The Senate Banking Committee’s top Democrat said Tuesday that former Consumer Financial Protection Bureau Director Richard Cordray is in the running for the top regulatory position at the Federal Reserve.
Cordray, who also served as Ohio’s attorney general, was appointed by President Barack Obama in 2012 to serve as the first director of the CFPB. In an interview with Yahoo Finance on Tuesday, Sen. Sherrod Brown (D-Ohio), confirmed the Wall Street Journal’s early reports that the White House is considering Cordray, among others, for the Fed’s vacant vice chair of supervision role.
“Rich served my state well as attorney general, he served the country well out of the Consumer [Financial Protection] Bureau. I think he's one of several that are qualified,” Brown said.
Brown said he has been talking to the Biden administration about all of the Federal Reserve vacancies.
Last week, Biden announced that he would be renominating Fed Chairman Jerome Powell for a second term and bumping Fed Governor Lael Brainard to a vice chair role. But he did not announce picks for three other open spots on the central bank’s Board of Governors, including a vice chair of supervision role that has remained unoccupied since October.
The role is critical because the central bank is a primary regulator and supervisor for the nation’s (and the world’s) largest banks. Under Trump appointee Randal Quarles, some post-Great Financial Crisis regulations were rolled back in the interest of “tailoring” liquidity and capital requirements on banks of differing sizes.
Proponents of those changes have argued that the changes extend regulatory relief to smaller banks that do not present systemic risk to the financial system. Opponents worry that some regulations were opportunistically extended to banks that are of systemic risk.
If nominated and confirmed, Cordray could have the ability to revisit some of those changes.
“The good news is the difference between the Trump nominee Quarles and the Biden nominee — whoever it is — it [will be] night and day,” Brown told Yahoo Finance.
Obstacles to confirmation
A potential Cordray nomination could ignite a fierce political battle in the Senate, where a 50-50 balance of Democrats and Republicans leaves the Biden administration with little wiggle room to lose support.
As the head of the CFPB, Cordray drew ire from Republicans who felt he used the young agency’s powers to regulate the industry through aggressive enforcement actions and agency rulemaking. But Democrats supported Cordray’s efforts to introduce guardrails on corners of the financial services industry that were outside the scope of traditional banking regulators (like the Federal Reserve).
During Cordray’s time as CFPB director, the agency passed rules on limiting payday loans and expanding lender due diligence by requiring an assessment of borrowers’ ability-to-repay.
Complicating his tenure at the agency: a multi-year legal battle surrounding the constitutionality of the agency’s single director model. The legal kerfuffle escalated all the way up to the Supreme Court, which left the consumer watchdog intact. To hedge against the perception that the lone director could have too much power, the highest court severed a provision in the law that now enables the president to fire the head of the CFPB at will.
After leaving the CFPB in 2017, Cordray made a failed run for Ohio governor.
More recently, Cordray served in the Department of Education’s office of Federal Student Aid, with jurisdiction over the administration of federal student loan programs.
Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.