CFPB nominee Kraninger questioned about her involvement with controversial administration policies; Toomey says he plans to continue blocking quorum at Ex-Im

The Senate Banking Committee on July 19, held a hearing on the nominations of Katherine Kraninger to be director of the Consumer Financial Protection Bureau (CFPB) and Kimberly Reed to be president of the Export-Import Bank. Materials from the hearing are posted here.

In his opening statement, Chairman Mike Crapo (R-ID) noted a dispute between the committee's majority and its Democrats, who four weeks ago sent a letter to the White House seeking documents related to the administration's response to Hurricane Maria in Puerto Rico and any involvement Kraninger may have had in her position as associate director of the Office of Management and Budget (OMB) in developing the administration's previous policy of separating families at the southern border — an issue that came up repeatedly during the hearing. Because the White House had not replied, Ranking Member Brown and others asked that the hearing be postponed, a request Crapo rejected. Crapo said the Democrats' requests "go far beyond the practice of this committee in document production. Indeed, I would not expect this administration or any administration to release documents related to its ongoing deliberative process … This is a multi-faceted battle with the president being played out in the context of this committee's nomination process. I hope this doesn't change the tenor of cooperation we have on many other issues." Crapo noted that the committee's 2011 confirmation hearing for the CFPB's first director, Richard Cordray, had taken place one month after the nomination was submitted and Kraninger deserved similar treatment. But in a departure from their usual bipartisan comity, Brown later called Crapo's comparison "specious" because Senate Republicans proceeded to block Cordray's confirmation vote for two years as they pressed for changes to the law that established the CFPB.

Crapo otherwise hailed the nominees' qualifications, noting Kraninger's service at OMB and the Departments of Transportation and Homeland Security, and as a congressional staffer. He said Kimberly Reed's previous nomination last year to serve as first vice president of the Ex-Im Bank was reported favorably by the committee, and noted her positions with former Treasury secretaries Hank Paulson and John Snow, as well as congressional staff positions and "impressive leadership positions in the private sector."

In his statement, Ranking Member Sherrod Brown (D-OH) said that if committee Republicans "are concerned about transparency and about accountability and responsiveness, they should note this nominee's failure to reply to a simple request about her responsibilities in her current job. She's been involved in the management of one disastrous policy after another. The botched response to Hurricanes in Puerto Rico has left American citizens to fend for themselves. A housing policy that undoubtedly will increase homelessness. The administration's cruelest policy yet, separating children from their parents at the border." Brown said that "nobody wants Mr. Mulvaney out of CFPB faster than I do, but American consumers can't afford five years of someone who stands with the bankers in the administration and stands with the bankers in Wall Street." On the Ex-Im Bank, Brown said it has been four years since the Senate confirmed an Ex-Im nominee, "leaving Ex-Im partially shut down for three years. American businesses have transactions worth more than $40 billion pending at the bank, yet there's been stonewalling from this committee and this Republican leadership for years … If President Trump and Republicans are serious about helping American manufacturers after three years of obstruction … they should urge the majority leader to schedule consideration of Ms. Reed and the other Ex-Im board members immediately."

In her prepared statement, Katherine Kraninger, who is currently associate director of the White House Office of Management and Budget, serving under OMB Director and acting CFPB Director Mick Mulvaney, outlined four main priorities she would have if confirmed. She said the CFPB should: 1) be "fair and transparent" by using cost-benefit analysis in its rulemaking; 2) work closely with other federal and state regulators on supervision and enforcement; 3) limit its collection of sensitive data, a frequent criticism of the agency by Chairman Crapo; and 4) "be accountable to the American people for its actions, including its expenditure of resources." Kraninger said that under her leadership, the Bureau would also "take aggressive action against bad actors who break the rules."

In her statement, Ex-Im nominee Kimberly Reed said there are now 109 Foreign Export Credit Agencies (ECAs) around the world, and she noted the "increasing 'weaponization' of export trade credit by the world's ECAs to complement increasingly nationalistic trade policies, particularly those initiated by China. If confirmed, I look forward to working with the Administration and the Congress on an aggressive response to China's unfair trade policies. In a perfect world, there would be no ECA financing. If confirmed, I will work with the U.S. government and, as appropriate, the OECD, G20, WT, and other forums to move towards the ultimate goal of eliminating all ECA financing. On that you have my pledge. Until that goal is reached, the United States should not unilaterally disarm in a fiercely competitive global economy. While we negotiate, we should not place our nation in a worse position than our foreign counterparts." Reed said the Ex-Im Bank has "more than $40 billion in pending applications supporting 250,000 U.S. jobs. We need to keep and support these jobs in the United States while we, at the same time, work to reform the export subsidies of our competitors to save even more. We can do both."

