPB “will be considering two-tiered regulatory requirements and exemption thresholds as it writes regulations so that community banks will be able to conduct their business without overly burdensome regulatory requirements.” This idea of applying burdensome rules on large banks and exempting small banks follows the pattern established by Senator Durbin when he crafted a small-bank exemption to Dodd-Frank’s “Durbin Amendment” and thereby picked up the votes required to enact the Amendment into law. A “divide-and-conquer” strategy may be tactically successful from time to time (admittedly, it also finds some statutory support in Dodd-Frank) but it strikes me as a serious departure from basic notions of fairness. If it is unfair, deceptive or abusive for a big bank to engage in a practice or mode of conduct, it is hard for me to see why it would not be equally unfair, deceptive or abusive for a smaller bank to engage in exactly the same conduct. And if “the rules of the road governing banks and nonbanks [should be] applied evenhandedly to all participants,” as Director Cordray testified before Congress this week, the rules governing large and small banks should also be applied evenhandedly. If a CFPB rule designed to articulate fundamental standards of fairness is so complicated or the compliance costs are so high that small banks will have trouble complying, instead of exempting small banks the CFPB might wish to reconsider the wisdom of the rule in the first instance.