Bloomberg Law’s® Bankruptcy Law News publishes case summaries of the most recent important bankruptcy law decisions, tracks major commercial bankruptcies, and reports on developments in bankruptcy...
A former aide to one of the Consumer Financial Protection Bureau’s fiercest critics could drive policy decisions at the agency if President Donald Trump’s nominee Kathy Kraninger becomes director.
If confirmed by the Senate, Kraninger would enter the CFPB with wide experience in setting budgets but little exposure to financial regulation.
That’s where Brian Johnson, a former aide to House Financial Services Committee Chairman Jeb Hensarling (R-Texas), comes in. Johnson was named the CFPB’s acting deputy director July 9 following a seven-month stint as senior adviser to acting Director Mick Mulvaney.
“At least until Kraninger gets her feet wet and becomes more knowledgeable about consumer financial services and the workings of the bureau, Johnson will de facto manage the bureau,” Alan Kaplinsky, the co-chair of Ballard Spahr LLP’s consumer financial services group, told Bloomberg Law in an Aug. 1 email.
Kraninger has had decades of experience in domestic security and budget issues, including her current role as an associate director at the Office of Management and Budget. Her resume does not include any prior work on financial regulatory issues or much direct experience with the bureau.
Johnson has been in charge of many of the CFPB’s day-to-day operations because Mulvaney splits his attention between the bureau and his full-time job as OMB director, according to people with knowledge of the situation.
Mulvaney called Johnson an “indispensable advisor” who knows the CFPB “like the back of his hand” when he announced his promotion in July.
Both Johnson and the CFPB declined to comment for this story.
Johnson’s previous work for Hensarling could give some clues about where the CFPB under Kraninger will go on rulemaking and enforcement.
A guiding principle for him “has been that the bureau should stay within the parameters of Dodd Frank, no more and no less,” Charles Washburn, the co-chair of Manatt Phelps & Phillips LLP’s consumer financial services practice, said in an Aug. 1 email to Bloomberg Law.
During Mulvaney and Johnson’s tenure, that has meant reconsidering the bureau’s payday lending rule, reviewing enforcement actions started under former CFPB Director Richard Cordray, and reviewing the results of a series of requests for information about all of the bureau’s operations.
Critics have said many of those moves reflect the priorities of the House Financial Services Committee, where Hensarling and other Republicans routinely chastised Cordray.
During his time at the committee, Johnson helped craft legislation that would have restructured the CFPB and curtailed many of its current regulatory, supervisory, and enforcement powers. Johnson also had a hand in writing bills that were ultimately signed into law that altered mortgage servicing and other bureau regulations.
Johnson, who earned economics and law degrees from the University of Virginia, also previously worked for Ohio Attorney General Mike DeWine, another Cordray antagonist. Cordray lost his job as Ohio’s attorney general to DeWine in a close 2010 election and is facing off against DeWine in Ohio’s governor’s race this year.
Johnson is one of about 10 political appointees Mulvaney brought into the bureau since he took over from Cordray in November.
Democrats on the Senate Banking Committee have raised concerns about Johnson’s experience with Hensarling, and the impact it could have on the bureau if Kraninger takes over.
Among a series of questions submitted to Kraninger after her July 19 confirmation hearing, Democrats including Sens. Sherrod Brown of Ohio and Elizabeth Warren of Massachusetts asked the nominee for director specifically about her potential interactions with Johnson.
The senators noted that Johnson was on the Financial Services Committee’s staff when it released a report calling the CFPB’s use of disparate impact to enforce the Equal Credit Opportunity Act “controversial” and “not cognizable” under the law. They then asked Kraninger whether she would consult with Johnson on that issue.
She didn’t say no.
“If confirmed, I will have a detailed conversation with the relevant staff on this topic, to better understand the positions the bureau has taken in the past on this issue, and the status of any litigation on the issue,” Kraninger wrote back, according to documents released Aug. 1.
There’s been no indication that committee Republicans will join Democrats in opposing the Kraninger nomination. Sen. Richard Shelby (R-Ala.) told Bloomberg Law on Aug. 1 that he supports Kraninger and hopes the banking committee will advance the nomination when the Senate returns from its two-week recess the week of Aug. 13.
Having Kraninger in place to slash the CFPB’s budget — she described a Trump administration proposal to cut the bureau’s fiscal 2019 budget by 23 percent as “opportunities for efficiencies” — and Johnson to reshape its regulatory and enforcement priorities could provide a way for Mulvaney to exert influence at the bureau even after he leaves.
And that is just one more worry that consumer advocates have about Kraninger as her confirmation process rolls on.
“There’s no information we have now that would indicate that there would be a counterpoint to what we’ve seen so far as business as usual under Mick Mulvaney and Brian Johnson,” Scott Astrada, the federal advocacy director at the Center for Responsible Lending, told Bloomberg Law on July 31.
To contact the reporter on this story: Evan Weinberger in New York at firstname.lastname@example.org
To contact the editor responsible for this story: Michael Ferullo at email@example.com
Copyright © 2018 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)