Richard Cordray: Watchdog

April 14, 2020 0:55:23
Kaltura Video

An online conversation between Richard Cordray and Dean Michael S. Barr on Cordray's distinguished career and his new book, Watchdog: How Protecting Consumers Can Save Our Families, Our Economy, and Our Democracy.


I'm Michael Barr, I'm the Joan and Sanford Weill Dean of Public Policy at the University of Michigan's Ford School of Public Policy. I am thrilled to be here today with Richard Cordray, the former director of the Consumer Financial Protection Bureau. Rich and I are gonna be talking today about current events. And also about his new book, Watchdog: How Protecting Consumers Can Save Our Families, Our Economy and Our Democracy.

First, I wanna thank all of you for joining us in this new virtual format. Hope you're all staying safe at home and getting through the current crisis as best you can. Rich, like so many of our distinguished speakers has devoted his career to public service. Starting out as a clerk at the US Court of Appeals and the US Supreme Court. And going on to serve as Solicitor General, Treasurer and then Attorney General for the State of Ohio. He then became the first Director of the Consumer Financial Protection Bureau, also known as the CFPB from 2012 to 2017.

The CFPB was created as part of the Dodd-Frank Wall Street Reform legislation passed in the wake of the 2008 financial crisis. Elizabeth Warren, who was then an assistant to President Obama, and special advisor to the Secretary of the Treasury was instrumental in the Bureau's creation. Upon Rich's appointment as Director, Senator Warren said, "For too long American families who have worked hard, played by the rules and lived up to their financial obligations have struggled against a large, complex financial system with no cop on the beat to enforce the law. Richard Cordray has the vision and experience to help us build a team that ensures every lender in the marketplace is playing by the rules." I'm thrilled Rich is joining us today to share his experience at the CFPB and to talk about important issues facing the nation and our economy today.

Let me just give you one note about the format, we'll have some time at the end of today's event for questions. You may pose a question at any time by using the Q&A function at the bottom of your screen. We will collect your questions and try to answer as many as possible. You can also pose questions to us on Twitter using the hashtag policytalks. While, unfortunately this online format won't allow us to give Rich a round of applause, I hope you'll join me in giving him a warm Ford School welcome. Rich, thank you so much for being here today.

Thank you, Michael. And let me also say that, although he's too modest to say, so, another person who was instrumental in the creation of the Consumer Bureau, was Michael Barr, who helped oversee and make sure that the legislation pushed through amidst a bitter partisan fight as it turned out to be and to make sure that the Bureau had strong authorities to carry out its role as watchdog in the financial marketplace. Thank you, Michael for everything you did. And do continue to do as a champion of the Bureau.

Well, thank you so much, Rich, I deeply appreciate that and it was definitely a hard-pitched battle in the Congress to get this done. And Dodd-Frank, it was not a very popular idea in some quarters, but certainly among consumers, it was always immensely possible it was always able to... I think we were always able to connect to the public and... Actually, a person who is amazing at connecting to the public and still is was Elizabeth Warren. Who, at that time, was not yet in a formal role in the administration but played a big role in the outside in advocating for the agency. And I wonder whether you might talk about your time working with Elizabeth and what you learned from her about consumer protection, and about talking to the public and communicating these ideas more broadly.

Sure. So, Senator Warren is someone that I deeply respect. I had not met her, Michael, before she began recruiting me to the Bureau which was in November of 2010. I had just been defeated, for re-election as Ohio Attorney General.

Elizabeth wanted to have someone head the enforcement effort at the Bureau who could connect and work with State Attorneys General around the country because that's an important network, and there's a lot of things that we ended up doing together. I was skeptical at first because my family was living with me in Columbus, Ohio, Grove City, Ohio. And I didn't really see how I could make this work. Our twins were in sixth grade at the time, but Elizabeth was so magnetic and so persuasive that she encouraged me to think about what I could do on a 50-state basis with the work that I had done on a one-state basis as the Attorney General of Ohio.

We had been aggressive at going after the Wall Street companies, for abusing our pension systems and tax payers and she thought that with the new authorities of the Bureau, we could do so much more. And ultimately, I was, I would say, swept off my feet, and signed up to go back and forth on a 500-mile commute round trip every week, which I ended up doing not just for the next year or so, which I thought I was originally agreeing to do but eventually, when she recommended me to President Obama to head the Bureau, I ended up doing that for seven years. So I made that trip about 350 times.

And it became a very familiar pattern. I know you did a lot of the same, when you were commuting from Ann Arbor to work at Treasury. There were a lot of sacrifices, a lot of people made because they saw this work as so important and the need to protect consumers and give them the voice and the strength that they deserve was so immediately necessary in the wake of that crisis. And by the way, is now necessary again, and I'm sure we'll talk about that.

Yeah, we're gonna come back to that and maybe... I thought you might say a few words about your time as Ohio Attorney General. I first became familiar with your work, when you were fighting against mortgage abuses in Ohio, which was really ground zero for the foreclosure crisis back in 2006, '07, '08, '09. It really hit Ohio early and you were really on the front lines fighting there. I wonder if you could say a little bit about your time, what it was like to be Attorney General at that time fighting the way you were for consumers on the ground.

