Unlike the contentious hearings with Elizabeth Warren, the Senate Banking Committee’s exchange with Rich Cordray on Sept. 6 could be called cordial, if anticlimactic.
Their comments to each other, however, reignited a familiar debate over how the Consumer Financial Protection Bureau should be run.
Cordray, President Obama’s nominee for CFPB director, garnered many positive comments from seven Democrats and two Republicans present. They remarked on his current position as head of enforcement at the CFPB, his track record as Ohio attorney general, his work ethic and first job at McDonald’s, his success as a Jeopardy champion, and the smiles of his 12-year-old twins, Danny and Holly, who sat behind him during the hearing.
A sampling of their comments follows:
“The purpose of today’s hearing should be to consider whether Mr. Cordray is qualified … Instead, a vocal minority is playing games with the process and holding Mr. Cordray’s nomination hostage. This political gamesmanship is preventing Americans from receiving the consumer protections they deserve and putting community banks and credit unions at a competitive disadvantage to nonbank financial companies,” said Sen. Tim Johnson, D-S.D., chairman of the Senate Banking, Housing and Urban Affairs Committee.
“We believe today’s hearing is quite premature,” said Sen. Richard Shelby, R-Ala., repeating his concerns about confirming a single director. (Republicans submitted a list of CFPB “accountability measures” as part of the hearing record.)
“I’m sure that you have a good background,” Shelby told Cordray. “You’ve got a fine family, too. . . But you’re caught between a big, substantive debate here, as you well know.”
“I am someone who believes very strongly that the work of the Consumer Financial Bureau must go forward and should go forward under the direction of Mr. Cordray. I think to block his appointment simply to express displeasure with either the process or the substance of the law is the wrong way entirely,” said Sen. Jack Reed, D-R.I.
Reed said he is particularly concerned about servicemembers, who are often “preyed upon” by unscrupulous financial services providers, and the shadow banking system.
Sen. Daniel Akaka, D-Hawaii, echoed his support for Cordray: “I am confident that he will make the CFPB a strong defender for consumers. This has been needed in our country.”
“We shouldn’t have to remind our colleagues that just three years ago, our economy was on the brink of collapse,” said Sen. Sherrod Brown, D-Ohio. “This was a man-made catastrophe. It could’ve been avoided if we’d had, as Sen. Reed said, a better regulatory system. The network of agencies charged with protecting consumers was full of holes.” He said local efforts in Ohio to curb “ripoff loans” were “blocked by federal regulators.”
Brown said he asked the Senate historian when the last time a minority party blocked a nomination because they opposed their existence. “Never happened before – unprecedented,” he said. “That kind of partisanship is why people are so unhappy with their government. … Now is not the time to undermine an agency that a bipartisan majority in Congress created.”
Sen. Kay Hagan, D-N.C., talked about efforts to protect servicemembers, then added: “I’m aware that a number of concerns have been raised about the impact that the Bureau will have on lending. I’m going to be particularly interested in how, Mr. Cordray, you intend to balance the needs of consumers for protection with the need for community financial institutions to provide loans to homeowners and to small businesses, and I’m hopeful that we can mitigate these concerns and move forward.”
Sen. Bob Menendez, D-N.J., pointedly addressed the bipartisan bickering, saying the minority party does not have the right to effectively “nullify” the law by their refusal to confirm a director.
Finally, Cordray had the opportunity to share his prepared opening statement and then to answer questions.
“Without a director in place, CFPB will not be able to exercise is examination and enforcement powers over non-bank financial institutions like private student lenders and credit bureaus. Do you agree that this authority is essential to level the playing field between responsible small community banks and their non-bank competitors?” asked Sen. Tim Johnson, D-S.D.
“I do,” Cordray said. “I think it was one of the key principles embodied in this new law. I can tell you, I remember a conversation I had with a community banker in Ohio – this would have been around 2007 when I was the state treasurer – talking to me about the fact that people were coming in seeking loans that were not feasible, they were not sustainable loans, and when he would tell the customers that, he would see them go down the street to unlicensed, unregulated, unscrupulous lenders who would make those loans, even though those loans were destined to fail.
“Our good community banks … were losing market share by upholding their standards,” Cordray continued. Now they are suffering the “second double whammy” of credit drying up, he said, adding that under his leadership the CFPB will not impose further regulatory burdens on community banks and credit unions.
Addressing the issue of litigation, given his history of filing lawsuits as attorney general, Corday responded: “I know from my own experience that lawsuits can be a very slow, wasteful, and needlessly acrimonious way to resolve a problem. … If people are ignoring or evading consumer protections laws – and seeking to gain an unfair advantage over their law-abiding competitors – then litigation is an essential tool, and we will use it judiciously.”
Mike Van Buskirk, chairman of the Ohio Bankers League, was among the business and industry leaders who attended the hearing in support of Cordray. Various Ohio groups submitted letters of support to the committee.
The full hearing is available for viewing on the Senate committee web site.