Never Mind the CFPB Director, Who's Staffing the Rest of the Agency?

WASHINGTON — While most of the attention so far has focused on who will be the director of the Consumer Financial Protection Bureau, would-be employees are increasingly anxious about how and when the agency plans to fill the lower ranks.

With little more than a month until the bureau assumes its powers and authority, regulators whose responsibilities are expected to transfer to the agency say privately that have been left in the dark about the hiring process and where they will fit in with the CFPB. Although some offers have finally begun going out over the last two weeks, industry observers said it's still unclear if the bureau will be fully operational on July 21.

"The time is terrifyingly tight," said Jo Ann Barefoot, a co-director at Treliant Risk Advisors. "There's a great deal of concern about the possibility of either understaffing or not getting people with good enough examination and supervision experience, people who are going to need to be trained on the job. So we're at a pivotal moment."

The bureau expects to hire about 1,500 employees over the next several years. That includes about 300 employees who will come from the other banking regulators, primarily from the Federal Reserve, according to a report from the Congressional Budget Office.

To date, the bureau has only hired about 200 people, approximately 50 of whom are only temporary employees detailed from other federal agencies, according to information provided by CFPB. It expects to have several hundred on board by the end of July.

Most of that hiring has occurred from the top down, including more than two dozen managers of the CFPB's various offices and departments. (They did not disclose exactly which departments those new hires have gone to.)

As of Friday, the bureau had 33 jobs posted for positions in Washington, New York, San Francisco and Chicago, from positions for senior economists to regional directors to chief financial officer. In March, the bureau also put out a broad call through its blog for applicants for its supervision team

It has received thousands of applications from across the country.

"We've been very lucky in terms of just the raw horsepower of the people that we've managed to attract," said Raj Date, the bureau's associate director for research markets and regulation, and a former executive at Capital One and Deutsche bank.

But observers questioned how much hiring the bureau can - or should - do without someone setting the tone at the top.

Elizabeth Warren, its de facto director, has already left her fingerprints all over CFPB by hand-picking its key players over the last nine months. But the administration has yet to nominate a permanent director despite pressure from Democrats and consumer advocates.

As the transfer date approaches, it's becoming less clear that Warren will be the permanent pick, said Mark Calabria, a director of financial regulations studies at the Cato Institute and former top aide to Sen. Richard Shelby.

Without a director, the bureau would only assume some of its authority, and staffing demands may not be as pressing. Still, dragging out the appointment of a permanent director could undermine the ability of the agency to do its job, he said.

"The real question is, how much hiring do you want to do if you don't have a permanent director in place?" Calabria said. "You run the risk of somebody coming in and feeling like they've gotten stuck with a whole bunch of people, none of which they have any attachment to."

Wayne Abernathy, a executive vice president for financial institution policy at the American Bankers Association., said the problems with filling the top job, as well as the head of supervision and enforcement departments, is causing consternation among bankers and regulators alike.

"A number of people at the agencies that have career paths in front of them are not sure what their career path will be like in a new agency that at this point looks dysfunctional, and they're not excited about making the move," Abernathy said. "We're hearing this especially at the examiner staff, but also with the policy folks."

Others have also complained about a lack of details on how the agency will be structured.

So far, Abernathy said, most of those conversations have occurred "at the 30,000-foot level."

"That may work in the public debate, but it doesn't work very well with someone who's thinking, 'Well, I want to go and work there,'" he said.

It's also unclear how the different departments will interact, said Lynne Barr, a partner at Proctor & Goodwin. For example, it appears that lawyers who will be in charge of rule-writing will be separate from departments that oversee policy. That's different than the model at the Federal Reserve, Barr said, where rule-writing lawyers often influence the policy side as well.

"I'm a bit concerned that there is not enough integration among the regulatory responsibilities, the enforcement responsibilities and the policy making," Barr said.

But some observers said it's not fair to expect the bureau to have all its ducks in a row at this stage, or even by July 21.

"To expect the federal personnel process to move with speed is to expect the earth to change its axis," said Karen Shaw Petrou, a managing partner at Federal Financial Analytics. "It is an extremely cumbersome process to transfer people from one agency to another and decide amongst them who stays or goes."

Stacie McGinn, a partner at Simpson Thatcher & Bartlett, said there's no guidebook for starting a bureau from the ground up, and the anxiety from those affected is understandable.

"It's not surprising that you'd have people who are affected by it and are concerned and feel like they're not getting enough information about how decisions are being made," she said.

Date disputed the idea that the bureau hasn't been open about its structure.

CFPB posted its organizational chart in February, and has asked for comments and critiques from the private sector, community groups, academics and lawmakers.

"I could understand how it is that people are concerned about how specifically that person will fit in, that's a natural human anxiety," Date said. But in terms of the governance and structure, "if people honestly don't understand that, then I'm just not sure they're paying attention. The governance structure has been public for quite some time."

Another common complaint is that the bureau's hires don't have enough industry experience, and that there hasn't been enough effort to recruit from both the banking side and consumer advocacy side.

Date said that notion is "wrong in principle and it's wrong on the facts."

The bureau has stacked its top tiers with former state and federal banking regulators, such as Steve Antonakes, the former commissioner of banks in Massachusetts, and Leonard Chanin, the former Deputy Director of the Federal Reserve Board's Division of Consumer and Community Affairs; former bank executives, such as Date, Catherine West, a former president of Capitol One's credit card business, and Elizabeth Vale, a former managing director at Morgan Stanley; and banking lawyers, such as Patrice Ficklin, a top fair lending expert who has practiced at Relman, Dane & Colfax.

Date said the criticism seems to be premised on the idea that consumer advocates and industry advocates can't co-exist.

"That is, just on principle, nonsense," he said. "There are tons of people within this industry that think that a more practical and right-minded approach to consumer protection is a necessary ingredient to better functioning consumer finance markets."