Why Obama Was Right to Pick a Fight Over the CFPB's Richard Cordray

The president makes a needed, consumer-friendly act of defiance in appointing a new director of the Consumer Financial Protection Bureau.



It will be viewed by the Washington punditocracy as a tough-minded executive act defying Senate Republicans, playing to a worried liberal base, and raising a possible legal challenge with constitutional ramifications.

But President Obama's Wednesday selection of Richard Cordray, a former Ohio attorney general, to run the spanking-new Consumer Financial Protection Bureau is also just smart and necessary.

If our politics weren't quite so polarized, and folks stuck a bit more to the facts in public debate, maybe far more people would know what Cordray symbolizes. They would know that they should be happy that a frustrated White House has circumvented a Senate filibuster last month and will try to actually protect consumers.

And it's probably fitting that Cordray, who had a strong reputation in Ohio for investigating suspect mortgage foreclosure practices, is also a five-time "Jeopardy" champ. The mere existence of the agency he will head would probably stump most of the game show's contestants and viewers.

It was created out of the Dodd-Frank financial-reform legislation and inspired by the reality that seven different agencies performed at times overlapping functions in overseeing financial products involving Mr. and Mrs. Joe Citizen.

It's the agency which Elizabeth Warren, a Harvard University law professor and bankruptcy expert, was asked to set up by Obama. She was badmouthed by Wall Street as too tough and strident, while 44 Senate Republicans harrumphed about the agency being potentially too powerful and unaccountable and in need of a board of directors rather than a single chief.

Warren split to run for U.S. Senate in Massachusetts, now raising the wonderful prospect of her one day having cocktails with fellow Senate members who shafted her. Obama picked Cordray, who Warren had already tapped as the chief enforcement officer, to run the bureau.

That ultimately led to the Senate filibuster and Wednesday's recess appointment, which might become a legal dispute since Republicans are claiming Congress isn't technically in recess, thanks to some rather cynical and superficial pro forma sessions they've been holding, in a technical sense, over the holidays. They've constituted a legalistic and legislative sham.

So why should regular folks care about Cordray?

For one, we really do need some coordinated oversight of lending practices and financial products involving consumers. Creating the agency was quite a feat, especially given decades of bureaucratic drift that left multiple agencies feeling empowered to monitor bits and pieces of our consumer lives, albeit in often half-hearted and unfocused ways.

It's basic civics, but one of the more important things that a regulatory agency does -- especially a financial regulator -- involves supervision. It means having federal personnel inside financial institutions.

But in a Dodd-Frank quirk, the law splits the basic supervisory authority. One year after enactment, the agency could begin supervising banks. But it could not begin supervising non-financial institutions until after it had a permanent director.

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James Warren is the Chicago editor of The Daily Beast and an MSNBC analyst. He is the former managing editor of the Chicago Tribune.

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