Questions

Most of the Q&A was directed at Kraninger, including a series of questions about the administration's since-rescinded "zero tolerance" policy on the Mexican border, and her involvement at OMB in developing budget requests for agencies such as the Department of Homeland Security. Democrats also quizzed her on her lack of financial regulatory experience, asking if she had experience working with banks, credit unions, credit bureaus, financial literacy, student loans or debt collectors. Kraninger generally said she could not respond when asked about her contribution to debates over budgets or immigration, telling Sen. Warren at one point, "I don't think it's appropriate or fair or right for me to articulate the advice that I gave. I would note again that I had no role in setting the policy." Several Democrats complained that Kraninger was refusing to answer most of their questions.

Notably, while Pat Toomey (R-PA) said he believed Reed was a good nominee for the Ex-Im Bank, he said he did not plan to drop his hold on the nominations of other Ex-Im nominees, which has prevented the bank from having a quorum and effectively blocked it from approving loans of more than $10 million. Speaking to reporters after the hearing, Toomey said, "I may support her. I am not going to support restoring a quorum at this point … I might support her because as president, she could begin implementing important reforms. [But] a quorum would allow the bank to just go back to business as usual and engage in large-scale transactions."

Jon Tester (D-MT) was frustrated by many of Kraninger's answers, telling her, "You're going to be leading this agency. Your recommendations are going to count for something. And so it would be really helpful for me to know, if I'm going to vote for you or not vote for you, where you're at." After the hearing, Tester told reporters, "I will confirm a lot of people that I disagree with if they answer the questions. But when they don't answer the questions, there's something fundamentally wrong here. I was going to make my decision based off of this hearing, and she failed."

Thom Tillis (R-NC) asked Kraninger for her views on the CFPB's payday lending, saying she should respect the rulemaking process that the bureau has re-started for that rule under Mulvaney. "On payday, it's on the regulatory docket for the agency and is something that cannot be prejudged," Kraninger said. When Tillis asked her about the authority wielded by the agency, she said, "Congress through the Dodd-Frank Act gave the bureau incredible powers and independence from the president in its structure. My focus is on running the agency as Congress established it. I'm very open to changes to that structure to make the agency more transparent."

Ranking Member Brown and Elizabeth Warren (D-MA) both focused extensively on the role Kraninger had, if any, in the administration's "zero tolerance" border policy, which involved separating parents from children. Kraninger told Warren she had no involvement in setting the policy, but Warren said, "You've given a very lawyerly and limited answer — you're dodging. The answers have also been contradictory: You've said you had no role in 'setting' the policy, but you also can't describe the advice you gave on the policy … You don't want to admit that you had something to do with this … Do you think that purposely inflicting that on children is immoral?" Kraninger told her, "There are many heartbreaking stories that appear in the news every day." Warren replied, "You were part of it, Ms. Kraninger. It is a moral stain that will follow you for the rest of your life. If you are given a big promotion it will be a stain on the senators who do it." Warren also asked Kraninger about a provision in the president's fiscal 2019 budget calling for cutting the CFPB's budget by 23%, or $147 million. She asked if Kraninger would achieve those savings by firing civil servants. "That is the president's budget request and not mine. Certainly, I did support its development," Kraninger said. "There are laws in place that protect civil servants."

Catherine Cortez Masto (D-NV) said she was troubled by Kraninger's "lack of candor" at the hearing about her work in the administration. "We can't even get you to be transparent and accountable about your work at the OMB. If you can't tell us what you do on a day-to-day basis, how can we trust what you are doing at the CFPB?"

Heidi Heitkamp (D-ND) told Kraninger, "We want somebody in that [CFPB] job who not only has core competency but also some empathy. In an interview with Politico after the hearing, Heitkamp said, "I also have concern that someone sitting there could listen to a story about someone losing their home, someone losing their life savings, and not feel compelled to move in a public policy way to remove that misery or to respond to that misery. I know a lot of times it's underrated, but in this case I would tell you empathy is pretty important in this job."

Joseph Schatz (D-HI) also expressed frustration with Kraninger's answers, at one point asking if she had been coached by attorneys on how to reply to senators' questions. "I am trying to get an answer from you and I just can't. It is maddening because this is not a trivial aspect of your qualifications for the job. You are coming in saying you are a manager and you can't explain anything you do," Schatz said.

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