The way Rep. Maxine Waters (D-CA) sees it, the banking industry has gotten a free ride for far too long.
As the new chair of the House Financial Services Committee, she’s ready to bring in Wells Fargo executives for questioning, scrutinize what Mick Mulvaney did as leader of the Consumer Financial Protection Bureau, and create a subcommittee on discrimination to make sure the lending industry playing field is level. She is going to make a lot of powerful people uncomfortable.
“This was known as the juice committee. There is no more juice in this committee,” Waters said in a speech at the Center for American Progress Action Fund on Wednesday, her first policy address as committee chair. So-called “juice committees” are generally ones that oversee lucrative industries and are seen as desirable to members because they’re a good platform for fundraising from those industries.
But Waters made it clear the committee is now about oversight.
“The time for accountability for his actions is about to begin,” Waters said at CAP on Wednesday, referring to Mulvaney, now Trump’s acting chief of staff and Office of Management and Budget director.
Consumer protection isn’t the sexiest of issues, but it’s one that affects literally everyone’s life — from credit cards to mortgages to student loans. And this administration has demonstrated a clear industry bent, watering down rules that would curtail predatory payday lenders, dismantling financial protections for the military, and taking an overall more pro-Wall Street stance. Waters may be able to use the spotlight on her to draw attention to that.
Waters said on Wednesday she wasn’t relying on the Trump administration “for much of anything.” She said she was open to working with Republicans — to a point. “I will work with those on the opposite side of the aisle who want to work on issues that we are alluding to,” she said, “but, of course, if they don’t, I have the gavel.”
The Trump administration has done a lot of damage at the CFPB. Waters will try to stop some of the bleeding.
Waters is a 15-term House member who represents California’s 43rd Congressional District, which covers part of Los Angeles. She’s been on the Financial Services Committee since 1991, serving as ranking member or chair of every subcommittee under its jurisdiction since 1995, and will now be the first woman and first African American to lead the committee.
In a letter to colleagues after the 2018 midterms, Waters laid out her plans if chosen to chair the Financial Services Committee. “I will prioritize protecting consumers and investors from abusive financial practices,” she wrote.
One main area of focus: the CFPB, the agency created under the Dodd-Frank financial reform and brainchild of Sen. Elizabeth Warren (D-MA) to focus on protecting consumers from financial fraud and abuse.
Under its first director, Richard Cordray, the bureau by its own tally handled more than 1.2 million consumer complaints and brought about nearly $12 billion in relief for harmed consumers.
Under Mulvaney, who took over as acting director of the bureau in November 2017 until the permanent director, Kathy Kraninger, was confirmed last month, the bureau’s activities have been curbed significantly. Mulvaney relaxed restrictions on often predatory payday lenders, disbanded advisory groups to the bureau, stripped the enforcement powers of an office meant to look out for discrimination, and weakened financial protections for the military.
Mulvaney may no longer be in charge of the CFPB, but Waters intends to continue to dig into his activities. In December, Waters sent a letter to Mulvaney informing him she may ask him to testify on the CFPB’s activities under his watch.
She has also put Kraninger on notice, upon her confirmation calling on her to roll back “the anti-consumer actions taken by her predecessor.”
“We will be doing all of the work that needs to be done,” Waters told me in an interview last December.
In her interactions with the CFPB, Waters could take a page out of the playbook of her Republican predecessor on the Financial Services Committee, retiring Rep. Jeb Hensarling (R-TX), who had an adversarial relationship with Cordray. Hensarling criticized the CFPB as a “rogue agency” and accused Cordray of abusing his authority — a critique often issued by Republicans against the CFPB.
“He certainly set a precedent for requiring a lot of information from the bureau and scrutiny of what is going on,” Lauren Saunders, the associate director of the National Consumer Law Center, told me. “The key difference is that Congresswoman Waters is not fundamentally hostile to the mission of the agency.”
Waters told me that she didn’t plan to call Kraninger to Congress “just to beat up on her,” but she plans to stay in contact.
“We’re going to act in a very responsible way,” she said. “We’re not going to just retaliate, but we’re going to be extremely responsible.”
Waters plans to dig in on some of the bad actors
Wells Fargo has been the subject of a series of scandals in recent years, including employees creating millions of fake accounts for unknowing consumers and charging people for car insurance they didn’t need. It is now under special restrictions by the Federal Reserve, and in April, the CFPB hit it with a $1 billion fine.
Waters, who in 2017 issued a 38-page report on Wells Fargo and called for it to be shut down entirely, still isn’t satisfied with the troubled megabank’s progress. “It seems as if they can’t get their act together,” she said.
Waters plans to meet with Wells Fargo CEO Timothy Sloan to “see what he has to say about the abuses that have been documented,” assuming he “knows where the bodies are buried.” In her letter to colleagues, she also called out Equifax, the credit reporting firm that compromised the personal data of some 150 million people in 2017. In her policy address at CAP, she said that it was “absolutely critical for Congress to reform the nation’s credit reporting system” in the wake of the data leak.
Waters has proposed legislation related to both — she introduced the Comprehensive Consumer Credit Reporting Reform Act and the Megabank Accountability and Consequences Act last Congress.
The ability to generate headlines matters
Waters’s power over companies and regulators may not be so much in legislation as it will be in calling attention to them and getting them into the headlines. While she will be able to pass legislation out of the House Financial Services Committee and, potentially, the House, a Republican-controlled Senate isn’t likely to take up many Democratic-led bills. That doesn’t mean her activities won’t matter.
