07.01.12

Inside the Consumer Financial Protection Bureau: An Interview With Richard Cordray

The Consumer Financial Protection Bureau is finally a reality, but is it making a difference in people’s lives? After six months on the job, the agency's chief, Richard Cordray, gives Daniel Stone a progress report.

The corner of 17th and G Streets is some of the most prized office space in Washington. It’s just steps from the National Mall and the White House, and far enough from the spinning interest groups and hard-nosed lobbying firms of K Street. Late last year, a building right on the corner was given to the Consumer Financial Protection Bureau, a new agency created by President Obama as part of his push to reform Wall Street.

In January, Richard Cordray took control of the bureau. Not long after, he was given a fancy corner office with a view of the Washington Monument and a staff of nearly 900 people. But he was also given an ambitious task from Obama and top Democrats: to have authority over large, bulky, and unfriendly banks to make sure that a replay of the 2008 financial crisis doesn't come to pass. He would also investigate complaints about financial practices dealing with loans, credit cards, and fees—and in many cases, help people read fine print that might appear illegible.

Now, six months in, the idea has gone from theory to practice. And Cordray, the soft-spoken chief of the powerful agency, feels like he’s hitting his stride. The agency in early June launched a Web database to collect consumer feedback, effectively showcasing which banks have the most complaints. They’ve run programs on student debt and credit card agreements. Each month, Cordray and his top deputies take the bureau on the road, recently talking about prepaid debit cards in North Carolina and financial aid in South Dakota.

In many ways Cordray is an unassuming man. He’s not the barnstorming stick-it-to-Wall-Street firebrand you might find in a Barney Frank or an Anthony Weiner. Earnest, in fact, might be the best way to describe the 53 year old, which might explain why sometimes when he travels, rather than be recognized as the guy with one of the newest and most powerful jobs in Washington, people frequently mistake him for Jack McBrayer, the actor who plays a courteous and ultra-sincere TV page from NBC’s 30 Rock. Even McBrayer sent him a letter to chide him about the resemblance.

As a state attorney general in Ohio, the opportunity to wield substantial federal power was a surprise to Cordray. He claims to be "allergic" to Washington, and to prove it, he travels back to Ohio every weekend—on his own dime, officials say—to see his teenage twins.

The bureau also wasn't his idea. That fell to Elizabeth Warren, the former Harvard professor who, after meeting intense scrutiny and the inability to be confirmed by Capitol Hill Republicans, decided to leave the bureau and run for a U.S. Senate seat in Massachusetts instead. Cordray was Warren’s top choice to replace her. Unwilling to negotiate with hard-nosed Republicans, Obama installed Cordray in January in a recess appointment. Congress never got a say.

Since the initial idea hatched, there has been a lot of hand-wringing on Capitol Hill about the bureau. Sen. Mitch McConnell, the Republican leader in the Senate, decried last year that the agency would have “vast rulemaking, supervisory, investigative, and enforcement powers.” Other Republicans criticized the lack of accountability or the power of Congress to impact its budget or staffing if lawmakers were unhappy with the agency’s work.

The White House ignored calls to define the bureau’s specific policies before it began working; since it would be operating in such a new, uncharted area of financial regulation, Obama argued, it was impossible to know exactly what kind of companies and activities it would regulate.

The bureau secured prized office space in the D.C. downtown area known as Federal Triangle. Sitting in his third-floor office that overlooks the Eisenhower Executive Building, which houses much of Obama’s core staff, Cordray reflected last week on the fact that his bureau is finally running on all cylinders. “A lot of our focus in the first year has been on writing new rules of the road,” he says, listing all of the areas, from credit cards to student loans to mortgages, that the agency has stepped up to regulate.

The obvious question is whether such a novel post untouchable by Congress is satisfying. Does he feel powerful? “When you’re building an agency from scratch, there are days you don’t feel so powerful. Getting the IT and HR and budgeting in place, dealing with all of that ... There’s an awful lot of work to do that we have to do now.”

Officials admit that the bigger challenge while building a new agency, and especially one overseeing such a broad and shadowy industry, is filling it with people who understand the job at hand. Anyone can comprehend how a credit card works, but understanding how credit default swaps work and ripple through the economy, for instance, requires financial sleuths—ideally folks who have worked in the industry before.

Many of those people used to make 10, even 20, times what a measly government salary can pay. “There’s a certain amount of taking the plunge that people have to do,” says Raj Date, the agency’s deputy director and a former executive with Capital One and Deutsche Bank. But the bureau’s goals, he says, are noble ones and have attracted top talent.

Far from sailing smoothly, the agency now has a new obstacle. A comglomerate of interest groups and lawyers are suing the federal government, arguing the bureau—specifically how it was set up—violates the Constitution. The 60 Plus Association, a senior-citizen-advocacy group in Alexandria, Va., and the Competitive Enterprise Institute, a Washington, D.C., public-policy group, say that they don’t want to nullify the bureau, just to add some accountability measures.

“We wouldn’t have any problem if we had the ability to appeal their work, or to go to Congress or the White House or contest something in court,” says Boyden Gray, one of the lead attorneys on the suit. “But we don't. And that’s the problem.” The suit also alleges that Cordray’s recess appointment occurred during a time when Congress technically wasn’t on recess this winter, having been gaveled into a weeks-long pro forma session by Republican lawmakers.

Inside the CFPB, top officials dismiss the critiques. “I don’t think there is anybody who doesn’t respect what we are doing here,” says Date. Plus, he says that the extra attention makes the bureau do better work. Cordray, for his part, says the allegations from opponents are “distractions” and “don’t hold much water” when compared to the work he and his colleagues are actually doing.

Both men think it’ll dissipate over time. In the mean time, says Cordray, he's preparing a new program to educate seniors on reverse mortgages, a product seeing new popularity now that the recession has passed. It's also a challenge to keep up with what he claims is increasing interest in the bureau. “It’s a high-class problem to have so many people interested in us and wanting to come to us for help.” He’s hoping the problem becomes harder to deal with.

Correction: An earlier version of this article stated that Cordray had teenage twin sons. He actually has a son and a daughter.