On January 4th, President Obama named Richard Cordray as interim head of the new Consumer Financial Protection Bureau (CFPB). Obama acted against the wishes of the Republican-controlled Senate, which opposed Cordray since Obama nominated him for the job in July of 2011. Obama’s bold action won praise from liberals, who view the act as a move against conservatives after the Iowa primaries. Republicans are crying foul, stating that Obama deliberately made the appointment on a day that the Senate was in recess.
Many Democrats had mourned Obama’s failure to name Elizabeth Warren, a Democratic Senate candidate from Massachusetts, as head of the agency. Warren made her case for the creation of the agency years ago. She hoped it would become a watchdog agency to make lending practices more transparent. Warren gained so much publicity for her role in developing the agency that it was clear that she would never be confirmed to head it. Obama chose Cordray over Warren because Cordray had a pro-consumer record and was a less controversial pick for the job.
Cordray is a Democrat who formerly served as the Attorney General of Ohio between 2008 and 2011. Prior to his election as the AG of Ohio, Cordray served as the Ohio State Treasurer, the Ohio state solicitor, a member of the Ohio House of Representatives, and treasurer of Franklin County, Ohio. As AG, Cordray sued many financial companies, including AIG, Bank of America, and Fannie Mae. Cordray alleged that these companies misrepresented the value of potential investments to Ohio’s pension funds, and negotiated a $700 million settlement from AIG for accounting fraud. Cordray also sued financial companies, such as Ally Financial, for using falsified documents to pursue foreclosures. As Franklin County treasurer, Cordray developed a community outreach program and personal finance education. Cordray has stated that he hopes to rely primarily on his experience as a politician and educator to bring relief to consumers without the cost and delay of litigation.
The CFPB is a new federal agency established by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The agency is funded and located inside the Federal Reserve. The CFPB began operating in July of 2011, provisionally directed by Raj Date, Special Advisor to the Secretary of the Treasury for the CFPB. In its infancy, the CFPB began its job of regulating and determining the fairness of consumer financial products and services. This responsibility was previously divided among seven different agencies. In the coming years, the CFPB will review the new laws of the Dodd-Frank Act within five years of their implementation and oversee the activities of all banks with deposits over $10 million.
Republicans in the House and Senate appear to be more opposed to the creation of the CFPB than they do to Cordray’s appointment as director. The action of Senate Republicans in December of 2011 to block Cordray’s appointment had the temporary effect of preventing the agency from supervising non-bank companies that engaged in predatory and fraudulent practices. In December of 2011, the House passed legislation to install a five-member commission instead of a director, which would slow the activities of the agency. This legislation may now be less likely to pass in the Senate in 2012.