What is the CFPB spending? We don’t know. Information about the Federal Reserve’s financial operations is fiercely protected by the Deep State.
I’m not exaggerating when I say this is close to a black ops intelligence operation.
After I first arrived in Congress in 2009, I ended up cosponsoring a bill with Congressman Ron Paul of Texas. His bill would require an audit of the Federal Reserve. In fact, the bill was often referred to as “Audit the Fed.” It seems simple enough. It seems fair. It was wildly popular back home and across the country. Even Barney Frank was in favor of the Audit the Fed bill. In fact, he cosponsored it.
It would not go on to become law.
That failure was a classic example of a good idea with broad support that still went nowhere. Congressional “leadership” worked to make sure that bill never actually got to the president’s desk. So many members wanted to tell the voters back home that they were in favor and cosponsoring the bill, but somehow the bill would never pass both the House and Senate in the same Congress.
There is a little-known process to bring a bill up for a vote on the floor of the House of Representatives without the consent of leadership. It is called a discharge petition. If a discharge petition is introduced with simple paperwork on the floor and a majority of members in the House sign it, the bill must immediately be brought up for a vote.
Leadership hates this. Through the years I served in Congress it was a little-used process, except during the reauthorization of the Export-Import Bank of the United States. (I opposed that.)
With 435 members in the House of Representatives, the process requires only 218 members to win a vote and successfully use the discharge petition to bring that bill to the floor. Most members in the majority are reluctant to publicly sign the document, since leadership views it as an embarrassment. But the Speaker or majority leader would secretly and verbally give members the okay to sign the petition if it helped them back home, as long as they were not the one who pushed it over the 218 mark.
Ron Paul’s bill had more than 300 cosponsors. He eventually introduced the discharge petition. Unfortunately, we never got more than 218 people to sign the petition. Nearly a third of the bill’s supporters wanted the credit for cosponsoring the bill without having to vote for it. The bill eventually got a vote, but it didn’t pass the Senate. The fight continues.
Meanwhile, the CFPB has a budget that is reportedly bigger than the Securities and Exchange Commission (SEC). Its mission is so broad there are no bounds to its areas of jurisdiction. It is an agency subject to very little oversight.
Many times people will suggest Congress should use the so-called power of the purse to check and balance an out-of-control agency like the CFPB.
One problem: there is no use of the “power of the purse” when an agency is funded by the Federal Reserve. Congress has a hard time even getting a response from the CFPB, let alone holding them accountable. Their budget is mysterious and lacks detail by design. Yet CFPB is one of the larger agencies in the federal government, particularly as it relates to regulations.
Congressmen Jeb Hensarling and Bill Huizenga have fought hard to try to dismantle the CFPB, but there’s no way the Democrats want to let go of that one. It should scare all of us to have a massive government regulatory body in D.C. with the power to regulate extensively while beyond the scope of Congress. Because the CFPB doesn’t get its funding from Congress, it doesn’t feel accountable to it. And that should scare all of us. Congress is a body made up of representatives of the people. The CFPB doesn’t answer to the people. It answers to the Fed.
The CFPB is particularly potent on publicly traded companies. As publicly traded companies, these entities must disclose the mere existence of threats. I have heard several examples in which the CFPB will make its presence known in a threatening posture and offer “guidance.” These aren’t laws, nor are they even rules that have run the gauntlet of review and comment. “Guidance” is another way of saying you’re going to do what we tell you to do or else your life will become very difficult and financially painful.
Honestly, those are reminiscent of mob intimidation tactics.
The CFPB has the ability to issue a press release. Press releases can devastate a publicly traded company and literally shed millions of dollars of market capitalization from its valuation in a matter of minutes.
It generally works like this: Via a nameless bureaucrat the CFPB or other regulators will find an entity or business model it does not like. They will begin an investigation and make themselves known to that company and eventually offer “guidance.” The company then has a very difficult choice: they can implement that guidance or they can choose due process. But this is not a fair fight, as there is no recourse or due process. The CFPB holds all the cards.
Companies are routinely held hostage without the ability to seek recourse or petition their government.
This CFPB behavior might seem like a good idea when the company is wrong. The company is publicly shamed for their bad behavior, and the whole industry is on notice that they have to do better. But what happens if the company isn’t wrong? What if the company has been unfairly targeted? What if it’s just a mistake?
The answer for the company is surrender anyway or else face a nearly impossible battle in court and the public square. Because Congress can’t do much to help it.
Protecting Itself Becomes the Mission
You may be thinking, or hoping, even, that the CFPB is actually a nonpartisan good-government agency concerned with protecting consumers.
I’m sorry. Prepare to be disillusioned. It gets worse. Cronyism and corruption quickly engulfed the agency.
President Obama famously used an advertising agency called GMMB, headed by Democratic strategist Jim Margolis. President Obama paid them more than $700 million for his 2008 and 2012 campaigns. Margolis also worked for Bill Clinton and for Hillary Clinton in 2016.
