Long day for CFPB's Cordray as accusations and innuendo fly at hearing

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Consumer Financial Protection Bureau Director Richard Cordray was subjected to a barrage of accusations and innuendo by House Republicans on Wednesday, as they apparently sought to give President Trump legal justification to fire the agency head.

The attacks ranged in tone and severity, often sparking heated exchanges between lawmakers and Cordray. Some criticisms were specific — that the CFPB was “asleep at the wheel” during the Wells Fargo phony-accounts scandal, and did not deserve credit for its role in the enforcement action against the bank.

Others were vague, with lawmakers asking Cordray to say whether there were federal investigations into alleged misconduct by the agency and its personnel, all the while making it clear that the lawmakers themselves were not sure such investigations existed.

"Mr. Cordray, boy, they really hate you, don't they?" Rep. Michael Capuano, D-Mass., said at one point, referring to his Republican colleagues on the House Financial Services Committee. "I don't know if it's you or the agency."

Cordray replied: “They don't want to give us any credit for anything good that we do. I understand that; that's part of the game."

But the Republicans’ agenda appeared deeper than that. The onslaught, during which Cordray was often denied the ability to respond, appeared to be an effort by Republicans to lay the groundwork for Trump to remove Cordray “for cause,” the legal standard in the Dodd-Frank Act. (There is a court case challenging that standard, which could allow the president to dismiss a CFPB director at will, but that case is still under appeal.)

House Financial Services Committee Chairman Jeb Hensarling touched on Cordray’s tenure at the outset of the hearing, describing the bureau head as a rogue regulator.

“Under Mr. Cordray's leadership, the CFPB has acted unlawfully, routinely denied market participants, due process, and abused its powers,” Hensarling said. “For all the harm inflicted upon consumers, Richard Cordray should be dismissed by the president.”

Hensarling and other Republicans alluded multiple times to rumors that Cordray might seek a run for governor of Ohio, even suggesting he should quit the CFPB now before the president fires him so he would not have to rehash the accusations against him.

"Would you prefer that the president—and again, we're going to note your political aspirations in Ohio — that we'll walk through the racism, the sexism. We'll walk through the intimidation and the retaliation, all the things that we did on our oversight committee and … do that publicly to have you removed for cause? ” said Rep. Sean Duffy, R-Wis., referring to allegations that the CFPB treated its minority employees differently when it came to promotions and pay increases. "Or do you think it's probably easier for you to go? … What's the better way to do this, for you even, politically, what's the best way?"

Through most of the hearing, Cordray was calm and collected, even in the face of shouting from lawmakers. But at times he was visibly agitated and frustrated at not being able to respond to lawmakers’ questions.

Following is a guide to some of the accusations leveled at Cordray and the CFPB.

Wells Fargo

While touched on by Hensarling and Duffy early on the hearing, Rep. Ann Wagner, R-Mo., was given 10 minutes (twice the usual allotted amount) to grill Cordray on when the CFPB intervened in the Wells Fargo scandal.

Democrats have pointed to the Wells situation as Exhibit A for keeping the CFPB, in which it and other regulators fined Wells $190 million in penalties and restitution for opening millions of accounts without customers’ knowledge. But Republicans argued that the agency was late to the game. They claimed the CFPB did not learn of employees’ actions until after it was reported by the Los Angeles Times and investigated by the L.A. city attorney.

"The only conclusion there is to draw regarding the Wells Fargo scandal is that the CFPB was asleep at the wheel," Wagner said. "Asleep at the wheel, Director Cordray, under your leadership."

Cordray praised the articles and the city attorney, but maintained that the CFPB had been tipped off prior to the public outing of the scandal.

“We had two whistleblower tips earlier,” he said.

Earlier in the hearing, Cordray also spelled out why the CFPB’s involvement was vital to the matter, saying the agency forced Wells Fargo to produce “thousands of pages of documents” and was able to implement a sweeping enforcement order against the bank. Cordray added that the CFPB is engaged in a review of other banks to see if “similar problems are occurring and to make sure they’re being cleaned up.”

Press releases

Republicans also accused the CFPB of dialing up accusations against firms it takes enforcement actions against, often going beyond the case the agency makes in its settlement documents.

Rep. Bill Huizenga, R-Mich., said that oftentimes a company settles with the CFPB and does not admit guilt, but the CFPB press release announcing the agreement contains accusations that the firm violated the law.

The “company doesn't admit to any violation of the law. Yet, in your press releases that you send out, there's regularly alleged — again without factual basis — that the company actually violated the law,” Huizenga said.

Cordray acknowledged that the press release may contain tougher language, but said it was always supported by the facts of the case.

“Everyone knows what was done and it doesn't matter to me whether the company says they don't admit or deny,” Cordray said. “Does anybody doubt that Wells Fargo had the problem that we described when they fired 5,000 employees?”

Other accusations

Lawmakers fielded a host of other complaints about the CFPB during the hearing, though it was not always clear the specifics of what they were talking about.

In one case, Rep. Bruce Poliquin, R-Maine, claimed that a Freedom of Information Act request had uncovered that Cordray and a dozen senior CFPB managers had used private cellphones to conduct official business.

“That circumvents the law unless you reported this,” Poliquin said.

Cordray appeared upset at the accusation, even as he denied it. He said that it might have been possible someone used a personal phone if their government device lost battery power, but such cases were rare.

“I'd like to know from you what government business was conducted,” Cordray said. “We understand the Government Records Act and anything else is just a character assassination."

Rep. Patrick McHenry, R-N.C., meanwhile, asked Cordray if he knew about possible suspicious trading activity at Navient, one of the largest student loan servicers, just before the CFPB hit it with an enforcement action in January.

"Are you aware of any confidential leaks from the CFPB that has led to insider trading?" McHenry asked.

Cordray said that he was unaware of any accusations but that he would “be very concerned about it, so I’d be glad to hear more.”

McHenry pushed further, asking whether anyone at the CFPB has been investigated for insider trading. Cordray said he was unaware of any such investigation, but promised to cooperate if there was such an investigation.

Arguably the strangest accusation, however, concerned the CFPB’s former No. 2, Steven Antonakes.

Rep. Alex Mooney, R-W.Va., asked if there was any investigation into Antonakes’ sudden departure in 2015. It was not clear what, if anything, Mooney believed prompted an investigation, or whether such an investigation even exists. Cordray said he was unaware of one and appeared angry at any insinuations against his former colleague. He said Antonakes left because he was commuting to D.C. from Boston, and wanted to spend more time with his wife and three children at home.

"I'm not aware of what you're talking about," Cordray said.

Democrats, meanwhile, noted Republicans’ animosity toward Cordray, saying it was often out of proportion and suggesting there were ulterior motives for it.

“Man, the level of outrage against you is way higher than the level of derision of some of these companies that ripped off people,” Rep. Keith Ellison, D-Minn., told Cordray at one point. “Much of what is happening is theater; it's not really about any of this stuff. It's about the CFPB diverting money to the pockets of working Americans and not financial interests.”

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