Amid growing criticism that a new federal consumer financial watchdog agency would open Thursday without a leader, President Obama on Monday announced he is nominating a former Ohio attorney general as its first director.
|Nominated: Richard Cordray|
Current job: Chief of enforcement, Consumer Financial Protection Bureau, January 2011 to present
Background: Attorney General of Ohio, January 2009 to January 2011. Former Ohio Secretary of Treasury and Treasurer of Franklin County, Ohio, Ohio State Representative and Solicitor General of Ohio. A former law school professor, U.S. Supreme Court clerk, he is a graduate of Michigan State University, Oxford University and the University of Chicago Law School.
Personal: Married with 12-year-old twins.
Quote: “When consumers sign a contract — for a home loan, a credit card or any other type of financial product or service used in their personal and household affairs — they should be able to say, ‘I understand this agreement and all the important terms.’ And they should also be able to know that no unwelcome surprises are hidden from them.”
Factoid: Five-time winner and Tournament of Champions semifinalist on the “Jeopardy!” game show
What’s next: Cordray faces confirmation hearings before the U.S. Senate Banking Committee and a vote of the full Senate. There’s no indication how long that process might take.
Richard Cordray, 52, is already chief of enforcement at the startup Consumer Financial Protection Bureau. Before he can be promoted to director, however, he must go before the U.S. Senate Banking Committee for confirmation — a process that could prove combative and extremely political. Republican senators who opposed creation of the independent watchdog agency in 2010 have vowed to block Obama’s nominee unless the CFPB’s powers are diminished.
Obama made the nomination official on the steps of the White House Monday afternoon.
The overall favorite by consumer groups to lead the agency had been former Harvard law professor Elizabeth Warren, who has served as the agency’s unofficial director since September, when Obama appointed her as assistant to the president and special adviser to the Secretary of the Treasury.
Obama thanked Warren for her work standing up the agency. “This agency was Elizabeth’s idea, and through sheer force of will, intelligence, and a bottomless well of energy, she has made and will continue to make, profound and positive differences for our country.”
“Richard has a proven track record of fighting for families during his time as head of the CFPB enforcement division, as attorney general of Ohio, and throughout his career,” Warren said in a statement. “He was one of the first senior executives I recruited for the agency, and his work and deep commitment make it clear that he can make many important contributions in leading this agency. He will make a stellar director.”
Support for Cordray
Consumer groups were pleased with Cordray’s selection. “He was one of the first voices to stand up to [mortgage] servicers on behalf of homeowners who were at risk of losing their homes to foreclosure,” says Ruth Susswein, deputy national priorities director for the Consumer Action advocacy group. “We’re pleased that the president plans to nominate someone before the bureau officially opens. Then it will be up to the Senate to either let the CFPB do its job or raise more roadblocks for consumer protection.”
Americans for Financial Reform, a coalition of more than 250 national and state grassroots consumer organizations, said it was disappointed Obama did not choose Warren: “But big Wall Street banks, finance industry special interests, and their friends in Congress fought her nomination fiercely.”
“Mr. Cordray is a great pick to get this watchdog up and running,” said Pamela Banks, senior policy counsel for Consumers Union, the nonprofit owners of Consumer Reports magazine. “He has the knowledge and experience to get the job done.”
If confirmed as director, Cordray will lead an agency of 1,200 people based in Washington, D.C., with satellite offices in New York, Chicago and San Francisco. The watchdog bureau — the first of its kind in the nation — will have broad powers to police banking and financial activities with an eye toward protecting consumers from fraud and unfair, abusive and deceptive practices. (See Your consumer financial watchdog: what it can do.)
The agency will be able to send examiners in to probe the books and operating practices of financial services providers to determine if they are violating existing consumer protection laws, and, if necessary, take action against those firms. They will research and monitor industry practices and, if warranted, draft new regulations to curb deceptive practices.
Created under the massive Wall Street reform law of 2010 (also known as the Dodd-Frank Act), the bureau is slated to officially open for business July 21, 2011. On that day, regulatory, supervisory and legal authority transfers from the Federal Reserve and four other existing regulators to the CFPB.
He was one of the first voices to stand up to [mortgage] servicers on behalf of homeowners who were at risk of losing their homes to foreclosure.
|— Ruth Susswein |
Because there is no director in place — and likely won’t be for the next several months as the Senate confirmation process continues — the agency will not be able to exercise all of its powers. A January 2011 Inspector General’s report ruled that without a director confirmed by the Senate, the agency cannot take on any new authority. That means oversight of nonbank financial service providers — such as payday lenders, money transfer and check cashing stores and debt collectors — will not immediately fall under the bureau’s supervision. Banks and consumer groups have lamented that the bureau is opening in a “handicapped” state and blame the White House for not acting sooner to ensure a director was in place by July 21.
‘I will move Mr. Cordray’s nomination forward … ‘
Sen. Tim Johnson, the South Dakota Democrat who chairs the Senate banking committee, said in a statement: “Until a director is in place, the CFPB will not be able to level the playing field for responsible community banks and credit unions. That is why I will move Mr. Cordray’s nomination forward in the banking committee as quickly as possible.”
“The absence of a confirmed director and the enormous powers of this new agency have created a time of great uncertainty for the retail banking industry,” Richard Hunt, president of the Consumer Bankers Association, said in a statement. The American Bankers Association said through a spokesman that it has a policy against commenting on bank regulatory nominees.
“It must have a leader in place as soon as possible, so that it can use all of the powers it has been granted to be an effective ‘cop on the beat,’ protecting Americans from deceptive and unfair financial practices,” Travis Plunkett, legislative director of the Consumer Federation of America, said in a statement.
At the White House announcement on Cordray Monday, Obama said he wouldn’t let opponents dilute the agency’s powers.
He added: “I will fight any efforts to repeal or undermine the important measures that we’ve passed.”
July 18, 2011: President Obama announces his nomination of Richard Cordray (right) as the nominee to be Director of the new Consumer Financial Protection Bureau. Watching the announcement are Treasury Secretary Timothy Geithner and Elizabeth Warren, who conceived and helped start up the bureau. (Photo courtesy of WhiteHouse.gov live video stream.)