Sure. And just for people to understand my situation. I was the state treasurer of Ohio in 2007 and 2008. So during the financial crisis, and had to make sure that our money was safe and protected and liquid and we could get out it and that was quite a challenge. Then I was elected in a special election to become the attorney general of the state for the years 2009 and 2010 and we were just digging out from the crisis. And as you noted, and you would have seen it as well, the mortgage foreclosure crisis, first hit the Midwest. It was for a long time the leading states in mortgage foreclosures were Michigan, Ohio and Indiana. And we thought it was a Rust Belt crisis, then ultimately expanded to become a nationwide problem and helped blow up the economy and create the financial crisis.

In Ohio as Attorney General and first as treasurer frankly, I started creating very rudimentary, I would say homely, save our home task forces county by county across the state. We worked with mortgage services, to the extent they would work with us to try to help people get mortgage workouts and stay in their homes. It was a difficult crisis to deal with, the volume of predatory and terrible, terribly underwritten loans was massive throughout our communities and many people did lose their homes, although we saved some of them. And out of that as the Attorney General of Ohio, I became familiar with the mortgage servicing robo-signing scandal, which essentially to take a very complex problem and try to boil it down for our listeners here.

The mortgage servicers, who are the ones who take your payments and make sure that the accounts are kept up-to-date were very sloppy in their paperwork. Mortgages were being sold and resold at that time, packaged and repackaged on Wall Street, into complicated financial instruments, and as mortgage servicers felt the time had come, where they needed to foreclose on your home, they often found that their files, their paper files were incomplete. And what many of them were doing and this was happening, it turned out in the hundreds of thousands of cases, maybe millions of cases, was they were falsifying affidavits and putting them in the file, so that they could close up any loose ends in terms of securing the evidence they needed in court to foreclose on homes. And I was the only attorney general at that time to file a lawsuit against a mortgage servicer.

Indicative of our predicament was that four of the five largest mortgage servicers were national banks nationally chartered, banks. We could not sue them, we were blocked by preemption as a state from going after them. It was only GMAC, General Motors Acceptance Corp now today known as Ally that we could sue and I did. Ultimately that situation led to a multi-billion dollar settlement. I think ultimately it amounted to more than $50 billion in relief for home owners across the country, all 50-state Attorneys General, the CFPB, the Justice Department and many arms of the federal government were involved in that. And it resolved itself during the time I was working with Elizabeth Warren at the Bureau. I remember we did a financial analysis, at one point, that helped boost the total settlement number much higher than they had originally been contemplating. That was good work that we did.

Yeah, I think that... It's interesting to see you were on the ground in Ohio doing this work, then your first job at the bureau, as you said, was chief of enforcement for the bureau. Maybe the closest parallel to the work you'd been doing on the ground in Ohio, in that sense, but in a very, very different environment, with different tools. The CFPB was very much set up to be a partner with the states. I'm wondering if you could talk about that partnership and what it was like to see it from the other side, to see it from the CFPB enforcement side.

Yes, and there were a number of us Michael, who came from the States, to join in this new effort at the federal level. Of course, it turned out for me, my background was such that it was tailor-made for me, but obviously I wasn't pointing toward a job like this, because it had never existed, before.

You had something to do with me getting that job because I interviewed [11:29] ____ must have waved me on through which I appreciate greatly. But our banking head who oversaw enforcement of the banks, Steve Antonakos was the former banking supervisor from Massachusetts. We hired many people in enforcement who came from State Attorney General offices, some of them came from the Justice Department, they came from all over, but a lot of them had that state experience. And the relationships that we had and the work we did together with state officials, mostly attorneys general, but also state banking regulators, financial regulators was very significant for the bureau in two respects. Number one, every enforcement action we took, if we could secure state partners we did because it magnified the resources we brought to the problem and the scope of the resolution and the ability of us to have clout against the banks and other financial companies.

The other thing... The other way in which that mattered enormously was that early on at the Bureau, we had a lot of problems about our jurisdiction not because of the statute which was well-drafted but because the Congress was engaged in a political rear guard action against the bureau to hold up my nomination as director, to hold up the appointment of anyone as the director. And until we had a director in place, the bureau's authorities were somewhat unclear and could not be fully invoked. And so, by partnering with State Attorneys General, we often were able to pursue actions where it didn't make a lot of sense for the company to try to knock us out because they'd still have the state officials to deal with. And so it got us through some of those jurisdictional hurdles in the early days when as you'll recall, the President, ultimately made a recess appointment of me to head the Bureau.

I was then under challenge in the courts for quite some time, ultimately the Senate yielded after two years of holding up my nomination and finally confirmed me, but all during that time, the bureau had some troubles in terms of knowing exactly what their proper authorities were in such an unusual situation.