Apparently the CFPB also needed good public relations and advertising. The CFPB has paid GMMB $43 million. Even after President Trump took office in January 2017, the CFPB has paid Obama’s ad agency $15 million. What was that money for? “Advertising placement, media planning, media buying, consumer research, creative development and creative testing,” according to the contract. One of the purchase orders, for $950,474.01, was “to develop a CFPB marketing strategy and the Owning a Home product.” This was described as an online tool only. An online tool to teach you how to buy a house, find out what current mortgage rates are, and get a mortgage.
Let’s put aside that the free market already provides this service. Most people looking to buy a house may stop by the local Realtor’s office for listings, or look at Zillow, or google “mortgage rates.” This arrangement is the kind of government corruption and cronyism that would be funny if it weren’t coming out of our pockets.
We will see this over and over again throughout this book: a government agency spending obscene amounts to educate the public on things people already know.
And to be clear; this isn’t just government “waste.” This is government corruption—taxpayer dollars going into the hands of political consultants.
More drama was to come following President Trump’s inauguration.
Richard Cordray, the controversial director of the CFPB, decided to step down while Donald Trump was the president. Cordray’s term was set to expire in 2018 and surely he would not be renominated.
Tucked into the legislation that created the CFPB was a little-known provision that supposedly allowed the deputy director to automatically become the acting director of the CFPB even without the president’s consent. Liberals were counting on using this provision to maintain control of the CFPB. They weren’t counting on President Trump fighting back.
Upon Cordray’s stepping down, his deputy, Leandra English, assumed she would show up for work the next day to continue to lead the agency.
President Trump saw it differently. Citing the Federal Vacancies Reform Act, the Trump a
dministration defended the president’s right to appoint someone to a vacancy that normally requires Senate confirmation. Under this act, the president can fill a vacancy with another person who has already been confirmed by that body.
President Trump selected Office of Management and Budget director Mick Mulvaney.
Mulvaney was a former member of the House from South Carolina. He sat on the Oversight and Government Reform Committee while I was the chairman. He is a fiery Irishman with a mind for numbers. He could be exceptional in questioning administration officials. That experience paid off in a big way. The OMB director is frequently on Capitol Hill and is bombarded with questions.
Since he joined the White House, Mulvaney’s wardrobe has picked up dramatically, but he still has a penchant for the vests that routinely made him the subject of ridicule on the floor of the House. Members tend to obnoxiously and habitually poke fun at one another, especially when wearing a vest that makes you look like a character from the game of Clue.
So, the old guard at the CFPB decided Mulvaney shouldn’t take office under President Trump. When the following Monday rolled around, both Mulvaney and English showed up to work to lead the agency. Oh, how fun it would have been to see the two of them go to the director’s office at the same time.
I know Mulvaney. No way was he going to back down on this one.
“It is unfortunate that Mr. Cordray decided to put his political ambition above the interests of consumers with this stunt,” White House spokeswoman Sarah Huckabee Sanders was quoted as saying in the Washington Post. “Director Mulvaney will bring a more serious and professional approach to running the CFPB.”
The presidential selection of Director Mulvaney was a clear signal that this administration wanted hands-on leadership in this dangerous agency.
The whole matter went to court and President Trump’s decision prevailed. I still find it unbelievable that it took a ruling from the U.S. District Court of Appeals for the District of Columbia Circuit for a president to be able to appoint somebody to run an agency in the executive branch.
While the Trump administration was victorious in court in this round, it does concern me that Democrats could continue to use the Federal Reserve to bypass Congress. Ultimately, it means they don’t trust the American people, and they don’t want accountability.
President Trump is trying to cut the CFPB budget by $150 million. Let’s hope he succeeds. Going further, Acting Director Mulvaney has recommended zero funding. The reason is that once a federal agency is established, especially one that is a poster child for Deep State interests like K Street lobbyists, it can be very difficult to get rid of.
That brings me to another newish federal agency that everyone agrees we need, but no one likes.
Chapter 2
What Don’t They Want Congress to See?
The Transportation Security Administration, or the TSA, as most of us know it, was formed after the attacks of September 11, 2001. Every reasonable American would agree that those attacks on our country and the subsequent years of Islamic terrorism have made extreme protection of our country’s airports and mass transportation system a top priority.
The 2017 budget for the TSA, which was made a part of the Department of Homeland Security in 2003, is $7.6 billion. The TSA employs more than 60,000 people, including 350 explosive specialists, 2,000 behavior detection specialists, federal air marshals, and explosive detection canine teams. They protect not just our airports, but also our railways and highways, cargo, tunnels, pipelines, and bridges.
Like so many federal agencies, the TSA is better at spending money than at getting results. A 95 percent failure rate on detecting hidden weapons, reported in 2015, resulted in acting TSA administrator Melvin Carraway being reassigned. The TSA screeners, in tests done by the Office of Inspector General for the TSA, failed to detect banned weapons in 67 out of 70 screenings. Similar results were found at individual airports. In a July 2017 test at Minneapolis–St. Paul, banned items got through screening in 17 out of 18 tries. The TSA refused to release the results of more recent tests, but in November 2017, ABC News reported a source had cited a failure rate in the area of 80 percent.
