BLOG VIEW: Richard Cordray is making his Capitol Hill debut this week as the director of the Consumer Financial Protection Bureau (CFPB). Needless to say, he will be facing a barrage of skeptical – if not downright hostile – questions on how he came into office and what he plans to achieve.
I have my own questions for Cordray, and I would be very happy if some of these inquiries were raised. Quite frankly, I believe that Cordray has a lot of explaining to do.
1. Can Cordray seriously claim to be the legitimate director of the CFPB when the Dodd-Frank Act requires the director's confirmation by the Senate?
On Jan. 4, President Obama used a recess appointment to put Cordray into the top CFPB spot. Needless to say, this creates a legal problem: The Senate was in pro forma sessions and not in formal recess, but the president arrogantly dismissed that fact as a ‘gimmick,’ and his bumbling Department of Justice quickly rubber-stamped the decision, giving it a phony seal of approval.
But even without that mess, the Dodd-Frank Act clearly states that the full authority of the CFPB cannot go into force unless the director receives Senate approval. Quite frankly, it makes no sense to have a law-enforcement entity run by someone whose presence in his job is a violation of the law.
2. Will Cordray ever acknowledge that mortgage fraud exists?
Throughout its brief and noisy history, the CFPB has operated under a warped and simplistic belief that consumers are the perpetual victims and financial services companies are the perpetual predators. In demonizing lenders, the CFPB has never once acknowledged that consumers have played a significant role in destabilizing the housing market by means of mortgage fraud.
Of course, the idea of consumers ripping off lenders (and not vice-versa) is antithetical to the entire CFPB philosophy. Other government agencies know better – the FBI called mortgage fraud an ‘epidemic’ as far back as 2006 – and I am curious if Cordray will finally acknowledge the two-way street traffic.
3. Will Cordray publicly acknowledge and agree with comments made by Sen. Sherrod Brown, D-Ohio, that the Office of the Comptroller of the Currency (OCC) enables banks to practice abandoned foreclosures?
The day before Cordray's recess appointment, his fellow Ohio Democrat issued a statement slamming the OCC for allowing banks to decline taking possession of properties after initiating the foreclosure process. Brown complained that the OCC – and, by extension, the executive branch – has given banks a ‘free pass’ to abandon foreclosed homes, which he attributes to rising crime rates and increased neighborhood blight.
Cordray and his CFPB posse have been very vocal about criticizing banks, but they've been remarkably silent when it comes to criticizing government regulators. It would be interesting to know what Cordray thinks of that ‘free pass’ statement.
4. How, exactly, could the CFPB have prevented the crash of the housing market?
In a brief conversation with reporters last week, Cordray mused that the housing market's collapse might have been prevented if the CFPB had been in place 10 years ago. But that notion would only be true if one were to believe in the CFPB fantasy that the crisis was solely the work of the private sector.
It has been well documented that the combined efforts that Congress, the government-sponsored enterprises, the Departments of the Treasury and Housing and Urban Development, and the federal regulatory agencies resulted in the chaos that came tumbling down in 2008. And even those who claimed they tried to raise red flags – most notably, former Federal Deposit Insurance Corp. Chairwoman Sheila Bair – found their efforts were in vain.
5. Is it possible for the Obama administration to simultaneously take money from the major Wall Street financial players while promising the public to hold these companies accountable for their actions?
As a career politician, Cordray appreciates the value of raising money for election forays. But in his role as CFPB director, he may face a new problem.
According to an Oct. 18, 2011, article in the Washington Post, the Obama re-election campaign is aggressively pursuing the Wall Street financial services companies for campaign donations for his 2012 re-election campaign. ‘Obama has brought in more money from employees of banks, hedge funds and other financial service companies than all of the GOP candidates combined,’ said the Washington Post.
What guarantee does the public have that the CFPB will not go soft on the companies that are stuffing large amounts of cash into the president's re-election campaign? We've already seen a Department of Justice that has conspicuously failed to bring any indictments against the major players that created the greatest chaos in the run-up to the 2008 crash – why should we believe that Cordray will push ahead when Attorney General Eric Holder has already looked the other way?
– Phil Hall, editor, MortgageOrb
(Please address all comments regarding this opinion column to hallp@zackin.com.)
