CFPB Stays, But Cordray Goes

George Yacik - Contributor - Fed & Interest Rates

The worst-kept secret in Washington is that Consumer Financial Protection Bureau Director Richard Cordray may be running for governor of Ohio. Whether that satisfies his political ambitions or not is unclear, given that if he wins he would have to answer to someone other than himself – the state’s taxpayers – a position he doesn’t seem comfortable with.

In a country loaded with way too many arrogant politicians and government officials who think they are above the law and normal standards of decency, Cordray has set the bar pretty low. Few public officials have shown the level of contempt for legitimate questioning from Congress, the White House and the industries his agency oversees than Cordray has shown since he took over the CFPB, and it’s only gotten worse in the past few months as his tenure winds down.

More seriously, his obstinacy, haughtiness, and lack of candor are likely to cost the agency a lot of goodwill and support in Washington, and possibly among the public. He owes it to the agency he helped build and supposedly loves to step down immediately before he creates more damage.

Now comes word that Cordray’s agency may have botched the Wells Fargo scandal – big time. Not only has there been previous evidence that the CFPB was lackadaisical in investigating the bank’s sales practices, at least a year after the Los Angeles Times reported there were problems, but now a recently released internal memo shows that the agency’s lawyers felt there was a strong justification to hit the bank with a $10 billion penalty, instead of settling for a paltry $100 million last September.

What’s up with that?

A more cynical person than myself might think that Cordray wanted to make a big, headline-grabbing score against a major bank just before throwing his hat into the Ohio ring, instead of building a case for an even larger but more justified penalty, but one that would have likely provoked a battle that would have dragged on for a long time, certainly well past the Ohio gubernatorial election. Indeed, the CFPB’s lawyers recommended a $100 million penalty to “help resolve this case,” according to the memo, never mind the fact that the agency found “more than two million violations” by Wells and its employees.

While $100 million sounds like, and certainly is, a lot of money, and is far and away the CFPB’s largest penalty to date, it had little effect on Wells’ stock price, indicating it wasn’t a meaningful event to the bank. So why did the CFPB settle for such a small sum, and why hasn’t Cordray commented on it?

Actually, his silence is in keeping with his behavior over the past few months as he walks and talks like he’s running for governor but doesn’t have the decency– and yes, the obligation – to make that intent public and then resign as CFPB director.

On Labor Day, he spoke at the annual AFL-CIO picnic in Cincinnati, extolling the virtues of the CFPB and the fine work it has done since its creation (and make no mistake, I have few objections about that. As I’ve written before in this space, the CFPB plays an important consumer protection role, one that was long overdue. The power of the agency’s director, however, needs to be overhauled, as Cordray’s behavior so amply shows why).

But when asked whether he plans to run for Ohio governor, Cordray said, “I don’t have anything to say about that,” as if it was beneath him to answer further. He followed that up a week later with a speech at the Ohio Land Bank Conference in Cleveland on the same day as the Ohio Democrats’ first gubernatorial debate.

He’s also blown off Congressional subpoenas and a request by House Financial Services Committee Chairman Jeb Hensarling, R-Texas, to state whether he plans to stay at the agency or not, a legitimate question. Cordray’s response has basically been to flash Hensarling the middle finger.

While Cordray is hardly the first politician or government official to play cute about his greater political ambitions or intentions, he’s playing politics with his agency’s rulemaking. That’s certainly not unheard of either, but it particularly goes against the CFPB’s very being.

Remember that the CFPB’s creation and authorization in the Dodd-Frank Act deliberately put it outside the Congressional budgetary process, leaving it reliant on funding not from politicians and lawmakers but from the Federal Reserve, which is also supposed to be “independent” from political influence.

Those intentions might be idealistic and a convenient fiction, but they are important in keeping the CFPB above politics and shielded from outside influence, meaning from financial institutions. Ironically, it’s the agency’s director who is playing politics with it, as the Wells case may show, even as he goes through the pretense that’s he’s not.

While Cordray may believe the CFPB’s charter puts him above Congress – which it hardly does, given that the agency was created by Congress – he still answers to the taxpayers, and according to some recent surveys, they still largely support the agency and its work. But Cordray risks hurting that reputation with his imperial behavior.

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George Yacik Contributor - Fed & Interest Rates

Disclosure: This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from for their opinion.

2 thoughts on “CFPB Stays, But Cordray Goes

  1. What state are you from? I think you don't know much about Richard Cordray. I do. He was Attorney General of Ohio before being tapped to lead the CFPB. I think he'd stay rather than let a Trump yes-man head the Bureau.

  2. Just business as usual in the nations Capitol. It will remain that way until / if the nation's population wakes up and realizes that they can actually put an end to all this BS. Since it's been entrenched over decades it doesn't seem like there's much chance of that happening.

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