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Fake News, Special Carrie Sheffield CFPB Edition

posted by Adam Levitin

The "fake news" phenomenon has gotten a lot of attention of late, but there's also the problem of its kissing cousins, faux academic research and opinions piece that springboards off of fake news and faux research.  A comically bad example of the latter category is the hatchet job Carrie Sheffield tries to pull on the CFPB in a piece on Salon.com.  In a nutshell, Sheffield (1) accuses the CFPB of being "rampant with internal racism and anti-woman bias," (3) claims that the CFPB has resulted in an increase in bank fees, and then (3) makes a big deal out of CFPB employees' political donations tilting toward Democrats.  The first and second points are simply false and not supported by the evidence Sheffield cites.  The third point is just irrelevant, but shows Sheffield to be nothing more than a partisan hack.  Sheffield's piece really doesn't merit a response intellectually, but given the current political climate, it's necessary to respond to any calumny, no matter how ridiculous.  So a point by point follows, after which I share a few thoughts on the political price tag that will come with trying to get rid of the CFPB.

(1) Sheffield claims that the CFPB "is rampant with internal racism and anti-woman bias".  Her alleged basis for this is a "blistering" GAO report.  It'd be nice if Sheffield actually linked to, much less read the GAO report, which is far from blistering, but pretty technical.  Instead, Sheffield links to another opinion piece on the right-wing website that has co-published her Salon piece.  More of the right-wing echo chamber.  It's pretty obvious that Sheffield never read the GAO report--it simply doesn't support her statements in any way. It's rather boring and technical and tells a complicated story of a new agency dealing with developing initial staffing and internal procedures and trying very hard to get it right.  Let's be very clear:  GAO report did not find that the CFPB had a racism or misogyny problem.  Full stop.  

The word "racism" does not appear anywhere in the GAO report, and the GAO specifically states, "It is important to note that our survey collected employees’ subjective perceptions of whether or not they had experienced discrimination or observed favoritism and we did not take steps to substantiate individual claims of discrimination or favoritism," much less attempt to determine on any statistical basis whether there were pay differences driven by race or gender. (GAO Report, p.23, n.30). If the CFPB brought an ECOA enforcement action on this basis against a lender, the Congressional GOP would be howling. Sheffield's racism/sexism claim is bullshit malarkey with a high degree of psychological projection baked in. Shame on Salon for publishing something that's blatantly false, and shame on Carrie Sheffield for being a liar. 

What the GAO report actually says is that the  "CFPB took steps from its inception to promote a diverse and inclusive workforce, but it did not implement important elements of its current diversity efforts until 2015" (p.15 of GAO report).  What were those "important elements" that weren't initially implemented?  "[M]andatory diversity training and the creation of employee diversity groups," (p.15 again) ironically two things that drive conservatives absolute bonkers as ridiculous PC interventions. Moreover, the GAO notes that the CFPB took steps on its own to self-inspect for internal bias and to remediate any problems.  (See p. 16, noting that the "CFPB identified areas for improvement in its diversity and inclusion efforts and concerns about disparate outcomes in its performance management system.")  And the CFPB did this before any Congressional hearings, etc. on the issue.  What other government agency does this?  The CFPB is actually practicing what it preaches, doing self-testing for bias, just as lenders are encouraged to do under the Equal Credit Opportunity Act. This is behavior that should be encouraged, not used to spuriously tar the Bureau. If you read through the full GAO report, or even its summary, you'll see there's a much more complicated and nuanced situation going on, but it does not in any way simplify into the CPFB having a race or gender problem. Carrie Sheffield is just making stuff up.  

(2) What about the claim that the CFPB has had unintended consequences for consumers in terms of higher fees?  Sheffield writes: 

The CFPB was also supposed to crack down on banks by outlawing fees, account minimums and the like, but ended up being the reason many account holders pay a fee every time they use an ATM, arguably making things worse.

This is just plain stupid.  First, the CFPB is not supposed to "outlaw fees, account minimums and the like." It's supposed to prohibit "unfair, deceptive, and abusive acts and practices." Not all fees, minimums, etc. are unfair, deceptive, or abusive. If you're going to criticize an agency, at least understand its authority. Second, where's the evidence that CFPB actions have resulted in ATM fees? Those fees have predated the CFPB by decades, and there's nothing showing that they've increased as a result of CFPB regulations (many of which aren't about "banks").   

