Consumer Bureau Nominee Appears to Survive Senators' Grilling

CFPB nominee Kathleen Kraninger testifies before the Senate Banking, Housing and Urban Affairs Committee. CFPB nominee Kathleen Kraninger testifies before the Senate Banking, Housing and Urban Affairs Committee. Manuel Balce Ceneta / AP

A Montana Democrat told President Trump’s nominee to be director of the Consumer Financial Protection Bureau last week that she “probably has the votes to be confirmed.”

But like several Democrats on the Senate Banking, Housing and Urban Affairs Committee, Sen. Jon Tester challenged the nominee on her promise to pursue, if confirmed, transparency.

“Can you answer the questions?” Tester pressed Kathy Kraninger, a former Capitol Hill staffer with a homeland security focus in her job at the Office of Management and Budget. “Do you support [acting director Mick Mulvaney’s policy of loosening rules on] payday lenders?  Do you plan to keep those political folks on board?”

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Kraninger said it was “inappropriate” for her to go beyond descriptions of OMB’s role in budgeting on policies issued by the attorney general. She stuck to general statements such as, “I will take aggressive action,” adding that Mulvaney has information she does not yet have. “It’s not appropriate to comment” on individual staffers, she said, promising to talk to every CFPB employee about what they’re working on.

The Democrats’ questions, however, extended beyond the expected topics of payday lenders and student loan issues in the bureau’s purview. Sparks flew over the more dramatic policy fights over her current White House role in the Trump administration’s separating of children from undocumented parents at the border and disaster relief to hurricane-ravaged Puerto Rico.

Sen. Elizabeth Warren, D-Mass., who is credited with conceiving of the consumer protection bureau created after the 2008 financial collapse, tore into Kraninger on her personal involvement in border policy, demanding to know her moral views—yes or no--on whether she believed “it is immoral to deliberately set up a plan to deliberately inflict harm on children.” At one point, Warren reminded the nominee, “You are under oath, and lying to Congress is a federal crime.”

Kraninger said she had no role in setting the border policy other than meeting after the attorney general announced it. “OMB is there to support those agencies and ask questions,” she said, “but in terms of advice and details, it would be chilling to the process to give details of the discussion.”

Kraninger’s opening statement included four priorities: be fair and transparent in rulemaking and cost-benefit analysis; work closely with other financial regulators and states to reduce fraud; protect Americans’ private data; and spend money wisely, paying attention to the congressional oversight.

But several Democrats questioned her lack of direct experience in consumer regulation, including her not recalling taking any courses in law school on consumer issues other than study of the Administrative Procedure Act. “The point I’m trying to make is that this is a highly technical job,” said Sen. Heidi Heitkamp, D-N.D. “We ought to have somebody who has experience … and who has empathy.”

The day before the hearing, Heitkamp joined with all Democrats in requesting a postponement of the hearing until the White House turned over requested documents on the nominee’s OMB work, a request the White House ignored. But Chairman Mike Crapo, R-Idaho, said he wouldn’t expect any administration to release documents on a deliberative process. “This is an issue that goes beyond this nomination process,” he said.

Warren before the hearing published a report highly critical of Kraninger’s qualifications and noting that at OMB, Kraninger proposed a hypothetical cut of 23 percent, or $147 million, at the consumer bureau. Warren said she would put a hold on the nomination.

“Would you fire civil servants?” she demanded at the hearing. “You’re playing dodgeball here.” Kraninger mentioned only that she would look for efficiencies, noting that federal employees have rights.

When Sen. Thom Tillis, R-N.C., posed friendlier questions about restructuring the bureau’s budget and oversight of the director, Kraninger said, “Congress through Dodd-Frank gave the bureau incredible power and independence, my focus is on running the agency as Congress currently established it, but I’d be open to changes in that structure to make the agency more accountable and transparent.”

Reactions to the hearing suggest that few minds were changed.

American Banker in its coverage used phrases such as “emerged largely unscathed,” “didn’t land a glove,” and “remained a blank slate on regulatory issues.”

Jim Nussle, president and CEO of the Credit Union National Association, said in a statement, “We thank a number of senators for raising the importance of structure at the Bureau to prevent fluctuation in policy. The common-sense approach for Congress is to establish a multimember, bipartisan commission. Short of that, confirming a permanent director at the bureau brings us one step closer to protecting consumers.”

But Linda Jun, senior policy counsel at the progressive-leaning Americans for Financial Reform, said, “Kraninger was completely unfamiliar with all of the statutes the CFPB oversees and the CFPB’s work in enforcing them, but despite this lack of knowledge endorsed Mick Mulvaney’s leadership at CFPB, which has opened consumers to more harm. She refused to say whether the common-sense rule on predatory payday loans should go forward. She will not commit to removing political appointees who Mulvaney installed to shadow the career professionals. Kraninger promised she would take ‘aggressive action against bad actors’ but offered no evidence that she would take any concrete steps to actually protect consumers.”

Karl Frisch, executive director of Allied Progress, told Government Executive on Monday, that “several Republican senators have previously articulated their opposition to nominees that they claimed lacked relevant experience. We knew going into the hearing that Kathy Kraninger had no experience with consumer protection or holding financial scammers accountable. The fact that she refused to talk about her record of mismanagement on other issues in detail should give every senator pause.”

CORRECTION: The original version of this story misattributed quotes that were from American Banker

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