Cordray Is the Sort of Nanny Ohio Loves

An official who’s been in charge of a Democrat-created federal office for blame, scapegoating, and extortion announced Wednesday that he’d be stepping down at the end of the month from the Consumer Finance Protection Bureau.

This was followed almost immediately by the news that the official, Richard Cordray, was expected to run for governor of the Ohioans, a people united by a belief that, whatever it is, it’s not their fault. The lassitude of the Ohio economy in one stat: no state spends a higher percentage of its GDP on unemployment insurance, workers compensation and government pensions than Ohio.

As head of the nanny state’s most overbearing agency, Cordray has plenty of experience infantilizing the public, which will serve him well in this race. He is not known to have expressed any casually racist sentiments about the Chinese, which puts him at some disadvantage, but he has almost a year to start.

Cordray could take a few cues, for example, from Sen. Sherrod Brown, who has called Chinese people “obsequious and obedient… cogs in a 3,000-year-old totalitarian machine.” The state media has never called him out for the “me so solly” routine, as (a) being a Democrat means everybody knows your heart’s in the right place, and (b) they’re likely ignorant enough to think Brown’s slur is a serious socioeconomic explanation of how Ohio’s proud union men were undermined by scrounging foreigners who don’t even have the self-respect to demand a living wage.

Now, I don’t live inside the heads of any Ohioans, of course, but I did live in Ohio for a few months back during the 2012 campaign. For weeks before the election, virtually every spare second of commercial airtime was filled with voter-tested campaign ads. The effect was indelible: China, China, China, payday lenders, China, payday lenders.

Politifact’s Lie of the Year that year, by no coincidence, was given to a true claim that Mitt Romney made in an ad for Ohio about President Obama selling “Chrysler to Italians who are going to build Jeeps in China.” The race for Senate between Brown and his Republican challenger, Josh Mandel, was filled with Brown calling Mandel a tool of the despised payday lending industry.

Paranoia about financiers and foreign interests just plays well there. I could give you a potted explanation about why, mentioning the decline in manufacturing jobs, the abandoned neighborhoods all over the state, and the prevalence of insular Appalachian attitudes, but the point is simply that it does. This is what the pros find that Ohioans care about. So I don’t think it’s any coincidence that Cordray stuck around just long enough at the CFPB to finalize a far-reaching new rule that makes life hard for payday lenders.

This is the sort of thing Cordray plans to run on, and it’s worth debunking. The idea that payday lenders represent an especially pernicious form of lending is one of the founding myths of the CFPB. The truth is that (a) all debt is risky and (b) payday borrowers pay way less in interest than credit card users.

A study by the CFPB itself found that the average payday borrower paid $574 in fees in a year, which is less than a third of what the average household with credit card debt pays in interest in a year. Those apparently obscene fees actually do motivate people to pay off their debt quickly.

Cordray’s resignation email to his agency this week mentioned some of the other points he’s sure to make on the campaign trail:

Together we have made a real and lasting difference that has improved people’s lives, notably: $12 billion in relief recovered for nearly 30 million consumers; stronger safeguards against irresponsible mortgage practices that caused the financial crisis and hurt millions of Americans; giving people a voice by handling over 1.3 million complaints that led to problems getting fixed for vast numbers of individuals, and creating new ways to bring financial education to the public so that people can take more control over their economic lives.

Rep. Jeb Hensarling (R-TX), Cordray’s antagonist on the House Financial Services Committee, says it is clear “that under Mr. Cordray’s leadership the CFPB has shown an utter disregard for protecting markets and has made credit more expensive and less available in many instances; this is particularly true for low and moderate income Americans. What is also clear is that under Mr. Cordray’s leadership, the CFPB has acted unlawfully, routinely denied market participants due process and abused its powers.”

His colleague on the committee, Rep. Steven Pearce, represents a southern New Mexico district where half the homes are manufactured housing, a sector that’s been stricken by CFPB’s mortgage rules.

“CFPB reform would start opening up those lines of credit,” he said earlier this year.

Cordray claims to have recovered $12 billion for consumers. I offer a four-word rebuttal: Bayesian Improved Surname Geocoding. That’s the name of a program the CFPB used to identify black-sounding names in predominantly black neighborhoods so that it could mail out $80 million in checks to folks who might have been black, and therefore might have been part of a borrower pool that in the aggregate was charged higher interest rates. This was part of a settlement against Ally Financial. The problem, as you might have guessed: CFPB didn’t actually know the race of a single one of Ally’s borrowers.

That’s not recovery. It’s shakedown and robbery. The gritty details rarely make the news reports; the editorial pages tend to think the whole business sounds great, although it’s obvious that few journalists understand how corrupt the CFPB is in practice.

A federal appeals court is still considering arguments heard in May on whether the CFPB’s structure is constitutional. Congress isn’t showing any inclination to reform CFPB. C. Boyden Gray, former counsel to President George H.W. Bush and the co-author of a white paper on the CFPB, says the courts need to fix the CFPB’s constitutional defects, which “let a politician like Richard Cordray exert unrivaled regulatory and enforcement powers during a Republican administration until he is good and ready to leave office,” he says. “In the meantime, the president should nominate a new CFPB director who will follow the law, curb the Bureau’s job-killing overregulation of financial institutions, and answer to the president as the sole head of the executive branch of government.”

We can choose between vigorous markets competing to offer all sorts of products and the one-size-fits-all requirements that characterize the CFPB, Obamacare, and most Democratic policies. One creates lower costs for all and the freedom to do something dumb. With the other, we all do the same dumb thing together, and watch the jobs disappear, watch the steam go out of the economy. And when we can’t figure out where we went wrong, a new nanny will come along to reassure us, singing a little song about China.

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