CFPB Nominee Kraninger Faces Senate Confirmation

think should not exist. This is her confirmation hearing, and at it, Kranninger discussed her commitment to keep in the CFPB true to its mandate. For more on this story, we're joined now by Evan Weinberger. He's a reporter for Bloomberg Law. He's in our Bloomberg eleven three, our studios in New York and having a lot of people have been scratching their heads about this one. What is up

with this nomination? Well, what is up is that at this point looks like she has the votes to at least make it out of committee, and if Mitch McConnell wants to bring it before the Centaploor get her confirmed to be the next director of the Consumer Financial Protection Bureau UM after that. The real motivation here was at the end of June there was a deadline to nominate somebody. Otherwise mc mulvaney, who's currently the acting director, would have

had to leave his post at the CFPB. So they put in Kathy Cranniger, who was kind of an unknown quantity. She works at the Office Management and Budget, where mcmilvany also works UM, and nobody really knew anything about her. She didn't have any experience of financial policy or in consumer finance or anything relevant to the CFPB, mostly in budget work and Department of Homemound Security and security issues,

things like that. That's a kind of a shell nomination, or I wouldn't say shell necessarily, although it's it's clear that if she is confirmed, she's most likely going to follow along with what mcilvaney has been doing at the CFPB. UM. She's a budget person. The Trump administration proposed cutting the cfpp's budget by in fiscal but because it's an independent agency, they don't actually have any control. The fear and Senator Elizabeth Warren, who was kind of the brainchild of the

cfpb the intellectual architect of the cfpb. UH. She expressed some concerns that Cranninger is going to go in there and find ways to cut that budget, whether it's firing civil servants or cutting examination budgets and things of that nature. Had did Crowdinger in the nomination? Since she has no experience in banking or financial services? What did she say her qualifications are for running this consumer watchdog, the biggest consumer watchdog agency we have primarily budget issues. I mean,

she she by all accounts, is a talented manager. She's a talented budget person. She knows that. She's a twenty year veteran of government, both on Senate and House committees and at the Department Homeland Security and the Office of Management and Budget. So she comes in there qualified for a range of jobs. It's just not necessarily we are too, at least Democrats on the committee where those skills come into play when it comes to running a consumer regulator. Yeah.

One of our stories on the terminal calls her an enigma kind of she most definitely mastered the skill of using a lot of words to stay a very little amount in the questions from senators. But we know what the President thinks of the Consumer Financial Protection Bureau. He doesn't like it, he wants to roll it back, cut it and all that. She's just she's going to follow the marching orders. Um that is the best guess that anyone has a source of mind. Uh emailed me during

the hearing. I actually know less about Kathy Crottinger now than I did before the hearing started. So we mentioned, you mentioned Elizabeth Warren, and this the CFPP is her baby, so to speak, and we've seen her in these hearings get very you know, sarcastic, sharp, whatever you want to call it. Did she take that attitude with Kranneinger. She was outraged at Kranneger, but not because of CFPB issues,

at least at the start. Her first round of questioning focused on Kranneger's potential role in the Trump administration zero tolerant immigration policies and the child separation policies at the border, because her role at o m B is to oversee

the Homeland Security Department and Justice Department's budgets. So Democrats had asked for the hearing to be postponed to get more information about what she did in helping to craft the policy and the documents, right, I mean, at one point, uh Warren said that the child separation policies will be a moral stain on Kranneger, and any senators who vote to confirm her will have will carry that moral stain because as they gave her a big promotion in the

wake of it. Can we clarify to just for the record, what mc mulvaney has actually done at the CFP b B while he's there. I know that he has rolled back some proposed regulations and some consumer protections, but the CFPB still has a basic mission that it must fulfill, right well, what one of mc mulvaney's first actions was to say that a controversial payday lending rule that the CFB finalized right before his predecessor, Richard Coudray left the bureau,

uh it was scheduled to take effect. Mulveney said that they're going to reconsider it, and many advocates for the rules think that that's just a prelude to eliminating the rule altogether. There also, he took the cf AB's Office of Fair Lending, which was its main anti discrimination unit, and it had been a fairly independent office within the CFPB UH, Mulveney took that and for that into another unit, took away its independent enforcement authority UH, and there he

has slowed down the pace of enforcement actions. And even with the enforcement actions that he's taken outside of the Walls Fargo UH enforcement action from earlier in the summer, he's taken a much lighter touch on enforcement actions than his predecessor did. And when she was asked by Shared Brown to name something specific that she approved of that Mulvaaney has done, it was or that the CFPB has done.

