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Financial Planning > Behavioral Finance

CFPB’s Cordray Shouldn’t Be Fired, He Should Quit: Senate Banking Chair

By David Baumann

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CFPB Director Richard Cordray should resign as the Obama administration ends, new Senate Banking Chairman Mike Crapo (R-Id.) said this week.

“I think he should submit his resignation and allow the president to select his own person,” Crapo said, in a brief interview.

However, the new chairman did not go as far as his two Senate colleagues — Sens. Ben Sasse (R-Neb.) and Mike Lee (R-Utah) — who have called on President-elect Donald Trump to fire Cordray as soon as his administration begins.

In their own letter, Democrats on the House Financial Services Committee warned Trump that firing Cordray would result in a lengthy court battle.

“While we understand that many powerful special interests would like to see Director Cordray leave, we urge you not to bow to their demands to initiate costly, meritless litigation, and we stand ready to oppose any efforts you may make to do so,” the Democrats said, in their letter.  

They said that no president has ever removed a head of an independent agency for cause.

“We caution you not to engage in partisan litigation, particularly since it is likely to be unsuccessful and will needlessly divert government resources away from other important priorities,” the Democrats said.

When asked about his colleagues’ comments, Crapo repeated that Cordray should resign.

Crapo also said that he has not decided how his committee will proceed on financial institution regulatory relief bills.

The ranking Democrat on Crapo’s committee, Sen. Sherrod Brown (D-Ohio), said Tuesday that if Trump fires Cordray, he would be breaking his campaign pledge to aggressively police the financial community. Brown said that under Cordray’s leadership, the CFPB has returned $12 billion to people who have been victimized by financial institutions.

“Firing Cordray and abolishing the consumer bureau so the special interests can get their $12 billion back would shatter President-elect Trump’s promise to hold Wall Street accountable and protect working people,” Brown said.

On Tuesday, Sasse and Lee blasted Cordray, saying that he has vigorously supported an unconstitutional structure of the CFPB and pursued a harmful regulatory agenda.

However, it remains unclear whether the president has the power to simply fire Cordray since the issue is tied up in federal court. A panel of appellate court judges has ruled that the organization of the CFPB is unconstitutional since it states the CFPB director can only be fired for cause.

However, that ruling has been stayed, since the CFPB has asked that the full U.S. Court of Appeals for the D.C. Circuit to consider the case.

Meanwhile, asked how the Senate will handle regulatory relief bills, Crapo said that his panel has not set its agenda for the year.

In the past, many House-passed regulatory changes have stalled in the Senate, where they haven’t even gone to the floor for a vote.

The House already has passed financial regulatory legislation, such as a bill that would require major financial rules to be sent to Congress before they are implemented.

And House Financial Services Chairman Jeb Hensarling (R-Texas) is expected to reintroduce his legislation to overhaul Dodd-Frank. That legislation includes provisions to convert the CFPB into a commission with five members.

Crapo said he has not decided whether the Senate will consider regulatory changes individually or bundle them into a single piece of legislation, as Hensarling has proposed.

For his part, Brown said Republicans want to abandon much-needed regulatory changes that were made as a result of abuses that led to the financial crisis.

“Clearly there’s amnesia on the Banking Committee,” he said.

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