Richard Cordray, the former Ohio attorney general picked by President Obama to lead the Consumer Financial Protection Bureau, had a hearing with the Senate Banking Committee Tuesday. The elephant in the room — no pun intended — is that 44 Republican senators have said they’ll block the confirmation of any director to head the new CFPB unless the Obama administration agrees to substantially change the agency’s makeup in a way that would almost certainly curtail its ability to crack down on providers of predatory financial products.
Most of the senators conducting the questioning were pro-CFPB, so the exchanges with Cordray were mostly non-combative, although Robert Menendez (D-N.J.) tried to prod him into pointing out that none of the lawmakers objecting to his confirmation had called his qualifications into question. But two members of the committee tried to argue that a consumer finance watchdog is a bad idea and wound up saying some pretty ridiculous things in the process.
1) “The director will be virtually free of any constraints on his authority,” he claimed. “It’s only a matter of time before this concentration of power is abused or misused.” – Senator Richard Shelby (R-Ala.)
GOP senators are demanding is that the CFPB be led by a committee rather than a single director, claiming that a single-director model puts too much power in one person’s hands and would be unprecedented in the financial regulatory structure. Both the Federal Housing Finance Agency, which just filed lawsuits against a slew of big banks for selling junk mortgages to investors, and the Office of the Comptroller of the Currency have single directors. For its part, the OCC has been described variously as an “enabler” of bad bank behavior and “asleep at the wheel,” so a single director doesn’t necessarily lead to heavy-handed regulation.
2) “We’re creating an environment … encouraging people to default.” - Senator Bob Corker (R-Tenn.)
Corker asked the would-be director how he felt about credit-card late fees, and Cordray said he’d pushed to have the government put limits on them, reforms that were eventually incorporated into the Credit CARD Act of 2009. Corker’s response is disingenuous, at best, in its suggestion that prohibiting card companies from charging huge penalties is going to turn credit cardholders into scofflaws, en masse. In fact, the percentages of people not paying their credit cards has actually been on a downward trajectory since the CARD Act was implemented.
3) “It’s not typical to have a political activist … announced to be head of a national organization.” – Senator Corker
Corker’s complaint makes Cordray sound like some kind of slogan-chanting firebrand. In reality, he was an early, aggressive advocate for homeowners who were foreclosed on with “robosigned” paperwork by suing mortgage companies for fraud during his tenure.
(Corker also argued that Cordray’s earlier contemplation of a run for governor would make him an inappropriate choice for director. Cordray responded that he had no plans to run for any political office.)