Yeah, it was a politically incredibly fraught moment, a moment, a two-year moment and obviously legally, very complicated as well, but on the other end of that, you got through the Senate with a 2/3 majority vote as I recall.

I did and I thought, "Boy, doesn't this reflect the kind of nonsense you have to deal with in Washington DC." I talk about that fight considerably in my book, both the original recess appointment and the ongoing confirmation drama. And by the way, this was a strategy I believe concocted by the financial industry to begin with, and then pressed by a number of Republican senators at the time. That if they could hold up the appointment, they could try to secure changes in the legislation that would weaken the agency. By the way, I then saw, and I talk in the book about my transition to the Trump administration where I served as the director of CFPB for an additional year, under President Donald Trump where the issue re-emerged and lots of calls to fire me during that time and continued uncertainty about my tenure and therefore the direction of the agency.

So what's interesting to know is that as is often the case, and I'm sure your students learn this, the public policy issues that we deal with on the merits that matter so greatly for the American people, often are wrapped in a political context that interferes with or shapes the way in which public policy can be made and is carried out. And that is always true of the landscape of the work that people wanna do in this area.

Yeah, the transition of the Trump administration must have been very challenging. And I know, I was at the Law School then, and with some students was helping behind the scenes on brief writing and other motion work about the really live potential that you might be fired by the administration and certainly then also participating in the legal fight about the structure of the agency, which as you said was really a political battle that had started in the Dodd-Frank legislation, but then continued at pace.

I wonder if you could... Let me bring you back to the Obama administration and then we'll fast forward again to President Trump. So you had this amazing opportunity, President Obama, first as you said gave you a recess appointment then renominated you, a chance to serve as a director, fully Senate confirmed director of the agency, and just let me just say you got an enormous amount done building that agency. First with Elizabeth Warren setting it up and then building it, starting in the middle of 2011. What was it like to build an agency out of nothing? 

Well, it was quite a... Quite a job and Congress as you'll recall, had given us in the statute a one year temporary period to build the agency before then, opening our doors and exercising our authorities. Of course, it was a heroic and highly unrealistic time frame to think that you could build a federal agency from scratch in a year. And it only ultimately took us about three or four years to get closer to steady state. And so for a long period of time, we were both continuing to build the agency while also trying to carry out our functions with the short staff that was having to devote part of its efforts to building the agency. In terms of the range of the things that we were able to get done, one of the people who worked with me at the agency said, in reading my book, they found it really interesting and illuminating because this person had had his head down in our mortgage reform efforts and hadn't really ever quite appreciated all the different things we were doing at once, in terms of debt collection, credit reporting, credit cards, auto loans, all the different things we were doing.

So the book is kind of a rich description of the range of work we were doing, but I know that's what you all had contemplated from the beginning. What you had recognized was that the federal regulatory system was designed to look out for the companies themselves and make sure that they were safe and sound. And that's important, it's important consumer protection because obviously if your bank goes belly up, as my dad's did during the great depression and you lose your savings, that's a terrible problem for consumers. But the issue here was we need to look at their customers as well and think about how consumers are affected. And sometimes the companies and the customers are at odds with one another, and people need a voice to be able to get problems solved, and when there are systemic problems, we need to understand those and address those, and that's really what the consumer bureau has been all about from its beginning.

You describe really nicely in the book the wide range of different approaches that you took to use the bureau's authority to deal with problems. And I think one of the maybe underappreciated ones that you spent a good bit of time discussing in your book is the consumer complaint database. It sounds like a very simple thing, not a sexy thing, but the agency has been able to use that really to enormous effects. I wonder if you could talk a little bit about how that pretty simple tool became so important to the agency's work.

Yeah, and I smile as you say that because as I began to think about whether there was a chapter for the book and whether that was a whole chapter on the consumer complaint system, over time, I began to realize it really was because what the consumer complaint system did, and we were required to have one by the legislation, which was another farsighted provision that was made there.

Of course, every agency and every form of government, every level of government, every part of government has some way of dealing with the public, they have to, because the public has questions, the public has information they wanna convey. There has to be some way to have a two-way communication on that. But what we did went far beyond that. What we did was, we had a mechanism that we set up that allowed individual consumers all over the country to file complaints. And we phased this in because we were so worried about the volume overwhelming us to file complaints about how they had been treated by financial companies, whether it had to do with credit cards, or mortgages, or auto loans, or student loans, or any kind of household finance. And we actually worked to resolve individual problems, and we worked with the companies to do that, and when we weren't satisfied with the responses, we sometimes launched investigations and found broader systemic problems.

I tell a story in the book about a young man named Ari and his father. He was a service member. He got into a terrible auto loan. When he went to be deployed, he kinda confessed to his father what he'd done, it was taking 70% of his take-home pay. There were undisclosed fees and misleading add-on products that he'd been deceived into getting. We did an investigation when the father filed a complaint with us and found that 50,000 other service members had been similarly affected. We got an enforcement action that got relief for all of them. And we also found that there was a systemic abuse of the military allotment program, a sort of bill collection program that the military had set up years ago before online banking, and debt collectors were now using it as an aggressive tool for them to get debts collected. And the Pentagon ended up working with us and reformed the allotment system. So that's an example of how the simple mechanism of consumer complaints that came to us as the voice of the consumer all over the country helping us understand what kind of problems they were facing could lead to some broad systemic relief and systemic change. And that's the way in which the bureau was very effective for consumers.

