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Obama's consumer watchdogs cash in

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Corporate giants are hiring away officials from the Consumer Financial Protection Bureau (CFPB), gaining inside knowledge of an agency that was created to police their bad behavior.

At least 45 former CFPB employees, ranging from investigators and enforcement attorneys to higher-ranking officials who ran the agency, have departed to work at law or consulting firms, corporations and nonprofits since the agency opened its doors in 2011.

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A dozen people left the agency for the private sector in 2015 alone.

Titans such as JPMorgan Chase, U.S. Bank, Wells Fargo, PricewaterhouseCoopers, PayPal, BlackRock and Bank of America all have former CFPB officials on their payrolls. 

So do elite K Street firms such as Arnold & Porter, Hudson Cook, Covington & Burling, K&L Gates, DLA Piper, Venable and WilmerHale. 

Consulting firm Promontory Financial Group and the Center for Responsible Lending, a nonprofit that pushes for stricter consumer protections, have several.

While none appear to be registered lobbyists, many still work closely with the entities under CFPB supervision.

Critics say the staff exodus from the four-year-old agency shows that the CFPB is falling victim to the same tactics that have taken the sting out of Washington’s other regulatory agencies.

“The most important difference between the Bureau of Consumer Financial Protection and other financial regulatory agencies is its mission,” said Public Citizen’s Craig Holman. “Conceived and dedicated to protect consumer rights, CFPB is naturally going to attract those concerned more about the public’s interest.

“But as it becomes evident that service on the CFPB can also lead to riches in the private sector, the agency will become increasingly plagued with the conflict of interest concerns that trouble the [Securities and Exchange Commission] and other regulatory bodies,” he said.

The business world’s efforts to hire away CFPB officials began early, with officials inside the agency being bombarded with potential offers from the time it opened its doors.

“I would get calls from headhunters frequently, even right after I started working there,” said Joe Rodriguez, a CFPB official from 2012 to 2014, who is now of counsel at Morrison & Foerster. 

Some of the companies that have hired staffers away from the bureau did so after facing a compliance fight with the agency.

Genessa Stout, a former enforcement attorney at the bureau, became PayPal’s director of litigation in September. Four months earlier, the agency had fined the online payment company $25 million for illegally signing up consumers for unwanted credit.

“We would evaluate who is the best resource for the project, obviously keeping in mind that we would comply with any and all ethical guidelines,” a PayPal spokeswoman told The Hill, regarding its hiring practices.

Ethics rules bar some former high-level employees from having work before the bureau for one or two years, depending on how senior they were at the agency. For other levels, it gets a bit murky and depends on the kind of cases on which the individual worked.

The CFPB fined Wells Fargo and JPMorgan Chase $35 million earlier this year as part of a “mortgage kickback” scheme. 

In September, Wells Fargo hired Brian Webster, who was a key player in the creation of fair lending and mortgage rules at the bureau. 

He is now the bank’s senior vice president for financial reform strategy in its Business Capability Group and is tasked with focusing on “the impact of the evolving regulatory environment on the business.”

Many of the firms that have hired CFPB employees did not respond or declined to comment. Those who spoke with The Hill said they left to pursue other career goals, in order to move closer to family or because they became burned out with the increasing bureaucracy at the growing agency. 

“I think it’s healthy — both for the CFPB and for the industry — for former CFPB folks to be in the private sector because it will help industry understand the agency, to the benefit of them both,” said Ori Lev, a partner at K&L Gates and former deputy enforcement director at the CFPB.

Near the end of 2011, the new agency employed 58 people. Now, it has nearly 1,500 employees. 

“The CFPB has attracted, and continues to attract, talented staff from diverse backgrounds, including the financial sector, consumer advocacy, and federal or state regulatory agencies. For some the Bureau will be a career-long commitment, and for others it is an opportunity to make a difference on behalf of consumers over a shorter period of time,” said CFPB spokesman Sam Gilford. 

“We believe our work benefits from both a constant flow of new perspectives combined with a strong consistent core and so we want employees from both ends of the spectrum,” he said.

While being debated as part of the Dodd-Frank financial reform package, the CFPB was hailed as an agency that could eventually change the way Wall Street operates.

During a conference meeting on the legislation in 2010, then-Sen. Chris Dodd (D-Conn.) said that the conceptual agency would consolidate the “consumer functions of seven different regulatory agencies” into one bureau.

“For the very first time in American history, our banking system — the regulatory playing field between banks and the shadow banking industry will be level,” he told his colleagues. “Gaming the regulatory system will become totally something of the past.”

Republicans, meanwhile, have remained the bureau’s most vocal critics, arguing it is overly powerful and
unaccountable. 

It has even become a flashpoint in the 2016 presidential election cycle, with outside group American Action Network airing critical ads during the GOP debate visually portraying CFPB Director Richard Cordray and its chief architect, now-Sen. Elizabeth WarrenElizabeth WarrenOvernight Cybersecurity: FBI probes possible hack of Dems' phones | Trump's '400-pound hacker' | Pressure builds on Yahoo | Poll trolls run wild Wells Fargo board to decide on executive clawbacks Labor Department launches Wells Fargo review MORE (D-Mass.), as communist
dictators.

“What I didn’t appreciate from the inside is how opaque it appeared to the outside world,” said Lev, who joined K&L Gates earlier this year after being one of the bureau’s first employees. Other former bureau staff expressed similar sentiments to The Hill.

While some former CFPB officials say they do not handle the same types of issues they once did at the bureau, others list detailed CVs that involve helping clients fight or navigate litigation or regulatory actions. 

“There is so much more attention being paid to consumer protection now because of the CFPB. I’ve talked to clients who’ve had to hire 30 people to handle new compliance efforts,” said Nicholas Smyth, now at ReedSmith, who went from working on the Dodd-Frank legislation at the Treasury Department to serving as one of the CFPB’s first
employees.

“There’s a real commitment across the industry to make it a priority because the government is making it a priority,” he added.