Banks over students

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Banks over students

Forty-four million Americans are saddled with more than $1.5 trillion in student debt. The crushing burden has made these Americans, who sought to improve their lives through education, vulnerable to predatory practices by financial institutions.

The Consumer Financial Protection Bureau (CFPB), a government agency created in 2011, has sought to curb the worst abuses. The Trump administration has put a stop to that.

In a scathing resignation letter, the student loan ombudsman at the CFPB, Seth Frotman, said the Trump administration “has turned its back on young people” and neglected “its duty to fairly and robustly enforce the law.”

Frotman accused the Trump administration of using the CFPB to “serve the wishes of the most powerful financial companies in America,” and in so doing “abandoned the very consumers it is tasked by Congress with protecting.”

The student debt explosion

Student debt has ballooned over the last 12 years. In 2006, total student debt outstanding was under $500 billion. Today, that figure stands at over $1.5 trillion.

Student debt is the largest source of consumer debt, easily topping credit card debt.

Millions of Americans are delinquent or have defaulted on these loans. There are options available that allow most to repay the loans based on what they can afford, but debt collectors are pushing the vast majority of borrowers into more expensive alternatives.

The rip off and the cover-up

In his resignation letter, Frotman accuses the Trump administration of hiding evidence of malfeasance by financial institutions, suppressing the publication of a staff report “showing that the nation’s largest banks were ripping off students across the country by saddling them with legally dubious fees.”

In May, the Trump administration formally shuttered the CFPB’s Office of Students and Young Consumers, which was run by Frotman. Its activities were folded into another division of the agency.

Before Trump took office, the CFPB had been chipping away at abuses of students by financial institutions.

Frotman and others at the CFPB successfully advocated for students and were able to “return more than $750 million to harmed student loan borrowers.” In his resignation letter, Frotman says those efforts were stymied over the last 10 months.

“The Bureau’s new political leadership has repeatedly undercut and undermined career CFPB staff working to secure relief for consumers,” Frotman wrote.

The war on the CFPB

The allegations in Frotman’s resignation letter fit a pattern of conduct by the Trump administration, which has systematically tried to undermine the CFPB.

It started by pushing out the former chairman, Richard Cordray. He was replaced by Mick Mulvaney, Trump’s budget director, who opposes the existence of the CFPB. In a 2014 interview, Mulvaney called the CFPB a “sick, sad” joke and described the agency as “extraordinarily frightening.” He said he would like “to get rid of it.”

At the beginning of 2018, Mulvaney requested $0 to fund the agency’s operations, saying it could get by with what it had in reserves.

Abuses at the nation’s largest student loan servicer

The CFPB played a critical role in exposing abuses at the nation’s largest servicer of student loans, Navient. A lawsuit filed by the CFPB in the waning days of the Obama administration alleged that Navient “for years misled borrowers and made serious mistakes at nearly every step of the collections process, illegally driving up loan repayment costs for millions.”

Navient services about $300 billion in student loans for 12 million people.

The lawsuit accuses Navient of “deliberately steering borrowers away from income-based repayment plans that could have lowered their loan costs — in order to maximize its own profits.”

With Mulvaney at the helm, the future of the suit against Navient -- and other efforts to crack down on abusive practices -- is in doubt.

Mulvaney’s partner in crime

Mulvaney has not been alone in his crusade on behalf of financial institutions taking advantage of student borrowers. He’s had the full support of Education Secretary Betsy DeVos.

DeVos has sought to undercut “state efforts to stop unfair and deceptive actions by federal student loan servicers,” arguing that federal law preempts state action. States like Massachusetts have sought to protect borrowers with a “Student Loan Bill of Rights.” The National Consumer Law Center called DeVos’ announcement “a flawed attempt to shield servicers and debt collectors from the consequences of their illegal actions.”

Last August, DeVos announced her department would stop sharing information with the CFPB and cease collaborating on enforcement efforts against lenders and educational institutions that rip off students. In a letter, the Department of Education called the CFPB “overreaching and unaccountable.” Navient’s stock spiked on the announcement.