Yeah, I think that it really is a... It's hard to imagine it being a compelling story, but it is, and you really do a really nice job in the book explaining those roles. I wonder if we could maybe focus in on a couple of areas of abuse in the past and I know many of our audience online are students. Could you talk a little bit about your experience dealing with a student loan servicers and what you found in that area? 

Yes, one of the things that was frustrating at times for us at the bureau was that we didn't have comprehensive authority over a problem. So the problem of student loans which where education has grown to be so expensive in our society and many middle class families and working class families are unable to finance it without extensive borrowing. And by the way, years ago when I went to college, it was very possible at the time if you were diligent to work your way through school, to have a job that paid you enough that you could carry a lot of the college bills and you could do that. That's really not possible for students anymore. So what we were stuck with at the consumer bureau was kind of the back end of that problem. Once people had incurred debt, how could we help them? .

In fact, it turns out there are a lot of problems with the ways debt is managed, and the payments are made and the programs are complicated and whether you're getting the right allocation of your payment and whether it's going to your highest interest debt, which is what you typically want and what your options are for paying it off. And I talked in the book about it. A typical example of a woman who told us that she had been told she didn't qualify for income-based repayment. She was now a teacher and she was being weighed down by her student loans and they were causing her to be behind on other bills. And ultimately, she found she did qualify for what is known as income-based repayment. And for all those students who are gonna be facing repayment of student loans, you are entitled to have an income-based repayment schedule that reflects your income. And if your income is less, you pay less, you'll probably pay for a longer period of time, no doubt, but it's more affordable for you in the meantime, that is a right you have with federal student loans.

We worked closely with the US Department of Education during the Obama administration and Secretary Duncan and then Secretary King were very encouraging with us to work together with us, they appreciated our help. We cooperated. It's a way in which government can work when people are willing to work together. Once Betsy DeVos came in under the Trump administration, all of that cooperation ceased and the CFPB has been much less effective at dealing with student loan servicing problem since. By the way, some of this now has moved down to the states where more states have adopted laws to give them oversight over student loan servicers, and they're trying to fill the gap, which is a recurrent theme right now of states filling the gap while the federal government has been in retreat on consumer financial protection.

So that's an interesting facet and probably worth exploring. When the agency got set up, the provisions in it unusually for federal statute gave a significant authority to the states to step in and enforce federal law. And when we were thinking about the structure of the agency, we were thinking about these kinds of checks and balances and in times where maybe the federal government is not fully aligned with the interest of consumers. And I'm wondering if you could say a little bit about what it was like during the transition to the new administration and how do you think they've been doing on the consumer front, and to what extent have states been able to step in, has it been enough where there's still real, real gaps.

Yeah, it was a very farsighted approach to the Dodd-Frank Act in the statute and two things, in particular. The Congress specified that if federal and state law are in disagreement in this area, that federal law is a floor not a ceiling and state laws even if they're inconsistent with federal law, if they are more protective of consumers, they will be allowed to operate. That was very important because it set a principle of states having muscle in this area. The other thing is that it allowed the states, in many instances, state officials could enforce the federal law. And that's very important right now because in an era where the federal regulators are in retreat and are doing less, and that's certainly true of the bureau, the enforcement actions have been way down since I left. They don't have the same impetus to hold the financial companies feet to the fire. States have been stepping in to try to make up the gap. And by the way, you're aware Michael, that I've been working with consumer advocates in California where they're trying to create a state-level Consumer Financial Protection Bureau analog, so that they could fill the gap for Californians that they're not getting filled from Washington.

And I believe that that is a very worthy project. It is moving forward right now, it's in front of the legislature this spring. And interestingly, when we went to look at what kind of template we needed for overhauling the current agency, it was very much patterned after the Dodd-Frank Act because those authorities were solid, they were comprehensive, they were what was needed to protect consumers. And so the proposal in California is very similar, which is another testament to the great work that was done on this statute at that time. But I would say during my tenure, we did a lot of cooperation with the states, we worked aggressively with the states. Now that the federal bureau is doing less, in some areas, the states are stepping in and doing more on their own and together, working together with one another. And that's a very, very good way that they can be affective is by teaming up with other states at the same time.

Rich, where do you think the biggest gaps are? The new administration, the new CFPB head rolled back some of the regulations that you all put in place and rolled back enforcement as you said. Where are the key steps they took that created gaps? Where do you see the biggest potential holes in federal oversight of consumer protection today? 

