By Christopher Maag
President Obama announced on Sunday that he will nominate Richard Cordray, who aggressively pursued cases against banks over illegal mortgage practices, to lead new consumer finance watchdog agency, the Consumer Financial Protection Bureau. Cordray already works for the bureau as director of its enforcement team.
The decision ducks a fight over Elizabeth Warren, the controversial former Harvard law professor widely credited with creating the agency.
“Richard Cordray has spent his career advocating for middle class families, from his tenure as Ohio’s Attorney General, to his most recent role as heading up the enforcement division at the CFPB and looking out for ordinary people in our financial system,” Obama said in his prepared statement.
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The CFPB was created by the Dodd-Frank financial reform act of 2010. It seeks to do for mortgages and credit cards what the Consumer Product Safety Commission does for products like toys and microwaves, making sure that the products that consumers buy are safe. That became especially important after the recent housing bubble and crash, which was precipitated by risky mortgages that were designed to fail, according to the Financial Crisis Inquiry Commission.
But in the year since Dodd-Frank passed, the bureau has become one of the most controversial aspects of the sweeping law. Republicans in Congress have introduced more than a dozen bills to cut the bureau’s power and cap its budget.
A group of 44 Senate Republicans also sent a letter to President Obama in May declaring that they would oppose any of the administration’s nominations to any regulatory agency until the administration agreed to change the bureau’s leadership from a single director to a committee.
Obama’s decision to skip over Warren and nominate Cordray instead appears unlikely to change the Republicans’ opposition.
“Until President Obama addresses our concerns by supporting a few reasonable structural changes, we will not confirm anyone to lead it,” Senator Richard Shelby, the ranking Republican on the banking committee, said Sunday.
Many consumer groups and Democrats in Congress had called on Obama to nominate Warren to lead the bureau, since the agency was Warren’s idea in the first place, and her lobbying effort succeeded in creating it.
But Warren also created many enemies in Congress and on Wall Street. She almost seemed to revel in taking jabs at her opponents. “For years, Wall Street CEOs have thrown away customer trust like so much worthless trash,” Warren wrote in a Wall Street Journal editorial. “When they weren’t selling deceptive mortgages, Wall Street invented new credit card tricks and clever overdraft fees.”
Cordray, despite his aggressive pursuit of banks during his two-year term as Ohio attorney general, is a less controversial figure. He’s less well-known than Warren, and far more soft-spoken. While some consumer groups expressed mild support for Cordray on Sunday, they expressed regret that the Obama administration ducked the fight over Warren’s appointment.
“Elizabeth Warren was the best qualified to lead this bureau that she conceived—and we imagine Richard Cordray would agree,” consumer advocate Stephanie Taylor told The New York Times. “That said, Rich Cordray has been a strong ally of Elizabeth Warren’s, and we hope he will continue her legacy of holding Wall Street accountable.”
For her part, Warren was quick to step aside, despite rumours that she still hoped to take the director’s seat. Warren has been serving as special advisor to the president in charge of setting up the new agency. Cordray “was one of the first senior executives I recruited for the agency, and his hard work and deep commitment make it clear that he can make many important contributions in leading this agency,” Warren said. “He will make a stellar director.”
Christopher Maag is Credit.com’s Staff Writer. Chris graduated with honours from the Columbia University Graduate School of Journalism, and has reported for a number of publications including The New York Times, TIME magazine and Popular Mechanics. Reach Chris via email at chris (a) credit.com.
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