With those results, how much security is our $7 billion investment in the TSA really buying us? Apparently, the TSA leadership is happy enough with the results to offer massive bonuses to those at the top—even as the agency’s turnover rate is among the highest in the federal workforce. While the attrition rate for the federal workforce as a whole is a low 6 percent, the TSA’s rate is 9.5 percent. And that’s the good news for the TSA. Among part-time employees, which make up 23 percent of the TSA’s workforce, the turnover rate is 19 percent. The TSA is perpetually spending money to train replacements. I liken it to demanding we pour more water into a tub while the drain is open. The agency consistently ranks last on the annual survey of best places to work in the federal government.
Meanwhile, those at the top can qualify for massive bonuses. The inspector general reported that the TSA assistant administrator for the Office of Security Operations Kelly Hoggan was paid nine different bonuses in the $10,000 range between 2013 and 2014, for a total of $90,000—on top of his $181,500 annual salary. One would hope that was an extreme example—which led to Hoggan’s resignation in May 2016 following a hearing before the House Oversight Committee. That hearing explored high attrition rates, poor disciplinary policies, retaliatory reassignments against disfavored employees, a lack of accountability among senior staff, and, of course, the bonuses awarded in the face of poor performance. Against that backdrop, let’s take a closer look at the technology meant to detect weapons and who benefited from the purchase of that technology.
In 2008, the TSA started using body scanners in ten airports around the country, and soon announced that thirty-eight machines would be set up within weeks.
We want to be safe. But those scanners were seriously invasive of a person’s privacy. Let’s just say that, in addition to health concerns, those scanners would clearly show a person’s sex.
Now, any passenger could decline the scanner, and ask for a pat-down instead . . . but only 4 percent of passengers did. I can understand why, as you’ll soon see.
We can all agree that $90 million is serious money. That is the amount of the federal contract awarded to a company called Rapiscan, one of the most unfortunately named companies in history. Rapiscan made those first-generation airport body scanners that cost about $180,000 apiece. There were lots of potential problems with those scanners, but to me one of the biggest was that Rapiscan was a client of Michael Chertoff, through his company the Chertoff Group. Chertoff was the secretary of the Department of Homeland Security (DHS) from 2005 to 2009.
Chertoff founded his firm just after Barack Obama took office as president and he recruited at least ten top officials from DHS and the CIA. The Huffington Post called it a shadow homeland security agency.
This kind of mutual back-scratching just isn’t right. Representative Ron Paul tried to stop the purchase. “Here’s the guy who was head of the TSA, selling the equipment. And the equipment’s questionable! We don’t even know if it works and it may well be dangerous to our health,” Paul said on the House floor.
According to the Huffington Post, the other company manufacturing similar scanners, L3 Systems, spent more than $1.4 million lobbying the government. Its chief lobbyist was Linda Daschle, ex-wife of former Senate Democratic majority leader Tom Daschle.
Is this whole thing starting to sound like the Swamp to you? It sure did to me.
I don’t often side with the American Civil Liberties Union, but I did on the issue of personal privacy. I called the scanners “TSA porn.” A measure banning them was the first piece of legislation I introduced as a congressman in 2009.
I started asking some questions and getting some briefings. That, combined with some information from whistleblowers, which I’ll discuss soon, and some classified briefings made me decide to pursue the issue.
There are 5,136 air
ports and more than two million people who get on an airplane in the United States every day. The TSA is responsible for security at 440 airports. I was flying back and forth from Salt Lake City to Washington, D.C., every four days or so. It took a little while to figure it out, but soon it became evident the so-called body scanners were easy to beat.
From what I learned—and saw—the devices were more security theater than anything else. I’m sure there was a bit of a deterrent factor, but would-be terrorists would soon figure this out as well.
Listen, finding and detecting explosives is important, whether it’s on airplanes or inside buildings, or on the ground in war zones. It’s critical. But it is also big business. The Pentagon spent more than $20 billion studying how to beat improvised explosive devices, or IEDs. We were losing too many Americans in Afghanistan and Iraq to them, so the Department of Defense asked a general to head up what was first known as JIEDDO, or the Joint Improvised Explosive Device Defeat Organization. After spending $20 billion, their conclusion was—are you ready?—the single best tool to detect IEDs is a dog. Yes, a dog.
But dogs don’t have lobbyists. That’s why you see more machines than you do dogs. Even though it’s more effective and less expensive, the TSA was succumbing to the billions of dollars appropriated by Congress. Like every federal agency in the bureaucracy, they felt the need to spend the money allocated to them.
Combine that Deep State impulse with lobbyists and you have a formula for expensive things that don’t work, something we saw in the last chapter as well.
The Deep State Page 2
