Who is Richard Cordray, and what is he going to do?
The controversy surrounding Richard Cordray has focused on the process President Obama has used to install him as head of the new Consumer Finance Protection Bureau, not Cordray himself. Even before Wednesday’s recess-appointment, Republicans made it clear that their primary objections were based on the power structure of the agency itself, not the qualities of the candidate Obama chose to ran it. But now that Cordray is poised to take the helm of the CFPB, it’s worth taking a closer look at where he comes from and what he’s likely to do.
Cordray first entered public office as a Democratic politician, serving one term as a Ohio state representative in the early 1990s before being redistricted out of office. But he rebounded to serve as treasurer and then attorney general of Ohio — and that’s where he built his reputation as one of the nation’s leading consumer advocates.
As attorney general, Cordray aggressively pursued lawsuits against some of the country’s biggest financial firms — including AIG, Bank of America and Fannie Mae — for misleading the state’s pension funds, ultimately securing a $700 million settlement from AIG over accounting fraud. He also led an early effort to go after so-called “foreclosure mills” that used falsified documents to speed up foreclosures on consumers, suing Ally Financial in 2010 and campaigning for big banks to slow down their own foreclosure proceedings. “We pursued many actions against foreclosure rescue scammers who were reaching into the pockets of desperate people in an effort to steal what little remained as they sought to keep their homes,” Cordray told the Senate banking committee in September.
Cordray had previously expressed interest in running for Ohio governor in 2014, but since his CFPB appointment, he says that he’s abandoned these near-term political ambitions.
Cordray’s pro-consumer, anti-Wall Street background seems well in line with the CFPB’s own mandate. Funded and located inside the Federal Reserve, the CFPB will consolidate oversight of consumer financial products and services that had previously been scattered across seven different agencies. Under Dodd-Frank, the CFPB has the mandate to review all the new rules that are part of Wall Street reform within five years of their implementation. The agency’s purpose is to “address unfair, deceptive, and abusive practices by payday lenders, private student loan providers, debt collectors, and other nonbank lenders, including certain mortgage originators and servicers,” according to Deputy Treasury Secretary Neil Wolin. And it has the responsibility of overseeing all banks with deposits over $10 billion in line with such a mandate.
It remains to be seen, however, exactly what path the CFPB will take under Cordray’s leadership. During his Senate confirmation hearings, he tried to assuage concerns that he would quickly resort to litigation to carry out the agency’s mandate, in line with his work as attorney general. “I know from my own experience that lawsuits can be a very slow, wasteful, and needlessly acrimonious way to resolve a problem,” he said in a statement. But Cordray’s experience suggests that he’ll pay special attention to the still-ailing housing market, which neither Congress nor the Obama administration (nor the private market) has managed to address successfully so far.
For Mark Spindel, co-founder of the Potomac River Fund, that will be a major indicator of how effective the CFPB can be. “The key for me is whether and when and if this will have some impact on the foreclosure and housing markets. Frankly, the jury is still out. Someone will have to ‘take the hit’ of principal reduction to really unclog the housing market,” he said. Though Obama may have been politically aggressive in recess-appointing Cordray, the real test for the CFPB will be in seeing how aggressive Cordray will be in pushing financial policy to favor consumers.