When Donald Trump arrived in Davos, Switzerland, on Thursday to attend that city's cartoonish annual pro-capitalism festival, he really did have something to crow about. The American economy looks, by some measures, to be even stronger than the already-good one Trump inherited: Unemployment is low enough that economists are debating if it can go much lower, the stock market is at or near its highest level ever, and companies like Starbucks say the Republican tax cut bill is helping them raise wages and benefits. But beyond the Trump tweets and FOX News headlines about how the administration has unleashed the stupendous power of the free market, there's a widespread and deeply pernicious effort going on to enable predatory practices and corruption in the US financial industry.
It's not news that a Republican administration would try to slash regulations, but it's striking that even after running an often populist-sounding campaign, Trump seems devoted to allowing the poor to be victimized by big business. Republicans were already gutting new Consumer Financial Protection Bureau (CFPB) rules designed to protect people from shady lenders and other financial predators by early last year. But once they installed Office of Management and Budget boss Mick Mulvaney, a hard-right conservative, as its acting director in November, they really got down to business. As American Banker reported this week, after killing a lawsuit against a payday lender charging interest rates north of 900 percent, the agency decided to axe its investigation of World Acceptance Corp, a South Carolina financial company. According to a ProPublica report from 2013, unlike normal payday loans that theoretically come due pretty quickly, World Acceptance preyed on borrowers with longer-term installment loans that were often renewed over time, trapping borrowers in a cycle of misery as they tried to claw their way out of debt.
Not only did the company's stock immediately take off after news of this rescue from oversight, but consumer advocacy and good government groups quickly pointed out that Mulvaney had taken thousands in campaign donations from World Acceptance when he was a member of Congress. (The CFPB insisted that normal procedures were followed in ending its probe and that Mulvaney was not personally involved in the decision.)
The revolving door between business and government is a venerable and seemingly indestructible DC tradition, but this is worse than that. A sitting cabinet member with glaring conflicts of interest is also running a key regulatory agency involving his former donors. The CFPB was created in 2010 by the Obama administration to stop the financial industry from destroying lives, but Mulvaney has frozen all enforcement action for what seems to be a review of the agency's whole mission. He's made it clear he thinks the business community—whether they have a history of giving him money or not—has been overburdened despite record profits, and that the solution is to roll back excessive and pesky government oversight. His first quarterly funding request as head of the CFPB was exactly zero dollars; his predecessor, Richard Cordray, sought $217 million for the first quarter of 2018 back in October.
Gashing the regulatory state isn't the only way Trump has gone after the poor. His tax cuts, while sold as a vehicle for job creation and better wages, will ultimately almost entirely go to the benefit of the richest few hundred families in the country. Whether by ideological dogma or sheer ineptitude, he's got entire agencies critical to the lives of the working poor, like the Department of Housing and Urban Development, on the rocks. His Supreme Court pick Neil Gorsuch is likely to be a key vote against union rights that have historically helped workers live better lives.
Will Trump be punished politically for all this? It's not clear. Presidents tend to perform well at the polls when perceptions of the economy are good; if the macro fundamentals are solid in the fall of 2020, Trump can claim that he's helped people by keeping the economy growing just as he promised.
But that's a long ways away. In the meantime, millions of Americans are being exposed to dubious loan offerings and financial products that can entrap them in debt for the rest of their lives. That was obviously not among the president's talking points when he delivered the keynote address about the glory of his America First economic philosophy in Davos Friday, but it's one of the few things that has changed since January 2017 he really can take credit for.
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