I think the biggest gap has been in enforcement. We were bringing four to five actions a month. That very much keeps the financial companies on their toes and makes them aware that they're at risk if they're violating the law or if they're not serving their customers properly. And so, that's one area. In student loans, the consumer bureau has cut back and done a lot less, part of that's been the disconnect between them and the Department of Education, but part of it happened even before that. In fair lending, that is discrimination in credit where people are either not offered credit based on race or ethnic origin or sex, or they're offered it on more expensive terms. We had put in place a mechanism for bringing actions and for overseeing fair lending in the marketplace. And when I left all of that stopped, they haven't brought a single fair lending action in the last two and a half years. They haven't referred a single investigation to the Justice Department. I don't believe that discrimination in lending has suddenly disappeared when I left the bureau, that we had solved that problem. I think it's a matter of lack of oversight. And there's other gaps as well that are happening, but those are some of the major ones.

Rich, the fair lending case, is some of the most interesting fair lending issues arose in the context of auto lending where the bureau's jurisdiction was, let's say, complicated by lots of political infighting in the legislative process that curbed the bureau's power, but you were able to take some steps there to enforce fair lending in the auto sector. I wonder if you could just spend a little bit of time talking about the complexity of operating in that world where your authorities were more constrained than the marketplace, but there were clear problems to be addressed.

Yeah. And I talk in the book Michael, this is a very widespread and well-known phenomenon. That when the individual customer, you or I or any of the people involved in this talk go out to get a car, either new or used, and they also typically have to take out a loan because it's a big, expensive purchase. As soon as they come in to the dealer's show place, they will be scrutinized and eye-balled by the dealer representatives who will make a judgement about what kind of negotiator they are. And they have many levers that they can push to try to boost the total price. Whether it's your trade-in, or it's the interest rate on your loan, or it's the cost of the car itself, or its add-on products or whatever it may be. And people don't realize, but sometimes these assessments of them are based on stereotypes. It just happens in our society.

Sometimes people don't even intend it purposely, but they're doing that. And there's no way to know whether there's systemic discrimination by lenders unless you can actually run the numbers and see if there's a pattern of certain ethnic groups or racial backgrounds paying more or not having access to credit. The consumer bureau is in a position to run those numbers and make those judgments and see those patterns. The individual consumer is not. People often walk out with a loan that is much higher interest rate than they could have qualified for. They don't realize that that's the case, they pay on it over the course of the loan and they are none the wiser.

That's why this discrimination is so insidious because it's often unseen. We were in difficulty in this area because under the statute, we had jurisdiction over auto lenders, but we did not have jurisdiction over auto dealers. They got themselves carved out. They had enough muscle in Congress to carve themselves out of the statute. And of course, when you go to buy a car, you get a loan, very often the dealer is the one that you're dealing with and they deal with the lenders, you don't directly. By the way, tip for the auto consumer. You are far better off going to your bank or credit union and getting a loan ahead of time arranged if you can, where you know what you're dealing with, and you are their customer and they will give you their best rate, than putting yourself in the hands of someone who may have other incentives or other arrangements to put you in a higher cost loan. And you should definitely shop around on the loan, just as you tend to shop around on the car, to get the best price.

That's good, good advice, for sure. One of the subtitle phrases of your book is about saving our democracy. And I wonder if you could explain your thinking, Rich, about the connection between protecting consumers on the one hand, and a quite big, lofty goal of saving our democracy. How are those two linked in your mind, and what can we do as individual citizens to foster a strong democracy? 

So I link those things in two major ways, Michael. The first is the actual experience we saw coming out of the financial crisis and the deep recession that followed, and the slow but steady recovery that occurred for over 11 years until the current crisis we're in right now. When people feel that they are not being treated fairly, there's a lot of alienation, a lot of resentment, a lot of sense that the system is rigged. And if people don't get the help that they need, and they felt at that time that a lot of that help went to the banks and went to Wall Street, but it didn't get itself to Main Street, and they often weren't feeling that they were getting help on their mortgages or their small businesses and the like. Hopefully, lessons we've been learning from that crisis this time, although I'm still unclear on the delivery of that help that's being promised in the current crisis.

So the issue is, is the government actually effective for the average American, or is it really only serving those at the top of the heap with the influence, the clout, the money to throw around in Washington, the power? Is our system rigged? If people believe it is, and if they aren't seeing results being delivered to them, that affects our politics, it helped fuel the Tea Party movement, the anti-government feelings at that time. Boy, the chickens have come home to roost on that because at a time when we really needed the government to step up and deal with this pandemic and be proactive and preventative, it failed to do so very badly, and the country has been hurt by that. So, to me, effective government that can deliver results for average, middle class families in this country is an important part of our democracy. Our democracy is built on the middle class. It's been an advantage for America to have a strong and wide middle class as a strong foundation for our politics, and when that teeters and when that's cast into doubt, our politics are very much threatened, and they are right now in this age of populism.

