In 2011, President Barack Obama nominated Richard Cordray, a former attorney general from Ohio, to lead the new Consumer Finance Protection Bureau (CFPB), but Republicans, as they have done with many other presidential nominees, blocked him.
Over the objections of Congressional Republicans, the president pushed ahead and made Cordray a recess appointment, a tenure that expires at the end of the year.
Cordray's renomination and the nomination Thursday of former U.S. Attorney Mary Jo White to lead the Securities and Exchange Commission sends a signal that in his second term as president, Mr. Obama will stress enforcement of new Wall Street regulations and consumer regulations. Mary Jo White served for nearly a decade as U.S. Attorney in New York, while Mr. Cordray, Ohio born and raised, has served in many public service capacities before going to Washington to head-up the agency newly elected Massachusetts Senator Elizabeth Warren conceived and pushed to completion even though she was unable to run it due to promises by Senate Republicans to block her appointment.
Senate Republicans, reports say, say the new financial regulations will slow economic growth and cost jobs. White House spokesman Jay Carney confirmed the appointment of White and Cordray during his morning briefing Thursday.
Five-time Jeopardy! champion Richard Cordray, appointed by President Barack Obama to be the first director of the CFPB, said he saw the housing crisis unfold in slow motion as a state and local treasurer in Ohio, and is now ready to tame it in his new position.
Cordray said brokers steered consumers into high-priced mortgages to earn higher fees, while first-time homebuyers signed up for balloon loans, not understanding the risks, and so-called unscrupulous operators sought to make fast cash, stealing market share from honest, responsible lenders that still cared about a borrower’s ability to repay.
"It was the wild West of lending, " Cordray said, adding that few people realized how dangerous or widespread the problem was. "Neither did we, though we could plainly see that something was very wrong."
President Barack Obama and Congressional Democrats created the CFPB over the objections of the GOP, giving it authority to oversee a range of financial products and services from credit cards to checking accounts and payday loans. But its biggest focus, Cordray wrote, is on the mortgage market. "It was, after all, the house of cards that crashed our economy and caused so much pain for millions of Americans."
Among the changes Cordray said the Dodd-Frank Act enables him to make are new mortgage servicing rules to protect consumers. The law directs the CPFB to issue a rule requiring mortgage servicers to provide consumers with better information in their billing statements. On his list of things to do are addressing "force-placed insurance," a term referring to hazard insurance that mortgage servicers secure at the borrower's expense, typically at a very high cost, when they believe (even erroneously) that a borrower's previous hazard insurance has lapsed, and hybrid adjustable-rate mortgages, defined as complicated loans that usually start with a “teaser” interest rate before resetting to a much higher rate.
"The CFPB cannot address all of the problems in the servicing industry in one fell swoop. But we are already making important adjustments that will protect consumers more effectively," Cordray said. "As we mature and grow, we will carefully identify risks and act as needed. We will also make certain that all federal consumer financial laws are being followed."
Almost a year ago, Mr. Cordray engaged senate banking committee senators when he delivered the first semi-annual report for an agency built to protect consumers from unfair, fraudulent, deceitful or misleading financial products.
Members of the committee, chaired by Sen. Tim Johnson (D-SD), took their tun in lobbing questions to Cordray, who again handled them with ease by exhibiting his expertise in a wide variety of areas and demonstrating a thoughtful professional demeanor that seemed to defuse some of his toughest critics, among them ranking Member Alabama Sen. Richard Shelby, who while he roared again about the unchecked powers of the agency, purred in his exchanges with Cordray himself.
When asked by Sen. Daniel Akaka (D-HI) whether a board would be more accountable than an individual, Cordray responded with an answer that may have mollified Sen. Shelby's outspoken opposition to both the CFPB and to the position of director.
"I'm responsible to you...the agency is held accountable in law in a number of ways...there's no passing the buck, you pass the laws, we are responsible to you for how we carry out those laws...we will listen closely to you so you know what we are doing and can have input into what we're doing."
By virtue of his position, Cordray now sits on the board of the Federal Deposit Insurance Commission, formed in 1933 to protect money deposited into an FDIC-insured bank in the event it goes out of business. This seat, he said, gives him another way to cross breed his agency with other regulators involved with banks and other financial institutions.
Cordray, 52 years of age, told committee members, "The American way is for reasonable businesses to be upfront with their customers...it's good for business and it's good for the economy. Invoking the spirit of President Ronald Reagan, Cordray quoted the "The Gipper" saying. "Free men engaged in free enterprise build a better nation, with more and better goods and services, but free enterprise is not a hunting license..."
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