How the CFPB is Targeting Americans for Personal Financial Data

Three cheers for privacy rights under the Obama Administration…

And if the sarcasm doesn’t leak from those words, it’s time for me to start designing coloring books.

Last week, the newest Washington agency designed to protect us from ourselves, the Consumer Financial Protection Bureau, was caught collecting data on more than 10 million ordinary Americans without their knowledge or permission.

Not only does the law that created the CFPB, the Dodd-Frank Act, prohibit this sort of data collection, but it is just another example of how government is using poorly designed laws to intervene in the lives of everyone.

The government is once again targeting ordinary Americans while letting the real financial criminals preying on Americans walk away scot-free.

Another “Data Project” Means More Spying on Americans

According to reports, the CFPB has allocated more than $20 million in its budget to collect and track the spending habits of more than 10 million Americans. Despite this new government initiative, Sen. Mike Crapo (R-Ida.) has suggested that the data collection project could become much more widespread than expected.

The agency is in the process of building a database of personal customer information, including monthly credit card, mortgage, car and other financial payments. Private contractors (crony friends of Washington) will store the data and share it with other federal agencies and Congressional staffs whenever it is ever needed – without really explaining why it is needed.

However, as Sen. Crapo noted in a letter seeking more information on this latest targeting of personal information, that the collection of such personal data is illegal, except under very narrow circumstances.

Crapo wrote: "While CFPB officials have stated the CFPB is not collecting [personal information], we do not know what information it collects, on how many accounts, or how this information is being used. We also need to know whether the CFPB is truly not collecting [personal information] from the data it is collecting or purchasing.... We need to know what safeguards are in place to prevent the collection or use of the data it is collecting."

This is just the latest headache for a new agency that was hastily put together in the wee hours of the morning when the Dodd-Frank Act was concocted. CFPB is just the latest federal agency stuck in the headlines for targeting Americans for reasons that remain unknown despite constant reassurances that Americans should simply trust the government.

Heading for the Exits

This information targeting scheme may help explain why several key players have decided to depart the CFPB.

Last month, American Banker reported that the CFPB has struggled to maintain its leadership and key staff members. The laws surrounding the creation of this agency were so poorly designed that it hastily hired a mishmash of professional bureaucrats from dozens of other agencies in the Washington Alphabet Soup.

In just the past few months alone, the CFPB has lost more than a dozen senior officials, including its chief of staff, Garry Reeder, and chief operating officer, Victor Prince. The reasons for this exodus are still unclear, but recent reports suggest that hiring practices are aiding this flight.

According to Business Insider, the government has been hiring "undercover agents" from banks and credit card companies to effectively conduct surveillance on specific companies from the inside, a whole new form of targeting.

Of course for it to work, this assumes that the revolving door between Wall Street and Washington has been shut and companies wouldn't be aware of such investigations of their banks. The likelihood of that is probably slim-to-none.

It's going to be virtually impossible for the CFPB to be taken seriously when it has been hiring more individuals from the banks in order to "target the banks."

Former White House bailout chief Neil Barofsky has said that the SEC's failure to bring anyone from Goldman Sachs to justice for its illegalities in recent years is "a stark reminder that no individual or institution has been held meaningfully accountable for their role in the financial crisis."

Effectively the system to prevent fraud and illegal financial practices isn't just broken, it's shattered into an unfixable mess of pieces strewn across the yard.

And if Neil Barofsky is saying that, one can understand why the biggest fish who should be fried for his recent (alleged) crimes is going to be walking free.

Start With the Real Crooks

If the CFPB would like to protect consumers, perhaps it would have been best to start with Jon Corzine.

There is no more allegedly egregious suspect than Jon Corzine, the former head of MF Global who used billions of dollars of his own customers money to patch up holes in the company's finances during the firm's last few days prior to collapsing. On Monday, the New York Post reported that Corzine will face no criminal charges for his role in the scheme.

The criminal probe into whether there was wrongdoing on the part of Corzine by the Department of Justice will be dropped due to a lack of evidence. Of course, the lack of evidence exists because the money completely disappeared and the paper trail went cold - almost by design.

I guess that's the type of thing the Justice Department does when you're the former CEO of Goldman Sachs and former governor of New Jersey.

But this lack of evidence is staggering since the very types of monitoring that the CFPB has been conducting on Americans would have been able to track Jon Corzine's use of customer funds, with estimates of $1.2 billion having gone missing.

Of course, there will be a civil trial for "failure to segregate and misuse of customer funds and failure to supervise diligently," which means that he will likely avoid any jail time by hiding behind corporate protections.

The same can be said for Goldman Sachs and JP Morgan bankers caught up in spotty derivative trades that went awry in recent years.

If the CFPB were serious about protecting consumers from banks, perhaps it should start by protecting banks from the hiring of crony capitalists and former politicians who skirt the law without regard.

That would be a good first step in using $20 million of taxpayer money rather than going on a scavenger hunt of American spending practices for reasons that are hazy at best.

A brief CFPB history: it reports to the Federal Reserve and is independently funded by the Fed, so it does not come under the same scrutiny as an agency reporting to the Treasury Department. It also has an unconstitutionally appointed director, Richard Cordray.

Play along with Money Morning's Shah Gilani in his CFPB Jeopardy game.


About the Author

Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.

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