Daily Times

Ever since the Consumer Financial Protection Bureau was created, in 2010, certain Republicans in Washington have been fixated on shutting it down, or at least dramatically reducing its power. The agency had too much autonomy, they argued, and was part of a regulatory system that was discouraging banks from lending money, which in turn was inhibiting economic growth. The target of much of their criticism was the agency’s director, the former Ohio Attorney General Richard Cordray. Amid speculation that Cordray might leave his post a few months early to pursue a run for governor in his home state, the CFPB’s antagonists could soon have their wish.

Those same Republican critics may be in a position to choose the next director of the CFPB, who could deliver on their dream of diminishing the agency. Incredibly, according to the Los Angeles Times, President Trump may be poised to appoint his Wall Street–friendly Treasury Secretary, Steven Mnuchin, as the bureau’s interim head. These are disheartening developments for anyone concerned about the integrity of the financial system.

The CFPB was created through legislation passed by Congress in response to the 2008 financial crisis, and it has been a small but effective bulwark against the wave of deregulation and rule-loosening that resulted from Trump’s election and his appointment of former bankers and lobbyists to key regulatory and policy positions. The agency was controversial from the start, partly because it sprang from the mind of Elizabeth Warren, who initially described it as a “Financial Product Safety Commission.” The banking industry immediately mobilized in opposition, and its representatives found sympathetic listeners among congressional Republicans. (Representative Jeb Hensarling, of Texas, described the CFPB as a “rogue federal agency,” and “a tyranny” in an editorial in the Wall Street Journal in February.) Warren rose to national celebrity as a prominent critic of the financial industry and was seen as the obvious candidate to lead the CFPB once it was established. When President Obama named Cordray to the role instead, it was an acknowledgment that Warren was unlikely to win confirmation in the Senate. Warren, of course, is now a senator herself, and Cordray has been playing the part of a Warren proxy ever since.

The CFPB’s mandate was to protect consumers from abuses by companies in the financial sector, including banks, mortgage lenders, debt-collection agencies, payday lenders, and others. While some of its detractors argue that the agency has not focussed enough on the kinds of frauds that led up to the financial crisis, there is no doubt that it has played an important role in keeping consumers safe from certain kinds of financial exploitation—particularly consumers at mid-to-lower income levels. Under Cordray’s leadership, the CFPB introduced a rule prohibiting banks from forcing customers to resolve disputes through arbitration, which is generally more advantageous to big banks than having disputes settled in court.

The agency also created guidelines that make it easier for consumers to avoid being charged exorbitant overdraft fees, reshaped mortgage-lending rules, and collected billions of dollars in consumer refunds and debt relief through its enforcement activity. Its most high-profile accomplishment was the hundred-million-dollar fine levied against Wells Fargo Bank, which helped bring attention to the bank’s practice of pressuring its sales people into opening thousands of unauthorized customer accounts. (The practice was first disclosed in the Los Angeles Times, in 2013.).

Since then, Wells Fargo has been embroiled in a cascading series of scandals and revelations, and multiple lawsuits remain unresolved. Back in September, Warren had the opportunity to question—and publicly shame—the then CEO of the bank, John Stumpf, as he testified before the Senate Banking Committee. “OK, so you haven’t resigned, you haven’t returned a single nickel of your personal earnings, you haven’t fired a single senior executive,” Warren said to a squirming Stumpf. “Instead, evidently, your definition of ‘accountable’ is to push the blame to your low-level employees who don’t have the money for a fancy PR firm to defend themselves.” Video of the back-and-forth went viral, as viewers took pleasure in seeing an actual banker in an expensive suit being reprimanded like a misbehaving child.

On Monday, Cordray delivered a speech at the Cincinnati AFL-CIO. Labor Day picnic, which the press portrayed as a warmup campaign event. “Have you ever been treated unfairly by a large, often faceless, company? When that happens, it can feel like the deck is stacked against you,” he said, according to his prepared remarks. He listed off the CFPB’s various accomplishments on behalf of average consumers, and spoke about how corrupt bank practices could exacerbate income inequality. He ended by quoting Eleanor Roosevelt, saying, “On Labor Day, we must remember that this nation is founded to do away with classes and special privilege, that employer and worker have the same interest, which is to see that everyone in this nation has a life worth living.”

It appears that Cordray has been an astute student not just of the political tactics of his patron, Elizabeth Warren, but also of those employed by the President, who has deployed images of the “forgotten” men and women of America—victims of an unfair financial system—to serve his own
purposes.

So far, Democrats have proved to be mostly hapless in capitalizing on the rage that many Americans still feel toward Wall Street, big banks, and an economic system that inhibits most people’s advancement. If Cordray runs for higher office, it will give Democrats another opportunity to figure out a winning formula.

Published in Daily Times, September 11^th 2017.