“People overestimate hard power and underestimate soft power,” Aaron Klein, a fellow in economic studies at the Brookings Institution and former Treasury Department aide, said. “Is there a hard power thing they can do? Not directly. Is there pressure they can put on a regulator? Absolutely.”
One regulator Waters could target: Comptroller of the Currency Joseph Otting, who supervises and regulates national banks. He is currently involved in an overhaul of the Community Reinvestment Act (CRA), a 1977 law meant to encourage banks to meet the credit needs of all communities, including low- and middle-income areas. Democrats have expressed concerns that efforts to modernize the CRA will make it easier for lenders to use discriminatory practices, especially after Otting said in June during a House Financial Services Committee hearing that he had “never personally observed” discrimination.
Waters has said she supports efforts to “reform” the CRA’s regulatory framework but expressed “great concern” about what she sees as the OCC’s decision to “relax its enforcement” of the CRA.
She will have the opportunity to press Otting for more details on his plans. “We would expect there to be some questions in terms of are the proposed changes to the CRA consistent with the purpose of the CRA, and, if not, why are we going in these directions?” Yana Miles, who was then senior legislative counsel at the Center for Responsible Lending, said in a December interview. On Thursday, she started as senior counsel for the House Financial Services Committee.
And the more time regulators have to spend preparing for hearings or documentation to send to Congress, the less time they have for their other work — in other words, in just asking for information, Waters will be able to slow down the Trump administration’s deregulatory agenda.
She will also be able to signal values and push oversight in other ways, like with the subcommittees she creates. On that front, she plans to put together a subcommittee on diversity and inclusion, which will be formally established when committee rules are established in the new Congress.
“We believe that not only are we going to be able to define very clearly for everybody where there is discrimination but also have recommendations and try to work with all of the entities that are involved to eliminate it,” Waters said.
Waters has a reputation for being able to work across the aisle
While Waters has in recent months come into the spotlight over her fierce opposition to Trump, on Capitol Hill, she also has a reputation as someone who can work across the aisle to push legislative priorities.
“I have dealt with her enough on issues to understand that she can see the whole picture,” Rep. Frank Lucas (R-OK) told Politico in October. “It is possible to negotiate with her and she’ll keep her word.”
During the last Congress, for example, Waters and Hensarling put together the JOBS Act 3.0, a package of 32 financial regulatory proposals including changes to credit access, investment disclosures, and capital raising. (The bill went nowhere in the Senate.) As the Wall Street Journal notes, she also compromised with Hensarling on extending “business-friendly programs” like the National Flood Insurance Program and the Export-Import Bank.
“If you go on a scale of pragmatic to ideological, Hensarling would have been very high on the ideological scale, Waters less so,” Ian Katz, an analyst at the Washington research firm Capital Alpha Partners, told me. “She’s not as ideological on legislation as Hensarling was.”
Waters says she wants to “work at” finding areas of legislative compromise with Republicans. She plans to reintroduce the Promoting Transparent Standards for Corporate Insiders Act with House Financial Services Committee ranking member Patrick McHenry (R-NC). The bill would require the Securities and Exchange Commission to study proposals to change industry rules governing how insiders of publicly traded companies buy and sell company shares.
Still, she is critical of some members of the party for expressing outward skepticism of the government’s decision to bail out the banks during the financial crisis while simultaneously supporting some of the deregulation that led to the crisis in the first place.
“It surprises you to see how much they support them and some of the attempts to allow the banks to do things that are not in the best interests of the very people that they should be serving,” she said in December.
Waters could also potentially tee up legislation that, while perhaps not viable in the current Congress, could be ready to go if and when Democrats control the Senate and/or White House. That’s what happened with the Credit CARD Act of 2009, which enacted reforms on the credit industry. President Barack Obama signed it into law soon after he was inaugurated, even though the original work on it was undertaken while President George W. Bush was still in office.
Waters is also not, by definition, adversarial to the financial services industry. “Folks on the industry side that are feeling angsty might be pleasantly surprised,” Miles said.
The wild card: Waters versus Trump
While Waters may be able to find some areas of overlap with Republicans in Congress, Democrats’ adversarial relationship with Trump may make things more difficult.
“The corrosiveness of Trump is a deep challenge,” Klein, from the Brookings Institution, said. And there is no sign that Waters plans to back down.
Waters has downplayed speculation that she will push for investigations into Trump’s finances or issue the Deutsche Bank subpoenas she called on Hensarling to send out in 2017. But when it comes to the president, she does not mince words — the above tweet is pinned to the top of her Twitter profile, and she and the president often exchange barbs.
She also has no problem criticizing Trump when it comes to his approach to consumer protections.
“I believe that the president of the United States not only does not provide any leadership [in this area], but this is not something that he cares about. It appears his past business practices as such are that he will take advantage of anything and anybody that he possibly can,” Waters said. She pointed to the example of the now-defunct Trump University, which earlier this year reached a $25 million settlement after thousands of students claimed they were defrauded.
Waters is in a bit of a predicament in terms of Trump: His attacks on her — and her rebuttals — have led to a lot of speculation on what she might do in terms of getting information about his finances as House Financial Services Committee chair. It might overshadow the rest of her agenda, but it also gives her a bigger platform to draw attention to other issues, including consumer ones.
Waters also reflected on why she thinks she’s been able to get under Trump’s skin in ways others have not. “The audacity of this African-American woman to challenge the president of the United States certainly did not sit well with him,” she said.