She mentioned Wells Fargo and Equifax, right, not the two biggest things that they've they've well Wells Fargo technically was the biggest enforcement penalty that that the CFB had ever applied, but one it did it in conjunction with the Office of the Controller of the Currency, which is another bank regulator. And they also did it after the President tweeted that there would be big penalties for Wells Fargo. Evan Weinberger,

reporter for Bloomberg Law, Thanks for your reporting. The Republicans sweeping federal tax law put a new ten thousand dollar cap on the federal tax deduction for state in local taxes, which will hit Northeastern states like New York hard. Here's New York's Governor Andrew Cuomo on the tax plan in late they call it a tax cart plan. In New York, it is a tax increase plan. So now New York is joining with New Jersey, Connecticut, and Maryland and suing

the Trump administration to invalidate the cap. Joining me is Laurence Zelenak, a tax professor at Duke Law School. So let's start with the basics. How much will this cap on the so called salt deduction actually affect taxpayers in these Northeastern states. Well, it affects you if you pay more than ten thousand dollars in state and local taxes, and that would be the sum of your property taxes and your state income tax. Uh, it will be Uh. I can't give you specific data on those states, but

but it's it's clearly significant. I. UM, there will be some people who would have had a tax cut from the rate reductions if it weren't for the salt limit, where with the salt limit there end up gonna they're gonna end up having no tax cut or even a tax increase. So on what legal basis are the states bringing the lawsuit. Well there, their argument, which I think is extremely weak, is that a state and local tax

deduction is constitutionally required. It's so it's based on the on the tenth Amendment, which says basically that power is not specifically convert conferred on on the federal government by the Constitution, are reserved to the state and by general principles and on general principles of federalism or states rights. But I think it's a very much a long shot. Why why a long shot? Well, a couple of reasons.

One is um there's a Supreme Court case which from called South Carolina v. Baker, which is not directly on point, but it's pretty darn close. So since the beginning of the federal income tax, interest on municipal bonds or state in local bonds had been tax exempt. Then in the early nineteen eighties, UM Congress imposed a minor limitation on that exemption, which said basically that the exemption no longer applied to state and local bonds that were not in

registered form. So if you could hold the bonds anonymously, then the income wasn't tax exempt anymore. And South Carolina, a number of other States sued on on the basis that they had arguing that they had a constitutional right to issue bonds with income tax exempt at the federal level UM and that, uh, therefore, the early nineteenies legist Lasian violated their constitutional rights. And in in the South Carolina by Baker case, the Supreme Court ruled by a

vote of eight to one. So it wasn't even close that there was no constitutional requirement that state and local bond interest be tax exempt. Now this is not, obviously not exactly the same issue, but on the other hand, it's pretty darn close. And uh, it's hard for me to see what the argument would be for distinguishing South Carolina by Baker so Lawrence. In in the complaints, some

of the things that the States says. The States say is that the federal government went after the states deliberately that are democratic. And they they quote conservative economist even Moore, who advised Trump on the tax policy, quoting him as saying, the salt deduction is death to Democrats. Will that play any part in the Court's decision whether this was done

to hit democratic states? Well, I don't think so. I mean, my my, if I remember right in the recent UM um Supreme Court ruling on the the the immigration restrictions. There was there were quotations not from Stephen Moore, who I think kind of doesn't count in a way, and he's not he's not in Congress after all, that from from the President himself indicating some dubious motivation, and h

and and and the court said that didn't matter. So if if the president's motivation doesn't matter, I hardly think that Stephen Moore's motivation is probably going to be that crucial.

Can I put corn out? One? One other thing, and relating to this is um if if if the state and local tax deduction is really constitutionally required, then the federal income tax has probably been unconstitutional for a long time because it's it's always been the case that you get to deduct your state and local taxes only if you itemize, and traditionally the percentage of taxpayers who itemize

has only been about one third. So so we've had a situation we're all along about two thirds of taxpayers have not gotten this deduction, which supposedly is is constitutionally required. In addition to anyone who's subject to the alternative minimum tax hasn't been allowed the salt deduction for since I think nineties six and and for a long period of time from until fairly recently. UM, state sales tax wasn't

deductible under any circumstances. UM. And all of those things, by the logic of this new lawsuit, UM, we probably were unconstitutional, but of course they weren't unconstitutional. And for the same reason they weren't unconstitutionally. I don't expect this loss to succeed either. Well, let's let's switch a little bit. We have a minute here. Governor Cuomo advanced proposals in the state budget this year to help New Yorkers try to circumvent the cap on deductions, creation of new charitable

credits and payroll tax deductions. The i R said in May that it would scrutinize that New York tax workaround. Has anything happened there? Uh? No, not. Well, I have an article on the very topic coming out in tax Well tell us, tell us in thirty seconds that the basics of your article, Uh, that that I think that there's two different kinds of workarounds. UM. One is trying to convert charitable or excuse me, trying to convert state in local taxes to charitable deductions. That's what the article

is about, and I conclude that doesn't work. The other the other workaround UM is basically trying to convert state taxes income taxes on wages into a payroll tax paid by the employer rather than by the employee. I think that probably could work as far as the federal tax result is concern. Okay, we're going to take that good news. You'll have to end it there. Thanks so much. That's Laurence Zelena, perhaps professor at Duke Law School. Thanks for

listening to the Bloomberg Law Podcast. You can subscribe and listen to the show on Apple Podcasts, Sounds Out, and on Bloomberg dot com slash podcast. I'm June Rosso. This is Bloomberg m HM.