White House Considering Richard Cordray as Top Fed Banking Regulator

President Biden is considering

Richard Cordray,

the first director of the Consumer Financial Protection Bureau, to serve as the Federal Reserve’s top banking regulator, according to people familiar with the matter.

If nominated and confirmed by the Senate, Mr. Cordray would become the government’s most influential overseer of the U.S. banking system, succeeding

Randal Quarles

as the Fed’s vice chairman of banking supervision.

Mr. Cordray, an attorney, served as head of the CFPB from 2012 to 2017, a watchdog Congress created after the 2008 financial crisis to regulate lenders and other companies tied to consumer finance. He is currently a top official at the Education Department, serving as the chief operating officer of Federal Student Aid, overseeing the $1.6 trillion student-loan program.

Richard Cordray and Moves at the Fed

Mr. Cordray declined to comment. The White House said last week it would announce additional Fed appointments beginning in early December.

Senate Banking Committee Chairman

Sherrod Brown

(D., Ohio) said Tuesday that Mr. Cordray was one of several candidates under consideration. “I’m talking to the White House about him and a number of other people,” he said.

At the CFPB, Mr. Cordray brought significant changes to consumer finance, a corner of the financial industry that had previously escaped regulatory scrutiny. The agency tightened underwriting standards for mortgages, required more disclosure on credit-card rates and fees, and introduced federal oversight to payday lending.

Mr. Cordray’s nomination for the Fed post could hearten progressive Democrats who have called for the central bank to take a tougher approach to regulating big banks and addressing financial risks posed by climate change.

Sen. Elizabeth Warren

(D., Mass.) has privately pushed senior White House officials to consider Mr. Cordray for the role, one of the people familiar with the matter said. A spokeswoman for Ms. Warren declined to comment.

Without citing a specific candidate, Ms. Warren said Monday that 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.”

Mr. Cordray won Senate confirmation on a 66-34 vote in 2013 for a five-year term as the CFPB’s head, following a lengthy delay. He received backing from 12 Republicans, including five who remain in the Senate. Before the vote, he had been serving as CFPB director for over a year through a recess appointment.

Mr. Cordray could face a closer confirmation vote if he is nominated for the Fed job. “I like Richard. I respect Richard. Richard is to the left of Lenin,” said

Sen. John Kennedy

(R., La.), a member of the banking committee, which holds hearings on Fed nominees. “Richard believes that only government can make America great. He and I disagree.”

Sen. Mike Rounds

(R., S.D.) hinted that Mr. Cordray’s previous clashes with Republicans from his tenure at the CFPB could make for a bruising confirmation fight. “We all have history with him already, and the president should know that,” he told reporters. Mr. Rounds said he would wait for a formal nomination before “we begin the process of consulting, and perhaps advising [the president] to withdraw” a nomination.

The administration has struggled to fill some top financial regulatory posts with individuals who can satisfy its allies on Capitol Hill and maneuver through an evenly divided Senate.

For instance, the White House considered at least three candidates for another banking post, comptroller of the currency, before settling on

Saule Omarova,

a Cornell University law professor, who is unlikely to win confirmation. Opposition from Republicans and a group of moderate Democrats has likely scuttled her nomination, though the White House said last week that it still supports her.

Mr. Biden last week said he would nominate Fed Chairman

Jerome Powell

to a second four-year term atop the central bank when his current position expires in February. He also said he would elevate Fed governor

Lael Brainard

to succeed Vice Chairman

Richard Clarida

when his term expires next year.

Federal Reserve Chairman Jerome Powell discussed in a Senate hearing the factors driving continued inflation and the risk the Omicron variant poses for the economy. Photo: Al Drago/Bloomberg News

With Mr. Clarida’s departure, one existing vacancy and Mr. Quarles’s resignation set to take effect at the end of this year, Mr. Biden has three seats to fill on the Fed’s seven-member board, including the vice chair of supervision.