Meet the new boss, same as the old boss

Trump has nominated Kathy Kraninger to replace Mulvaney, who is heading the CFPB in an interim capacity. Kraninger is “a little-known White House aide with no apparent relevant experience in finance, banking regulation or consumer protection.”

Her background is “largely in Homeland Security,” and she is “seen as a protege of Mick Mulvaney.”

Republicans praised Kraninger as someone who could help the agency do less. “Personally, I think Ms. Kraninger will do a good job of trying to rein in … an agency that needs to be reined in,” Senator Mike Rounds (R-SD), said.

A new FBI scandal

President Trump was personally involved in a decision to cancel plans to move the FBI headquarters to Maryland or Virginia after years of planning. Instead, the FBI has proposed redeveloping their current location in downtown DC.

The building, coincidentally, is across from Trump’s hotel.

Trump’s involvement was detailed by the Inspector General for the Government Services Agency (GSA) in a report released on Monday.

The report raises fresh questions about how Trump is using the office of the presidency to benefit himself financially.

Misleading and incomplete

The Inspector General said that the Congressional testimony of the GSA’s top official, administrator Emily Murphy, was “incomplete” and “misleading.”

Here is the key exchange:

Q: To your knowledge, was the president or anyone else at the White House involved in those discussions [about locations for the FBI headquarters], either with your predecessors, people you’re working with now, or yourself?

Murphy: The direction that we got came from the FBI. It was the FBI that directed to GSA as to what its requirements would be. We obviously did coordinate, given that it is a substantial budget request, we coordinated that request with OMB to provide for funding but the requirements were generated by the FBI.

Murphy had actually met with Trump on January 24 to discuss the project. She described the meeting to investigators as a “free-flow discussion.”

Asserting executive privilege

Murphy declined to share with investigators what Trump said during the meeting. An attorney for Murphy stated, “the White House Counsel’s Office had advised GSA’s Acting General Counsel that the presidential communications privilege was being asserted.” Later, the GSA said that was inaccurate but Murphy “was not authorized to disclose the content of presidential communications from those meetings.”

Whatever Trump said, Murphy got the message. After the meeting, Murphy said, “she understood that they were moving forward with the demolish-rebuild project” at the existing site across from Trump’s hotel, according to the report.

Emails from other GSA employees later referred to Trump’s “direction” and “instruction.”

Last month, a source told Axios that Trump is “obsessed” with the project and is “treating it like it's a Trump Organization construction project.”

North Carolina may redraw election districts before the 2018 election

A panel of three federal district court judges in North Carolina ruled Monday that the state’s congressional districts, drawn after the first map was ruled an unconstitutional racial gerrymander, are an unconstitutional partisan gerrymander.

From the decision:

By definition, partisan gerrymandering amounts to an effort to dictate electoral outcomes by favoring candidates of one party and disfavoring candidates of another… That is precisely what the Republican-controlled North Carolina General Assembly sought to do here. The General Assembly expressly directed the legislators and consultant responsible for drawing the 2016 Plan to rely on “political data”—that is, past election results specifying whether, and to what extent, particular voting precincts had favored Republican or Democratic candidates, and therefore were likely to do so in the future—to draw a districting plan that would ensure Republican candidates would prevail in the vast majority of the State’s congressional districts, and would continue to do so in future elections.

The court did not define the precise remedy, but left open the possibility of allowing the state to redraw the districts -- or appointing a special master to do so -- before the 2018 special election.

Ordinarily, Republicans would run to the Supreme Court and seek an emergency stay of the decision. But with Justice Kennedy’s retirement, the eight remaining justices are likely to split on the issue, which would allow the lower court ruling to stand.

The state is closely divided politically but “Ten of the state’s 13 House districts are held by Republicans.” A new map that is less tilted to Republicans could help tip control of the House of Representatives to Democrats.

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