Consumer advocate and newly elected U.S. Senator Elizabeth Warren should oppose the nomination of Richard Cordray to head the Consumer Financial Protection Bureau.
Because during year and more that Cordray has headed the Bureau under a presidential recess appointment, the CFPB has not made an example of any large financial institution by taking it to trial.
Instead, the CFPB during Cordray's watch has settled with a consent order -- yes, horrors, settled by consent -- every enforcement action that it brought.
Never mind that these settlement orders have returned $425 million to customers, collected over $100 million in civil money penalties, and terminated the financial firms' deceptive and illegal practices. We -- the consuming public -- have been deprived of the spectacle of a trial.
And we know creating such a public spectacle is a sine qua non of effective government regulation. How? Because Sen. Warren has told us so.
In a February 16 e-mail to supporters, Sen. Warren echoed her questions and statements two days earlier at a Senate Banking Committee hearing:
The pattern in Washington has been to settle with the big banks and reach voluntary agreements rather than ever go all the way to trial.
I think that's wrong. The government's unwillingness or inability to take the big banks all the way to trial reduces its leverage in settlement negotiations. It also means that what the big banks did wrong -- the days and days of testimony about illegal mortgage foreclosures or collusion on interest rates -- stay hidden from view.
Cordray himself was one of the seven witnesses whom Sen. Warren at the hearing asked to name a single instance in which the regulatory agencies they represented had taken a major financial institution to trial. Like the other witnesses, he could not do so.
So Sen. Warren should oppose his pending nomination. Right?
In that same Feb. 16 e-mail Sen. Warren asks her supporters to petition the Senate to confirm Cordray as CFBPB Director. She touts the settlements that the agency has reached under his leadership as a reason for his confirmation: "The CFPB has already forced the credit card companies to return nearly half a billion dollars that they had cheated from consumers."
Does Sen. Warren truly believe that not prosecutors but government regulators should take a big bank to trial? If so, then why is she urging Cordray's confirmation, rather than opposing it because of his ineffectiveness in leading the CFPB?