Chaos at the top of the government's consumer watchdog could be 'devastating' for Americans

Pablo Martinez Monsivais/AP

President Donald Trump looks over towards Budget Director Mick Mulvaney, left, after signing an executive order in the Oval Office of the White House in Washington, Monday, March 13, 2017. Trump signed "Comprehensive Plan for Reorganizing the Executive Branch". From left are, Mulvaney, Small Business Administration Administrator Linda McMahon, Housing and Urban Development Secretary Ben Carson, UN Ambassador Nikki Haley, Interior Secretary Ryan Zinke, Vice President Mike Pence, Transportation Secretary Elaine Chao and Commerce Secretary Wilbur Ross.

• President Donald Trump's naming of Mick Mulvaney as interim chief of the Consumer Financial Protection Bureau has set off a legal battle.
• Regardless of the outcome, the appointment of a critic of consumer protection to head the agency signals a big push for deregulation.
• Wall Street has welcomed the move, while critics worry it is simply laying the groundwork for another financial crisis.

President Donald Trump has a knack for naming men to head agencies they previously wanted to destroy.

There's Rick Perry at the Department of Energy, Scott Pruitt at the Environmental Protection Agency, and now the latest - the president has appointed his own budget director, Mick Mulvaney, to head the agency after Richard Cordray stepped down as its chief.

This is a man who, while still in Congress, told a House hearing: "I don't like the fact that CFPB [Consumer Financial Protection Bureau] exists, I will be perfectly honest with you."

Beyond a political row that's going to court over whether or not Trump gets to name the interim chief, rather than the position simply being filled by a deputy, the move is a clear sign that Trump views post-crisis consumer protections as superfluous.

"The consequences of that for the American people will be devastating," Dennis Kelleher, president of Better Markets in Washington, told Business Insider.

The CFPB was the brainchild of Massachusetts Senator Elizabeth Warren, who argued that financial products that could cause vast social harm should be tested out before being widely offered in the same way that food and pharmaceutical products are.

"The CFPB is vital for the protection of investors and consumers as well as for financial stability," he said. "While everyone understands the imperative to protect consumers and punish lawbreakers, few understand that predatory conduct is often the springboard for financial instability and crashes. This is what happened in the years before the 2008 financial crash."

Wall Street loves this, which is not surprising given that Trump has surrounded himself with bankers as advisors, including former Goldman Sachs bankers Steven Mnuchin, now Treasury Secretary, and Gary Cohn, head of the National Economic Council.

Before the financial crisis, banks were shoveling out mortgages with little focus on risk-assessment and credit monitoring, because Wall Street was making far too much money to be asking any hard questions. Regulators, including the Federal Reserve and others, let it happen.

"Financial predators ripped off unsuspecting and unprotected mortgage consumers who were victims of egregious fraud," Kelleher said. "The risk of that happening again, albeit in a new and different form, is virtually assured as the Trump administration on behalf of the financial industry is almost certainly going to cripple the CFPB."

Isaac Boltansky of Compass Point reaffirmed that sentiment in a research note to clients:

"Under new leadership, the CFPB's rulemaking efforts will grind to a halt and its enforcement agenda will dramatically diminish."

Unfortunately, we've seen this movie all too recently - and few people enjoyed the ending.