"Rich" Cordray (as his sidekick Raj Date calls him) is being unfairly stigmatized by press references to him as "5-time Jeopardy winner." As if that were his greatest qualification!
Rich is something much more relevant to his job than that: a failed politician.
Ohio voters defeated him for the U.S. House. Then the Senate. Finally, they defeated him for re-election as Ohio attorney general 14 months ago. (Obama has lost only once in his life — so far!) Rich’s opponent said he was anti-business. Take that to heart.
From his defeat, Rich parachuted straight to the bureau. He told a home state paper that he'd work from Ohio rather than move. And said he planned to run for statewide office in 2014.
A full term at the Bureau of Consumer Financial Protection (created under that name by Dodd-Frank, but referred to as the CFPB for political gain) would run for 5 years, until 2017. Keep your eyes peeled. He's a serial office seeker who'll run long before that.
Banks and payday lenders can't vote. It was consumers who ungratefully denied Rich an encore after his allegedly heroic exploits on their behalf. Exploits which featured kicking the dead and near-dead (AIG, B of A). When AIG pays settlements, all taxpayers are on the hook.
Whatever one might say about Bernanke, Paulson, Geithner — they were never politicians. They didn't use Washington jobs to generate headlines pending another campaign.
Rich is a litigator utterly lacking in regulatory experience. He's never run a large organization. But he's eminently qualified to play Obama's political game.
The game plan is perverse: denigrate banks and other lenders for "abusing" consumers by making loans they knew borrowers couldn't repay. Rich did this again in criticizing student lenders recently.
Wacky. Some lenders abused investors, which is a challenge for the underfunded SEC. Some abused bank balance sheets, which is a challenge for the prudential regulators.
But making a loan that isn't repaid often benefits rather than harms the borrower. The borrower gets something for nothing — even a college education.
So, copious crocodile tears for people who "bought" a house for $0 down and made few or no payments. Isn't it sad that they might get "thrown out on the street" after 9 or 18 months of free housing? (30% of them never even moved in — mostly because they were flippers, speculators.)
No tears left over for renters, against whom landlords are bringing thousands of eviction proceedings when they're just one month behind. Aren't apartment leases "financial"? Aren't they hard to understand? Aren't renters on average poorer, less sophisticated than homeowners?
But no, banks aren't directly involved in rentals, so Obama politics, synergistic with public anger against banks, bemoans the sad plight of buyers, even non-resident flippers — but not renters. Rents are rising during these hard times, while ownership gets much cheaper. This doesn't bother our political majority, although it increases the wealth inequality that they complain about vociferously.
No one but a politician, certainly not a banker or regulator, could argue that it abuses borrowers to give them loans they don't repay — to hand out free money or use of assets. The greatest concern of regulators is to ride herd on bad assets, to assure that lenders aren't creating or hiding overvalued assets. For sure the Fed, the OCC and most of all the FDIC hate bad loans with passion.
So, why does Rich, incredibly, propose to compete or "collaborate" with their already debatable examination processes—in order to eliminate some of the bad loans that allegedly abuse consumers? Politics, Obamitics.
Now Rich will oversee writing of an ability-to-pay requirement for mortgages. (How about one for leases? Annual evictions are over 10% in vulnerable neighborhoods?)
The Fed, mandated by Congress, already produced such a requirement for credit cards. Result: useless expense and confusion. If banks could use income data to reduce card losses, they'd do it voluntarily, delightedly. Losses on the loans they own are poison for banks. Congress couldn't (and the Fed didn't even try) to tell banks how to use ability-to-pay data or analysis to cut losses. Hence, compliance expense without any benefit.
Rich's head of non-bank supervision at the bureau recently stated that priorities would be based on "risk." Risk of what? Non payment, bad loans? If Rich really believes giving people something for nothing abuses them, then consumers, especially the "risky" ones, should shun their newly-anointed protector — as those who know him best, Ohioans, already have.
Anrew Kahr is a principal in Credit Builders LLC, a financial product development company, and was the founding chief executive of First Deposit, later known as Providian. He can be reached at email@example.com.