Relatedly, Sheffield cites "Harvard researchers" finding that Dodd-Frank is responsible for the demise of community banks.  I've previously written about what a nonsense study this is.  First, while I hate to pull academic rank, let's recognize that this is a piece by a "senior fellow" and a master's degree candidate at the Kennedy School. These are not people with professional reputational risk for their scholarship, and not surprisingly this study is a great example of faux research. Slap a K-school working paper cover page on some writing with footnotes, even though it makes laughable claims, and it's "Harvard research." And on the merits?  The piece is ridiculous. It treats correlation as causation and ignores a lot of low-hanging contrary evidence. In particular, FDIC data shows that community banks have disappeared at a remarkably steady rate of around 300/year for the past 25 years.  That rate didn't change with Dodd-Frank's passage. So how is there a causal relationship between the decline of community banks and Dodd-Frank? I can't fathom it, but it doesn't really matter in the right-wing echo chamber.  If you believe it, it's true, and given Sheffield's priors, that's good enough.  

(3) Sheffield's priors aren't hard to spot.  Sheffield notes that CFPB employees' political donations tend to be to Democrats.  So what? Why is that relevant in terms of whether an agency should exist?  I'm willing to bet that almost all government agencies (excluding the military) have the same tilt.  There's a selection bias in terms of who chooses to work in government (those who don't like "big government" aren't likely to take government jobs), and federal employees tend to be better educated, which also tracks with support of Democrats.  The fact that Sheffield thinks this is a reason to get rid of the CFPB is all that you need to know—it says that she is entirely driven by partisan concerns. 

Finally, even if one were to subscribe to Sheffield's nonsense, let's recognize that it's not so easy to get "rid" of the CFPB. There aren't the votes to do so in the Senate through normal legislation, and its hard to do all the various deregulation the GOP wants through the budget process, just as a political matter because the Senate isn't going to give up all of the rent-seeking opportunities that come with major legislation.  Sure, Trump could attempt to remove the CFPB Director (which doesn't get "rid" of the CFPB), but he doesn't have any legal basis for doing so. But there's a real price tag to doing so. It would trigger World War III on the Banking and Financial Services Committees. Any possibility of bi-partisan good will will evaporate.

Sheffield's obviously not very sophisticated on CFPB issues, and not even the House's CHOICE Act would entirely get "rid" of the CFPB (although it would effectively gut it). Instead, I think Sheffield's inarticulately attempting to suggest a different strategy that has some popularity on the anti-regulatory right:  cripple the CFPB by removing the Director either by claiming (somewhat dubious) "at will removal" authority or ginning up some sort of pretextual "for cause" basis for removal. It's funny to see these proposals because they really haven't gamed out what would happen next. First, if the Director were removed, the Deputy becomes the Acting Director until and unless a new Director is confirmed by the Senate. Second, the Director could litigate his removal. If he did, he'd get discovery on the administration's decision-making process. Think about that. Do Trump and his advisors really want to get deposed on their process of deciding whether to remove the CFPB Director? Do they want their communications to be turned over in the discovery process? Even with attorney-client privilege, there's all sorts of embarrassing stuff that might come out, germane or otherwise. I can imagine a lot of interesting questions one might ask Trump during 7 hours of deposition time. The financial services industry might be fine with Trump getting raked over the coals, but is Trump?  

Perhaps the GOP will be successful at killing off the CFPB, but as Elizabeth Warren put it, there will be "plenty of blood and teeth left on the floor.


Thank you so much for taking the time to write this. It is a sorely needed dose of truth.

I just about lost it when I read Sheffield's assertion that the CFPB caused ATM fees. That alone takes her piece over the line between "poorly researched" and "bat-guano crazy."

Sheffield appears to be Salon's token right winger. A look at her other recent stories reveals her priorities: (1) Fat shaming, (2) Whitewashing (rainbow washing?) the incoming administration's anti-LGBTQ record, (3) More nuclear plants, as an alternative to rather than a supplement to developing renewables, (4) we need more conservative evangelicals running for office (but remind me again why LGBTQ people shouldn't worry, willya?)

I should add that I am not as sanguine about the continuing existence of the CFPB after January 20. When you say that there aren't the votes to do so, I assume you mean that the Democrats could filibuster an outright repeal. That, of course, is true about a lot of things. As we all know, there is much debate going on about whether an obstruct-everything strategy is good for the Democrats (or good for the country, something that I understand three or four people are rumored to care about). The alternative is for the Democrats to pick their battles, and I think the best answer we can give to whether the CFPB will be defended in that scenario is "it depends on what else is on the table."

Carrie is Matt Sheffield's (Media Research Center, NewsBusters) sister, a BYU grad, a former opinion writer for the Washington Times, and founder of the cultural comment site Bilge..er..Bold. Any questions?

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