So, let me just say to our audience, some questions are starting to come in from our audience. I'm gonna weave them in to our conversation that Rich and I are having now, so keep the questions coming, and I'll mix them into the conversation we're having. Rich, one of the things that we talk about with our students is that, the time that you have in government is never, never very easy, and you have to make really hard choices kind of every day about priorities, about how to pursue a certain course of action or not pursue it. You're dealing with enormous uncertainty in your decision making, and you make mistakes all the time just because of that. I wonder if you could talk a little bit about mistakes you made, things you wish you had done differently, how you navigate that uncertainty, and maybe come back to or revisit issues that you think you might not have gotten right the first time, if you had the chance to do it, which is rare. So maybe just talk about the complexity of decision-making in that environment.

As an overall point, I would say that one of the things that the agency had the authority to do, was to do a lot of original research and monitoring of the different consumer finance markets, the mortgage market the auto lending market, the credit card market and the like, and our people were hard at work on putting that information together. But it takes time. And one of the things I used to ruefully say was, "I wish I could be the head of the Consumer Bureau 10 years from now, when you will have done all this research and we'll know all the answers, or at least you know more about some of the things we're dealing with." But in the meantime, we have to make judgements about how to proceed, knowing that we have imperfect knowledge.

And so, for example, our reforms to the mortgage market, I think we got those pretty much right. I'm pretty proud of those. And by the way, the mortgage bankers in the recent case before the Supreme Court really implored the Supreme Court not to invalidate the Consumer Bureau as a whole, because they said, "Those regulations have been working, the market is stronger, it's better. We don't wanna have to go back to square one. Please, whatever you do, don't impair the work the Consumer Bureau is doing on an ongoing basis." But inevitably, and by the way, for all of the students who are thinking about public policy, there's no better way to spend at least part of your life. You may go back and forth between the private and public sectors...

Or the non-profit sector was a great way to raise the quality of life in our communities, but public service is a really important way to devote some of your time and energy over the course of your life. And you should both participate in it when you can and respect those who do because setting the leadership and the direction of our society is really important. But you always do it based on imperfect knowledge, you never do it fully to your satisfaction, you can always look back and see things that you wish had gone a little differently. For example, as I described earlier, our work on auto lending was hampered by some of the problems in the statute and we didn't get quite the result I had hoped we would in terms of rooting out discrimination on a more systematic basis.

I would also say that although we moved as fast as we could, to do a lot of things I wish that we could have finished the Payday Lending Rule, sooner. I wish that we could have finished the arbitration rule sooner. And the politics around what happened with those might have been different. The arbitration rule was overturned by the Senate on a 51-50 vote and the payday lending rule has been snarled in litigation and the new agency has been trying to roll it back. So again, you always would like to have more time, you always would like to know more. You have to do the best you can in the circumstances you're given. And we certainly tried to do that.

So we have quite a number of questions. I'm gonna try and group them a little bit so we have some questions that are around the independence of the agency. So as we were talking about, alluding to a little bit along the way, there have been a series of challenges to the CFPB's authorities, is it okay to have a single director? The big question is, can you have a single director agency insulated from the politics somewhat of Washington by having that person only subject to removal for cause. We answered that question in the affirmative, set up the Bureau that way. You obviously operated under that authority for quite some time.

It was challenged by litigants who said that steps you had taken, against them were invalid because you couldn't have a single director under that authority. Upheld in the DC circuit, then challenged again, it's now up in the Supreme Court. The Trump administration has taken an opposite view from the one you had. What's the right answer? How do you make sense of this? How important is this to the structural integrity of the CFPB? 

Alright, you grouped those questions but there's still multiple questions there, let me... First of all, I do think that the...

One long question.

Yeah, the right answer is the law as it stood for the last 100 years, which is that although it's clear that the president has the removal power... By the way the Constitution doesn't say anything about removal power it only speaks to appointment power. Although the president is the one who has the removal power, it can be subject to modest restrictions, so that certain officials can have tenure for a limited period of time to insulate them from politics and carrying out their role. For example, everybody feels that that's necessary for the head of the Federal Reserve. So that the President can't control monetary policy and use it to boost the economy before an election, which we know has happened in other countries, and would happen here if it could or could happen here.

So I do think that's the right answer. And by the way, it's consistent with the civil service process itself where most of the people in the executive branch, do have protections in their work. And it's been understood that you don't want the entire executive branch to get thrown out on a spoil systems basis when a new president goes out and comes in, it would be too disruptive to government. And so, those limited restrictions have been upheld by the court. I do think this court is likely to go in a different direction in this case. I think it will be one of those familiar narrow five, four majorities. And they will hold, then in a very limited way, for an independent agency, with the single director exerting enforcement authorities that they have to be removable at will, by the president.

The practical effect of that I think will be limited. It will simply mean that when a new President comes in, the head of the CFPB will turn over like the heads of cabinet departments already do. And by the way, some other independent agencies operate under the same principle where it's understood that the chair of rolling member commission might resign with a new president and give them an opportunity to pick their own chair. That happened with the SEC and the CFTC at the turn over of the Trump administration.

