Professor Todd Zywicki is vying to be the toughest critic of the Consumer Financial Protection Bureau, the new agency set up by the landmark Dodd-Frank financial reform law to monitor predatory lending practices. In research papers and speeches, Zywicki not only routinely slams the CFPB’s attempts to regulate bank overdraft fees and payday lenders; he depicts the agency as a “parochial” bureaucracy that is “guaranteed to run off the rails.” He has also become one of the leading detractors of the CFPB’s primary architect, Elizabeth Warren, questioning her seminal research on medical bankruptcies and slamming her for once claiming Native American heritage to gain “an edge in hiring.”
Zywicki’s withering arguments against financial reform have earned him guest columns in The Wall Street Journal, The Washington Times and on The New York Times’s website. Lobbyists representing the largest consumer finance companies in the country have cited his writings in letters to regulators, and the number of times he has testified before Congress is prominently displayed on his academic website at the George Mason University School of Law.
What isn’t contained in Zywicki’s university profile, CV, byline or congressional testimony is the law professor’s other job: he is a director of the Global Economics Group, a consulting business that boasts in a brochure that its experts have been hired by industry to influence the CFPB and other regulatory agencies. Nor does Zywicki advertise Global’s client list, which includes some of the biggest names in the financial industry, among them Visa, Bank of America and Citigroup.
Last summer, Zywicki’s firm was retained for $500 an hour on behalf of Morgan Drexen, a debt-relief company accused by the CFPB of deceiving consumers and charging illegal upfront fees. None of these potential conflicts of interest, however, have been disclosed during the course of Zywicki’s anti-CFPB advocacy in the media or in government.
After the financial industry lost the battle to defeat Dodd-Frank, it moved quickly to minimize the law’s impact during the long slog of implementation [see Gary Rivlin, “How Wall Street Defanged Dodd-Frank,” May 20]. Academics like Zywicki have played a key role in this process. As Wall Street firms seek to beat back hundreds of rules still under consideration, sponsored scholars have been at the front lines of obstructing reform.
While sponsored research groups are something of a mainstay of Beltway lobbying campaigns, Dodd-Frank has created unique incentives for companies to hire professors to represent their point of view. The first reason is that Dodd-Frank delegates broad rulemaking power for some 400 regulations to a variety of agencies, giving lawyers and lobbyists the opportunity to flood policy-makers with comments, studies and testimony that could be used to affect the outcome of the proposed rules. The Volcker Rule alone—a regulation to prevent federally insured banks from making risky investments with depositors’ money—attracted more than 17,000 comments, including many from professors submitting their research.
Several of the anti–Volcker Rule academics providing comments to regulators, such as Harvard Law School professor Hal Scott, have been paid by investment banks seeking to block the rule. A nonprofit financed by Citigroup, JPMorgan Chase, Wells Fargo and other investment banks has paid Scott nearly $1.3 million in compensation since 2007, as Reuters reported in 2010. Separately, Scott has received more than $1.7 million in cash and stock from Lazard since 2006, when he was elected to the company’s board. Scott’s submissions to regulators neglect to mention these payments and other consulting jobs, including one for State Street Corporation, that may color the professor’s outlook.