Politico Cordray to resign from CFPB, clouding future of watchdog agency
Cordray made the announcement in an email to bureau staff on Wednesday.
Cordray has been rumored to be considering a run for governor of Ohio, but gave no indication Wednesday of his plans.
Trump is likely to put the bureau under the control of Treasury Secretary Steven Mnuchin, who can delegate day-to-day operations to an interim director, according to a White House official and others familiar with the administration’s thinking. An interim director can stay at the post indefinitely, or at least until the White House can get a nominee confirmed.
Cordray’s departure kicks off a high-stakes scramble to secure the future of the CFPB, a powerful Washington regulator that has cheered consumers and angered businesses as well as Republicans, who have accused it of overreaching. The independent bureau is the only bank regulator not led by a Trump appointee.
Trump, never a Cordray fan, has been scouting for his replacement among the ranks of Republican attorneys general. But the partisan grip squeezing Washington, and the agency’s supercharged politics, mean that anyone chosen for the job will face a rocky, if not impossible, road to confirmation.
Republicans are floating a handful of agency critics as contenders for the post, including Cordray’s biggest foe, House Financial Services Chairman Jeb Hensarling (R-Texas). Hensarling has not expressed interest in the job, according to people close to him.
Hensarling on Wednesday called the bureau a “rogue agency that has done more to hurt consumers than help them” and called Cordray’s departure “an excellent opportunity to enact desperately needed reforms.”
Keith Noreika, the outgoing acting head of the Office of the Comptroller of the Currency, has also been mentioned, along with Todd Zywicki, a law professor at George Mason University. Both have fiercely opposed the bureau’s approach to regulation and enforcement and would face long odds of being confirmed, but could serve as interim directors without Senate approval.
Brian Brooks, an executive vice president and general counsel at Fannie Mae who worked with Mnuchin at OneWest Bank, and former Florida Attorney General Bill McCollum are also mentioned as candidates to lead the bureau.
As the CFPB’s inaugural leader, Cordray fashioned the agency into a razor-toothed watchdog with as much bite as bark, racking up a legacy of sweeping regulations that redefined how mortgages are sold, debts are collected and credit card fees are tallied.
More broadly, his bureau gave consumers a strong advocate that returned nearly $12 billion to 29 million wronged customers.
While the agency made headlines with action against mandatory arbitration, payday lending and subprime mortgages, most of its work was done under the radar and in some ways a lot of its heavy lifting has already been done. The bureau spent a good portion of its first six years pushing out rules and studies required by the Dodd-Frank Act that created it and building guardrails for products that had been loosely regulated.
“They inherited a Wild West market,” said Mike Calhoun, president of the Center for Responsible Lending and a Cordray supporter. The bureau “cleaned up the mess it had inherited and now has evolved into a more established agency.”
With Cordray leaving, political vitriol over the agency’s independence and structure should subside.
“You’ll see less of an urgency to change the system structurally now that it’s in control of the current administration and current Congress,” Calhoun said.
Still, the bureau faces an uncertain future. Led by a lone, independent director armed with plentiful funding that can’t be withheld by Congress, its broad jurisdiction over banks, mortgage companies, credit card issuers and other financial providers is under fire from Republicans who want to rein it in.
Democrats quickly laid down their markers. Sen. Elizabeth Warren (D-Mass.), who inspired the bureau’s creation and helped set it up under President Barack Obama, tweeted that the agency is “no place for another Trump-appointed industry hack.”
Warren opposes transforming the bureau into a bipartisan commission, as some have proposed. In a press conference Wednesday, she cited the failure of the Securities and Exchange Commission to act before the 2008 financial crisis. “We need a regulator on the consumer’s side who is nimble and able to respond to crises before they bring down the American economy,” she said.
Warren was immediately taken to task by industry lobbyists who have pushed for installing a commission at the agency similar to those at the SEC or Federal Deposit Insurance Corp.
“She said today she doesn’t want some industry hack to run the CFPB. Well, that’s really not her choice right now,” said Richard Hunt, president of the Consumer Bankers Association. “They gambled and they lost. There cannot be any whining from the Democrats over who President Trump is going to appoint.”
The Consumer Bankers Association, American Bankers Association, Consumer Mortgage Coalition, National Association of Realtors and other groups have endorsed a plan to replace the CFPB’s lone-director system with a five-member, commission.
Rep. Blaine Luetkemeyer (R-Mo.), who chairs the consumer credit panel of the House Financial Services Committee, said the debate over whether to replace the CFPB director with a commission is finished for the time being after the idea failed to gain traction with Democrats.
“I just don’t see that it’s something that’s going to get support right now,” he said. “Once the Democrats see how [Trump’s] new designee could go in there and completely turn that agency upside down compared to where they want it to go, they may be more willing to sit down and talk.”
House Republicans declined to pursue installing a commission when they passed a sweeping financial deregulation bill in June.
Cordray’s future also remains uncertain.
In Ohio and across the country, the former state attorney general is adored among progressives and might be able to raise money quickly despite his shortcomings as a shoe-leather campaigner.
If he chooses to run, he would face a handful of lesser-known but still serious candidates: Dayton Mayor Nan Whaley, former Rep. Betty Sutton, state Sen. Joe Schiavoni, former state Rep. Connie Pillich and former Wayne County Commissioner Dave Kiefer.
Their Republican opponents have been building formidable war chests in a bid to succeed Gov. John Kasich, who is term-limited.
Attorney General Mike DeWine and Secretary of State Jon Husted each raised $2.5 million in the first six months of the year. Rep. Jim Renacci has shuttled $4 million of his own money into his gubernatorial bid. Lt. Gov. Mary Taylor raised $640,000.
Ohio Democrats worry that no candidate will be able to match the fundraising chops of DeWine, Husted, or Renacci — not even Cordray.
“The donor base is just still pretty bedraggled because of 2016,” said Sharen Neuhardt, a former Democratic candidate for lieutenant governor who has strong ties to what’s left of the Ohio Democratic donor community.