So I think it would mean that in the future, you wouldn't haven't stand-off like when I was the CFPB director I was still pro-regulatory, the Trump administration was de-regulatory and we were very much at odds with one another. But I think practically speaking, it's unlikely to upset the other work being done by the agency which will continue to fulfill its intended role as Congress expected to protect consumers.

Rich, there are a number of questions and I know you've been doing some work on this about the current environment, what concerns there are for consumers. What should the CFPB be doing to address that? 

So there's two pieces of the current environment, the bigger piece of going back several years is that the Trump administration has been in retreat on consumer financial protection. And we've talked about that already. The more immediate and insistent concern is that we're now in a new financial and economic crisis. The COVID health crisis has led to an abrupt halt in much economic activity in many sectors of the economy and that is just now beginning to crash down on to consumers who are unable to pay their rent or their mortgage, as they don't have income coming in. They're gonna get behind on their auto loans, they're gonna get behind on their credit card bills. This is gonna be a catastrophe for many consumers. We don't know how long it will last, we don't know how quickly we will rebound on the back side. I think it will be more slowly than a lot of people are anticipating and I think consumers will be badly damaged.

I and a couple of former colleagues in the CFPB published a white paper last week with action steps we're urging the CFPB to take right now, to be very protective of consumers. It's not a time to pull back and ease off on the financial companies that serve consumers and give them a lot of leeway in what they're doing, because if they have all that leeway, and if they don't serve their customers well, consumers will bear the brunt of it. So, for example, in terms of mortgage forbearance, in terms of debt collection abuses, in terms of credit reporting accuracy, all of those things are areas where the CFPB needs to step up and be more active in overseeing these companies right now, rather than less active. And that was what we urged on the agency, and we also sent that same paper to the heads of oversight in Congress, who I believe, will try to make sure that the bureau's feet are held to the fire, so that they, in turn, will hold financial companies accountable for what they're doing for consumers during these very... Times of very great distress.

We're seeing a lot of questions also, as you'd imagine, about the differential impact of both the virus and the economics on people of color and low-income communities. Can you talk a little bit about what you think the right steps are to address the huge disparities we're seeing in so many communities now? 

Well, the current crisis has dramatically emphasized what already was a divide in our society between those with more education and more access to internet and technological tools and those with less education and less access. Right now, we're seeing it in the very sharp divide between those who can continue to function in a digital economy, like you and I are having this webinar and you and your students are continuing to engage in the higher education through these tools. And those in the face-to-face economy who cannot go to work right now, cannot receive income, their hours are being cut, or they're being laid off, or they're having to go to work and expose themselves to the threats of this virus. And I think that we're going to see further rumblings of alienation in our society as this divide is sharpened.

The other thing that's happened is we supposedly had been making efforts to close the digital divide for years, even decades, and yet, we haven't managed to do it. And so for example when school children are being sent home and told to work from home, some of them are able to do it, and some of them are not. Some of them are continuing to receive education and make progress, and some of them are getting nothing, and that's a big, big concern. And it shows us some of the cracks in our society that are gonna need real attention, and it's gonna require attention from the government to help make sure these problems actually get solved, or we are gonna have a further crisis and a further divide in our society that will have as I said, not only economic, but political implications.

If you were advising Congress right now on the next aid bill that was gonna come forward, are there things that you think Congress should be doing that they hadn't been doing to really address this gap? 

Yes. And I think that this has been the fight behind the scenes that the public doesn't necessarily see. But there's been a real sharp divide between the Republicans on the one hand, who see the need, and it is a need to give money to the financial institutions and to companies so that they can survive this, and there will be employment for people coming out the other side, and those who wanna make sure that more relief is given directly to individuals and households who also, demonstrably, are in distress and need it as well. So for example, in the first CARES Act, there was mortgage foreclosure relief for about half the market. They limited it only to those who have mortgages backed by some government program like Fannie Mae, Freddy Mac, or Ginnie Mae and the like. But about half the market, people are getting no break on their mortgages, and many of them will end up being pushed into foreclosure.

This is particularly bizarre during a period when people are being subjected to stay at home orders. How can you stay at home if you can't stay in your home? And similarly, there was a limited amount of eviction relief in the CARES Act. That needs to be broadened to the whole market as well. And I think there's other things that can be done. Certain debt collection techniques that are continuing to be used in the crisis in most states, some states have restricted them, are auto repossessions and the use of kill switches to block you from using your car if you're behind on your auto loan payment. That is very detrimental in a crisis like this, where in most of the country, certainly in the areas that you and I are familiar with, that car is your lifeline, that car or truck, to getting to the store to get food or the food bank, to getting to the doctor if you do have an emergency medical need, and to getting to work if you're able to work and if you are still employed. So, there's a variety of things that Congress can do to impose temporary measures for this crisis, but that need to be getting there immediately for consumers, or many of them are gonna be lost and their lives will be affected for a long time to come.

Rich, there are a number of questions about how you talk about these issues, and how you convince people who have different views. So what are the... When you get opposition on Capitol Hill to the CFPB, what are the kinds of things people are worried about, and how do you hear those concerns and address them in a way that can communicate effectively with those individuals who are skeptical about the CFPB and what it's been up to? 

