Richard Cordray - Watchdog: How Protecting Consumers Can Save Our Families, Our Economy, and Our Democracy

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Richard Cordray 2020

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Library of Congress Cataloging-in-Publication Data

Names: Cordray, Richard, author.

Title: Watchdog : how protecting consumers can save our families,

our economy, and our democracy / Richard Cordray.

Description: New York, NY : Oxford University Press, [2020] | Includes index. |

Identifiers: LCCN 2019042464 (print) | LCCN 2019042465 (ebook) |

ISBN 9780197502990 (hardback) | ISBN 9780197503003 (updf) |

ISBN 9780197503010 (epub) | ISBN 9780197508251 (online)

Subjects: LCSH: United States. Consumer Financial Protection Bureau. |

Financial services industryGovernment policyUnited States. |

Consumer protectionGovernment policyUnited States.

Classification: LCC HG181 .C69 2020 (print) | LCC HG181 (ebook) |

DDC 381.3/40973dc23

LC record available at https://lccn.loc.gov/2019042464

LC ebook record available at https://lccn.loc.gov/2019042465

Consumers and Predators

The Rise of the Financial Consumer

An Ominous Mismatch

The Making of a Watchdog

Giving People a Voice That Matters

A Powerful Force for Good

Playing by the Rules

Ways and Means

Know Before You Owe

A Great Big Country

Teaming Up for Consumers

The Tougher Fights

Under Fire from All Sides

The Last Big Fights

A Treacherous Transition

Concluding Thoughts

As the country struggled out of the Great Depression, the collapse of thousands of banks loomed large. Bank regulators were installed, and banks were given access to federal guaranties so that no family would lose money they deposited. Banks steadied out, making profits year after year by taking in those deposits and lending out that money for a little higher pricesteady, not extraordinary, profits.

By the 1970s big banks and corporate executives were itchy for something bigger and more daring. They hatched a plan that was sinister, but simple: buy Washington. Shake off the regulators and federal laws that hemmed in their business model. Over time, they flooded the political system with money and deployed lobbyists across Capitol Hill. One tax loophole led to another; one rule rollback led to the next. The banks loaded up on ever more complex products that produced greater profitsand greater risksall while hanging on to their federal guaranties. By the early 2000s, the corporate executives on Wall Street were calling the shots while bank regulators and elected representatives sat on their hands and looked the other way.

In 2008, our economy finally snapped under the weight of greed and corruption bearing down on Washington. If only the corporate executives and their investors had paid a price, that might have been the end of the storya cautionary tale about risk. But this crash crushed millions of people, costing them their homes, their savings, their jobs. And then, as if to rub salt in the wound, they were forced to watch as our government bailed out the enormous banks and lavishly paid executives who had ruined their lives.

The Great Recession hit everyone hard, but the people with the smallest economic reserves and least political clout took a punch straight to the face. The blow was devastating for working families, seniors, communities of color, and veterans. It was the worst recession since the Great Depression.

Id seen this disaster coming for years. I told anyone who would listen that our economy was being driven to the brink, but it felt like I was screaming into a void. I talked about the dangers of subprime loans, the rising foreclosure rates, the middle-class families struggling to make ends meet and relying more and more on debt. But the people in power would not listen.

In the wake of the financial crisis, Democrats took a stand. Never again would Wall Street trample on working families without consequence. Never again would giant financial institutions be given license to boost their profits by cheating hard-working Americans. Never again would the self-proclaimed financial wizards be allowed to run over the cops on the beat. The tool to make sure that Never Again was truly Never Again was an idea Id developed for a real watchdog.

The concept was simple: create an entirely new agency, one whose purpose would be to rein in the financial institutions that were taking advantage of families across the country. The agency would have the power to oversee and regulate all consumer lendingcredit cards, mortgages, student loans, payday lending, car loans. It would be a tough watchdog whose sole mission would be to look out for the interests of families.

The idea was bigger than a single new law or a complex regulationit was about changing the structure of consumer credit regulation. More than a dozen federal laws already addressed issues involving consumer credit, but the laws were tangled and responsibility for enforcing these laws was spread out among sevenseven!different federal agencies. Worse yet, each of those agencies had some other first priority, like making sure the banking system was stable or administering housing policy. Not a single one of those agencies had as its primary job protecting consumers from dangerous credit productsnot oneand the big banks had already perfected the art of circumventing new laws.

We needed an agencyone agencythat would be a cop on the beat every day, watching what the big banks were up to, writing new rules when needed, and enforcing those rules. President Obama agreed, and he began fighting to create the Consumer Financial Protection Bureau (CFPB).

The big banks fought the idea of a cop on the beat. The moment the CFPB hit the airwaves, the political knives were out. Big financial institutions spent millions in a massive lobbying campaign to try to kill or weaken the bill to create the CFPB. Lobbying was nonstop. Members of Congress were overwhelmed. But we got organized, we built a grassroots movement, and, nevertheless, we persisted.

Persistence paid off. More than a year after President Obama first called for the agency, he had the chance to sign it into law. A few weeks later, he called me to help set up this new agency. I needed help, so I called Rich Cordray.

Rich was the perfect choice to help set up the new agency. He understood what was at stake for American families. First as treasurer, then as attorney general of Ohio, hed had extensive experience going toe to toe with financial institutions. He would come to Washington to fight for working families.