In Richard Cordray, Consumer Agency Would Be Led By Financial Cop Known For Toughness
In nominating Richard Cordray to lead the fledgling consumer protection agency, President Barack Obama has chosen a man with a reputation as a defender of consumers' rights, someone willing to take on the nation's most powerful financial firms.
Sunday's announcement that the president would name Cordray to head the Consumer Financial Protection Bureau, which was created under last year's financial reform law and is set to officially launch this week, came as a disappointment to some consumer advocates. Elizabeth Warren, the Harvard law professor who conceived of the agency, was seen as the natural choice to lead it, and the fierce opposition she met from congressional Republicans intensified her supporters' fervor.
But Cordray, who still must be confirmed by the Senate, is no pushover when it comes to defending the customers of the financial services industry against abuses. As Ohio's attorney general during the years following the financial crisis, he sued the major mortgage company GMAC Mortgage and wrote letters to big banks, following revelations that banks employed people who signed thousands of crucial foreclosure documents without reading them. The banks then temporarily halted foreclosures in Ohio.
Currently the chief enforcer at the CFPB, Cordray has done battle against institutions in high finance, such as rating agencies, and in low, such as payday lenders. Cordray's friends cite his no-nonsense approach to consumer protection, saying his vigilance is based on data and research, rather than mere ideology. But whatever his motive, one thing seems clear: He is known to be tough.
"He will definitely be tougher than the bank supervisors," said Ernest Patrikis, a former general counsel at the New York Federal Reserve, and now a partner at the law firm White & Case.
"When people do wrong, they should be spanked. That's nature's way," Patrikis continued. The CFPB, he said, "was envisioned as having a strong enforcement arm, and with him in charge of the agency, that will certainly be the case."
Cordray, who was an Ohio state representative in the early 90s, and who served as Ohio state treasurer before becoming state attorney general in 2008, got national attention for his hard-line stance in the mortgage crisis that exploded last autumn. He was one of the first attorneys general to act in an investigation that soon involved the top legal enforcers from all 50 states, in addition to a collection of federal agencies.
He also took on the giant insurer AIG, accusing it of fraud, and he sued the major ratings agencies, saying they bestowed top ratings on securities doomed to fail. All told, he has won settlements worth more than $2 billion.
His zeal is founded on experience with working families in Ohio, say those who know him. Like states across the nation, Ohio has been hit hard by the foreclosure crisis. Last month, one out of every 587 housing units in the state received a foreclosure filing, according to data provider RealtyTrac. That's about in line with the country as a whole, with one in 583 housing units nationwide receiving filings in June.
Cordray's observations in his state have informed his strong stance against mortgage abuses, said David Rothstein, a fellow at the New America Foundation and a researcher at Policy Matters Ohio, two non-partisan think tanks. Rothstein has worked with Cordray on a variety of issues.
"He wants to be convinced by statistics," Rothstein said. "He's not an ideological consumer protector, in the sense that he doesn't think all banks are bad, and he doesn't think that all financial products are bad."
"But if he sees a problem and identifies it through research," Rothstein continued, "he's going to pursue it."
Cordray is also a five-time winner of the game show "Jeopardy!" and those who know him say his memorization skills are impressive. Bill Faith, executive director of the Coalition on Homelessness and Housing in Ohio, who says he has known Cordray for 20 years, recalled one of Cordray's birthday parties, where friends set up a makeshift version of the popular game show.
"Initially he was having fun with it, everybody was joking around. And after the first round, he was losing," Faith said.
"And then he kicked in that mind," he continued. "It's like you could see the change. When he needed to, he ramped it up, and just slaughtered us."
Some supporters of Warren expressed frustration that she had not been the president's nominee to head the CFPB. Dean Baker, co-director of the Center for Economic and Policy Research in Washington, lauded Warren's ability to put complicated issues in clear terms, and worried about Cordray's ability to do the same.
"You're going up against very powerful institutions, who could put out tons of garbage saying how x, y and z is going to lead to the loss of a million jobs," Baker said. "You need someone who can in two or three sentences say why that's garbage."
Warren endorsed Cordray in a blog post on The Huffington Post.
Faith spoke of Cordray's fair approach in dealings with the financial industry.
"I do think that everybody can be well served by this guy," Faith said. "People from the industry who think he's just on a mission to attack them, they're just wrong. Unless they're involved in bad acts, they have nothing to worry about."
"For those involved in bad acts," Faith said, "he'll be their worst nightmare."