- Former Consumer Financial Protection Bureau (CFPB) Director Richard Cordray is among the candidates President Joe Biden is considering for the Federal Reserve's vacant slot as vice chair of supervision, The Wall Street Journal and Bloomberg reported Tuesday, citing anonymous sources.
- Nominating Cordray, a white man, would cut against the White House's statement last week that Biden "is committed to improving the diversity in the [central bank] Board's composition" — a promise made when Biden announced he is renominating Jerome Powell for Fed chair and seeking to move Fed Gov. Lael Brainard into the vice chair role Richard Clarida is set to leave in January.
- Cordray earned a reputation as a tough enforcer and consumer advocate as the CFPB's inaugural chief. The bureau collected nearly $12 billion in settlements from banks and other financial institutions during Cordray's nearly six-year stint, according to American Banker. His stances on monetary policy, bank capital and leverage requirements, and accounting rules are less well-known. However, during his CFPB tenure, Cordray sat on the board of the Federal Deposit Insurance Corp. and was included in the Financial Stability Oversight Council.
A Cordray nomination at the Fed is hardly a given. Former Fed Governor Sarah Bloom Raskin and Atlanta Fed President Raphael Bostic are also candidates for vice chair of supervision, according to Bloomberg. Each of those candidates would satisfy the White House's diversity pledge: Bloom Raskin is a white woman; Bostic, a Black man.
Biden “is looking for people of independent judgment who are going to be excellent at the craft but also that are going to face squarely and head-on the economic challenges that we face,” White House National Economic Council Director Brian Deese told Bloomberg on Wednesday.
Senate Banking Committee Chairman Sherrod Brown, D-OH, confirmed Tuesday to The Wall Street Journal and CNBC he is "talking to the White House about [Cordray] and a number of other people."
The prospect of putting Cordray in charge of bank supervision at the Fed may hearten progressives who lamented an easing of regulation under Randal Quarles, the previous occupant of the seat. Quarles' term as the central bank's vice chair of supervision ended in October. He has resigned from the Fed, effective this month.
In his time as vice chair, Quarles simplified banks' stress tests, ushered in revisions to the Volcker Rule curbing speculative bank investments, and eased capital, leverage and liquidity rules for all but the biggest lenders.
Cordray, by contrast, has been seen as tougher on banks throughout his career. During his two-year term as Ohio's attorney general, he prosecuted Bank of America in a 2009 lawsuit that alleged the bank's executives tried to conceal Merrill Lynch's foundering financials before shareholders voted on their merger.
Under Cordray, the CFPB filed a 2016 enforcement action against Wells Fargo, blasting the bank for opening accounts without customers' knowledge. Wells is still reeling from the fake-accounts scandal, which in essence, ended two CEOs' careers and spawned fines and restrictions from other regulators, including the Fed, which in 2018, capped the bank's assets at $1.95 trillion — a limit that's still in effect.
The CFPB, under Cordray, stiffened mortgage underwriting standards, bolstered oversight of payday lending, and forced greater disclosure from credit-card issuers regarding rates and fees.
However, at least one analyst saw Cordray's candidacy as an odd fit.
"Cordray is not an expert in bank oversight," Jaret Seiberg, an analyst at Cowen & Co., said in a note, according to Bloomberg. "We don't see how that works at the Federal Reserve."
Cordray may face a tough battle for confirmation from lawmakers, too.
The Senate confirmed Cordray to the CFPB post in 2013 by a 66-34 vote that included 12 Republicans — four of whom still serve.
"We all have history with him already, and the president should know that," Sen. Mike Rounds, R-SD, told The Wall Street Journal, adding that he would wait for a formal nomination before "we begin the process of consulting, and perhaps advising [the president] to withdraw" Cordray's name.
If nominated, Cordray wouldn't be the first of Biden's banking regulation picks to endure an uphill battle. The Senate confirmed CFPB Director Rohit Chopra in September on a 50-48 party-line vote. Saule Omarova, a Cornell University professor and Biden's nominee to lead the Office of the Comptroller of the Currency (OCC), faced a bruising hearing last month in which lawmakers peppered her with questions about her upbringing in the Soviet Union, as well as her past writings and public comments on bank oversight, which some said reveal "radical" views.
"I don't mean any disrespect, but I don't know whether to call you 'professor' or 'comrade,'" Sen. John Kennedy, R-LA, said after asking Omarova if she'd ever resigned from a group called "The Young Communists" during her childhood.
The idea of a Cordray nomination spurred another Soviet reference from Kennedy.
"I like Richard. I respect Richard. Richard is to the left of Lenin," Kennedy told The Wall Street Journal. "Richard believes that only government can make America great. He and I disagree."
Sen. Elizabeth Warren, D-MA, has pushed senior White House officials to consider Cordray, the Journal reported. The Fed job should go to "someone who has the insight to recognize how important regulation is to the effective functioning of the financial markets and has the courage to follow through on that insight," Warren said Monday.
During the Obama administration, Warren, then a White House adviser, named Cordray as her choice to lead the CFPB's enforcement arm. Obama named him to lead the entire organization when it became clear his first choice, Warren, would be a tough sell in the Senate.
Cordray has served since May as the chief operating officer of Federal Student Aid, a $1.6 trillion student-loan program.
Apart from the vacant vice chair of supervision post, Biden has two chairs to fill at the Fed: the seat Quarles leaves this month, and the one Brainard vacates provided she is confirmed to the central bank's other vice chair slot.