Well, we had a lot of congressional oversight that was vigorous and some of it was on a partisan basis. We had friends and we had foes there weren't a lot of people who were in between about the Consumer Bureau and what I found was that it's really important to address people's issues, questions, comments on the merits, take them seriously. Don't assume that somebody is partisan or don't assume that they don't mean what they say, don't question people's motives take them at face value, assume they're in good faith and deal with them on the merits. If you are running into partisan opposition that is unreasoned then you just have to push forward as best you can. But if you can turn as much of that oversight into a dialogue, where you can learn from them, but also they can learn from you. Sometimes their questions are not well-grounded or sometimes there already is something that's being done to address the problem, but if you can respect them and show that respect and hopefully, elicit that respect in turn then we have a much better chance of being on the same page, recognizing the problems, and seeing to it that we get real policy solutions to them, more quickly.

Rich, you were a former state treasurer, State Attorney General, you played really important roles at the state level, in addition to the federal level. In the current crisis, a lot of the action on the ground, at least for the first couple of months has been driven by the states and I wonder if you could talk about what states are doing now, and what states should be doing going forward. While we're hoping that the federal government catches up to that and accelerate its response.

Well, I'm not an expert on the health aspects of the crisis, which is, of course, what this is at it's core but certainly the Federal Government was slow to that and many states had to step up and start taking measures, which has been difficult because the states end up competing with one another over scarce resources. Some of the scarce health equipment that is available, we needed more of a federal response to that. On the economic and consumer front, states, they're closer to the communities, than the federal government. The federal government is distant and remote. And it sees things in terms of statistics and in terms of data, but often doesn't have that sense or that feel for what's happening in communities around the country.

By the way that's been made worse in recent decades, because Washington DC itself and the surrounding areas have become a bubble. Not just a political bubble within the beltway, but also an economic bubble. The counties of Maryland and Virginia, around DC and DC itself have been prosperous. They've not been on the same trajectory as the rest of the country and I think often there's a lack of recognition of exactly how difficult some of these circumstances can be in some parts of the country. And yet you will see Congressmen and Senators coming back from their states with very different reactions and very different pictures of what is happening.

But at the state level and particularly at the municipal level, and you see many mayors stepping up and trying to do things and their authority is not as great as they would like it to be. And governors have significant authority in an emergency, but again, not always what they would like it to be, and they're subject to the constraints of having jurisdiction lines. And many cities are right near a border and therefore it's difficult to coordinate policies and the like.

But states have been doing a lot. States are now gonna be doing a lot about thinking about how to reopen the economy, and they need to work closely with the federal government. The federal government needs to be open to working closely with them. That's the way our government works best.

Rich, we have just a few minutes left, so let me ask you maybe an unfair big question, if you were thinking about... If you had the chance to go back and run the agency again in a new administration, what would be the top couple of things that you'd wanna focus on right away to make sure that consumers were being protected in the new economy.

And by the way, Michael, I do intend my book, Watchdog to be a road map to what the future again, can be for the Consumer Bureau at the federal level, and also to things that can be done at the state level even now and in the future. So by talking about what we did and how we did it, and why we did it, it starts a dialogue for people to think about what can be done in the future, what should be done, why and how? But I would say that there are parts of the bureau that continue to work reasonably well. The consumer complaint function continues to answer and resolve and handle issues from consumers all over the country at about 30,000 a month, which is a significant volume of things. It also provides a lot of interesting data and insight into the consumer problems.

And by the way, it is gonna be very telling in terms of the immediate impacts of this crisis that is good real-time information. The supervision program has continued to work pretty well to prevent problems at the financial companies, but only if it remains very much on the job and doesn't ease off of these companies. Enforcement needs to be ramped up again to reasonable levels so that the companies know that they are at risk and they know to look at their own operations and to fix them up where they can because they recognize that they might be subject to an action if they don't. And I think that in the regulatory area they need to continue to move forward with the debt collection rule making, which is badly needed. They should stop trying to undermine the Payday Lending Rule, which is a good framework that, by the way, is being used in Britain right now to rein in excesses in the payday lending industry. And I think that there's just a variety of new needs that will emerge from this crisis that require vigorous, more vigorous action by the Consumer Bureau in order to protect consumers who need and deserve that protection, right now.

Thanks so much Rich. This has been just an absolutely wonderful conversation, thank you for participating in our first fully virtual policy talk at the Ford School. For those of you who have been watching online, it's just been a delightful conversation. Rich Cordray, former director of the Consumer Financial Protection Bureau has a new book out Watchdog: How Protecting Our Consumers Can Save Our Families, Our Economy and Our Democracy. I urge you to read it. It's just a wonderful great lesson and what government can get right to help people and I'm really grateful for all of you for joining us online, and I look forward to seeing you at our next Policy Talks. So Rich, thank you so much.

Thank you Michael and thanks to everybody.