Mr. Biden has pledged to ensure his future Fed appointments improve the diversity of the central bank’s leadership. Nominating Mr. Cordray, a white man, could increase scrutiny on the administration’s choices for the remaining seats.

“I was hoping for more diversity in the nominations,” said

Julia Coronado,

a former Fed economist and founder of economic-advisory firm MacroPolicy Perspectives.

The president’s decision to reappoint Mr. Powell won bipartisan backing but followed a last-ditch effort by some progressive Democrats to push for new leadership at the Fed, with critics objecting to the direction of bank regulation under Messrs. Powell and Quarles.

At a Sept. 22 news conference, Mr. Powell said he would defer on the regulatory agenda to whoever is installed as the vice chair for supervision because the Dodd-Frank law that created the post provides specific authority to that position. “I respect that authority. I respect that that’s the person who will set the regulatory agenda going forward, and I would accept that,” he said.

The Fed has several regulatory policy issues to tackle. These include an important potential tweak to how the Fed counts deposits held at the central bank toward banks’ leverage ratio. The Fed allowed a temporary, pandemic-related reprieve from the capital requirements to expire this spring, but it promised to consider a broader revamp to the rule’s treatment of ultrasafe assets.

It isn’t known whether new Fed governors might review changes to the postcrisis rulebook made during the Trump administration. Mr. Powell and supporters of those changes have referred to them as a “tailoring” of complex and unworkable rules. Some Democratic critics say the changes have substantially weakened the original overhauls.

The Biden administration has eyed tapping an experienced regulator who could focus on rebooting a bank-supervisory process at the Fed that some Democrats say was weakened under Mr. Quarles.

People who know Mr. Cordray have described him as hardworking and soft-spoken, with an encyclopedic mind. He sailed to five straight wins on the TV game show “Jeopardy!” in 1987, in part by knowing the names of the wives of French Emperor Napoleon and identifying

Harold Abrahams

as a 1924 Olympics champion.

He clerked for two Supreme Court associate justices,

Byron White

and

Anthony Kennedy,

before entering politics as an Ohio state representative in 1991.

Mr. Cordray left his post at the CFPB to run for governor of Ohio, a race the Democrat lost in 2018 to Republican

Mike DeWine.

While Mr. Cordray ran the CFPB, it imposed new restrictions on high-interest payday loans—small, short-term consumer loans that can have interest rates as high as 400%. The agency adopted the “arbitration rule,” which made it easier for consumers to band together to sue over complaints about bank accounts, credit cards and other products. Under the Trump administration, the CFPB eased the payday restrictions while Congress overturned the arbitration rule.

Mr. Cordray earned a reputation as an aggressive litigator during his years as a state attorney general, when he pursued high-profile lawsuits against some of the country’s largest financial firms. He also took a lead role in the multistate probe into foreclosure abuses by the largest U.S. banks, calling several companies’ foreclosure practices a “business model built on fraud.”

Under Mr. Cordray, the bureau frequently bumped heads with businesses. Companies accused the CFPB of penalizing them without providing a heads-up that they were breaking the rules and giving them a fair chance to comply. New rules, the companies also argued, created needless costs that made financial products more expensive for customers.

Representatives of the American Banking Association and the Financial Services Forum, industry groups that represent banks, declined to comment Tuesday.

Mr. Cordray previously served as attorney general of Ohio from 2008 until 2011, after he was also defeated by Mr. DeWine. He previously served as the state’s solicitor general and treasurer. He ran unsuccessfully for a seat in the House of Representatives in 1992 and the U.S. Senate in 2000.

Write to Nick Timiraos at [email protected], Andrew Ackerman at [email protected] and Ken Thomas at [email protected]

Corrections & Amplifications
Richard Cordray was confirmed in 2013 with votes from five Republicans who are currently members of the Senate. An earlier version of this article incorrectly said he won votes from four current GOP senators. (Corrected on Nov. 30)

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