After the Coming Purge at CFPB Here is What Will Be Left Standing
By Dan Kadlec
September 13, 2017
Richard Cordray has a tough commute. A resident of Ohio, he shuttles to and from Washington D.C. each week to lord over the financial industry as director of the powerful U.S. Consumer Financial Protection Bureau. But practically everyone expects his frequent flyer status to hit the skids, as early as next week.
The worst-kept secret in politics is that Cordray will run for governor in his home state, where Republican John Kasich terms out next year. Cordray would be the early Democratic favorite in a fray that—hold on to your chair—the TV personality Jerry Springer has said he might join.
One big question is why hasn’t Cordray formally joined the race already? As one Washington watcher notes: “He has been running for a while.” His CFPB appointment expires next July anyway, and he needs time to form a campaign and raise money.
Another big question has to do with what Cordray would leave behind. Under Cordray, the CFPB has seized the government lead in promoting personal financial literacy. Might his departure cause the movement to lose momentum?
That is no idle consideration. The financial education infrastructure in the U.S. is big, and growing. We spend $700 million a year trying…
• • •
…to make individuals smarter about money. That’s not nearly enough. But the effort spans government, nonprofits, educators, think tanks, banks, and human resources departments at most large companies. These parties have been on Cordray watch since the start of the year.
In some respects, Cordray is already late to the race in Ohio: the state’s first Democratic gubernatorial debates took place in Cleveland on Tuesday. Cordray wasn’t on stage.
But neither was he far away, having delivered a campaign-like speech earlier in the day to the Ohio Land Bank Conference in Cleveland. In that speech, Cordray touted his accomplishments at the CFPB. To be clear, those accomplishments are real. The CFPB has returned $12 billion to 30 million people who had been cheated or mistreated. On the financial literacy front, Cordray has championed research and promoted financial education programs for adults, youth, military and seniors.
In Cleveland, Cordray spun a good yarn about Deborah Jacobs, who fell behind in her mortgage, felt abused by her lender—and had a hefty loan modification fee lifted after complaining to the CFPB. Politicians running for office love nothing more than a heartening real-people story. The tea leaves are clear: Cordray will run, and to do so he must leave his CFPB post soon.
He may be waiting only for a signature set of rules cracking down on payday lenders. The rules are close to being written; small-dollar lenders have been in his crosshairs for years. Then he may feel free to move on.
Expect a ruckus when President Trump moves to fill the vacancy. No one in-house has the chops to take over for Cordray. Meanwhile, Trump and many Republicans would love to see the CFPB gutted. Republicans believe the director has too much power, which he abuses. Democrats love the Obama-era creation. They give Cordray high marks for reining in the financial industry.
This will generate a lot of political theater, and in the meantime the likely interim director will be Treasury Secretary Steve Mnuchin. Here is where things get interesting, at least for those principally concerned with the direction of financial education.
Republicans are most concerned with the CFPB’s authority over banks and its virtually untouchable nature as an independent entity with guaranteed funding through the Federal Reserve. They want to change the funding model and make the CFPB answer to congress, and cow to congress. They would then strip much of the CFPB’s power over lenders.
Earlier this year, names mentioned as Cordray’s replacement included the CFPB’s loudest critics: Republican Congressman Jeb Hensarling of Texas and former Texas Congressman Randy Neugebauer. Other names bandied about include Todd Zywicki, an economist at George Mason University, and Brian Brooks, a Fannie Mae executive nominated this summer to be deputy treasury secretary.
For a lot of reasons, these names have not resurfaced recently. Why would a career politician want a job clearly marked for less authority? And for optics, the last thing this administration needs is another banker pal in position of power.
With the political focus on bank regulations and funding, it just might be that the considerable financial literacy effort at the CFPB gets left untouched—even enhanced. That is far from a guarantee. But educating the public about personal finance is like motherhood and apple pie. Who can object?
Amid the certain political skirmishes, financial literacy may be the one thing Republicans and Democrats agree is a good fit at the CFPB. This promises to be a critical battleground that could decide if funding financial capability is a fad—or over. If this part of the CFPB survives a Republican purge, it will be a good sign that the movement is here to stay.