In nominating former Ohio Atty. Gen. Richard Cordray to head the new Consumer Financial Protection Bureau, President Obama avoided the highly controversial choice of liberal favorite Elizabeth Warren — but not the controversy.
Cordray, 52, was one of the most aggressive state officials in taking on the banking and the mortgage industries after the financial crisis. And in the eyes of some opponents of the agency in Congress and on Wall Street, he’s no better a choice to direct the powerful new agency than Warren would have been.
“He was a crusading state attorney general who went after financial firms,” said Jaret Seiberg, a financial services policy analyst for MF Global, a major derivatives broker. “The industry has good reason to be suspicious.”
During his short time as Ohio attorney general in 2009-10, Cordray initiated several high-profile class-action cases against major financial firms on behalf of the state’s pension funds. In separate securities fraud lawsuits, he obtained a $1-billion settlement from giant insurer American International Group Inc. and a $475-million settlement from Bank of America Corp. related to its acquisition of investment banker Merrill Lynch & Co.
A theme of Cordray’s tenure filling the expired term of his predecessor was “Holding Wall Street Accountable.” He narrowly lost reelection to Republican Mike DeWine last fall and was hired in December as the fledgling bureau’s head of enforcement.
The U.S. Chamber of Commerce said it had “deep concerns” about how Cordray would use the agency’s powers. As part of the agency’s leadership, Cordray has worked with other regulators and state attorneys general to help settle investigations into botched foreclosure paperwork.
The chamber said the agency’s involvement showed that it was trying to regulate the mortgage industry “through enforcement settlements rather than by engaging in a deliberative, fair, transparent rulemaking.”
One financial industry executive, who requested anonymity because the consumer agency will be regulating the industry, said Cordray was not any different ideologically from Warren. Most liberals pushed for Warren to head the agency because of her tough stance against financial firms.
But while Warren’s supporters were disappointed she wasn’t nominated, they said Cordray was an excellent choice. “We’re not getting Triple-A here. We’re still getting a major-league guy, and the industry’s not going to like that,” said Ed Mierzwinski, director of the consumer program for the U.S. Public Interest Research Group. He said Cordray was “just as tough” as Warren.
In announcing the nomination Monday, Obama touted Cordray’s background in making the case he was the best choice for the powerful new position.
“As Ohio’s attorney general, Rich helped recover billions of dollars in things like pension funds on behalf of retirees and stepped up the state’s efforts against unscrupulous lending practices,” Obama said at the White House, flanked by Cordray, Warren and Treasury Secretary Timothy F. Geithner.
Obama noted that Cordray was a five-time champion on the “Jeopardy” game show in the 1980s, joking that all his responses at his Senate confirmation hearing would be in the form of a question.
But Cordray faces a tough fight in the Senate. In May, 44 Senate Republicans — enough to mount a successful filibuster — promised to block the nomination of anyone to head the agency unless major changes were made in its structure. Among the changes they want is replacing the single director with a five-member bipartisan commission.
Obama said Monday that he opposed those changes, which he said were being pushed by “an army of lobbyists and lawyers.”
The agency, the centerpiece of last year’s Wall Street reform law, starts operations Thursday. Obama said the bureau was crucial to preventing the abuses that led to the financial crisis.
He praised Warren for proposing the idea of such an agency in 2007 and for helping to launch it from her post as a special administration advisor. Obama said part of her job was to find the best possible director — and it was Cordray.
Cordray’s record shows he is “absolutely the same kind of defender of consumers in the financial world as Elizabeth Warren has been,” White House Press Secretary Jay Carney said.
Mike Van Buskirk, president of the Ohio Bankers League, said Cordray has been committed to consumer protection since he was a county official.
“He’s very bright and cares about consumers and can be aggressive when he thinks he needs to be,” Buskirk said. “Any ethical financial institution always had access [to him] and he listened to them.”
Although Buskirk said he supported the nomination, he echoed congressional Republicans and other industry officials in wanting changes to the agency’s structure to reduce the director’s power.