U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

75–073 PDF 2012

BUDGET HEARING—CONSUMER 

FINANCIAL PROTECTION BUREAU 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

OVERSIGHT AND INVESTIGATIONS 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

FEBRUARY 15, 2012 

Printed for the use of the Committee on Financial Services 

Serial No. 112–101 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

SPENCER BACHUS, Alabama, Chairman 

JEB HENSARLING, Texas, Vice Chairman 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, North Carolina 

JUDY BIGGERT, Illinois 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

MICHELE BACHMANN, Minnesota 

THADDEUS G. McCOTTER, Michigan 

KEVIN McCARTHY, California 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

NAN A. S. HAYWORTH, New York 

JAMES B. RENACCI, Ohio 

ROBERT HURT, Virginia 

ROBERT J. DOLD, Illinois 

DAVID SCHWEIKERT, Arizona 

MICHAEL G. GRIMM, New York 

FRANCISCO ‘‘QUICO’’ CANSECO, Texas 

STEVE STIVERS, Ohio 

STEPHEN LEE FINCHER, Tennessee 

BARNEY FRANK, Massachusetts, Ranking 

Member 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JOE DONNELLY, Indiana 

ANDRE ́ CARSON, Indiana 

JAMES A. HIMES, Connecticut 

GARY C. PETERS, Michigan 

JOHN C. CARNEY, JR., Delaware 

JAMES H. CLINGER, Staff Director and Chief Counsel 

(III) 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

RANDY NEUGEBAUER, Texas, Chairman 

MICHAEL G. FITZPATRICK, Pennsylvania, 

Vice Chairman 

PETER T. KING, New York 

MICHELE BACHMANN, Minnesota 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

NAN A. S. HAYWORTH, New York 

JAMES B. RENACCI, Ohio 

FRANCISCO ‘‘QUICO’’ CANSECO, Texas 

STEPHEN LEE FINCHER, Tennessee 

MICHAEL E. CAPUANO, Massachusetts, 

Ranking Member 

STEPHEN F. LYNCH, Massachusetts 

MAXINE WATERS, California 

JOE BACA, California 

BRAD MILLER, North Carolina 

KEITH ELLISON, Minnesota 

JAMES A. HIMES, Connecticut 

JOHN C. CARNEY, JR., Delaware 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

February 15, 2012 ............................................................................................ 1 

Appendix: 

February 15, 2012 ............................................................................................ 47 

WITNESSES 

WEDNESDAY, FEBRUARY 15, 2012 

Cordray, Hon. Richard, Director, the Consumer Financial Protection Bureau .. 10 

APPENDIX 

Prepared statements: 

Cordray, Hon. Richard, with attachments ..................................................... 48 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Grimm, Hon. Michael G.: 

Written responses to questions submitted to Hon. Richard Cordray ........... 136 

Miller, Hon. Brad: 

Office of the Comptroller of the Currency FY 2013 President’s Budget 

Submission .................................................................................................... 137 

(1) 

BUDGET HEARING—CONSUMER 

FINANCIAL PROTECTION BUREAU 

Wednesday, February 15, 2012 

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON OVERSIGHT

AND INVESTIGATIONS, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 10:04 a.m., in room 

2128, Rayburn House Office Building, Hon. Randy Neugebauer 

[chairman of the subcommittee] presiding. 

Members present: Representatives Neugebauer, Fitzpatrick, 

Pearce, Posey, Hayworth, Renacci, Canseco, Fincher; Capuano, 

Lynch, Waters, Baca, Miller of North Carolina, Ellison, Himes, and 

Carney. 

Ex officio present: Representatives Bachus and Frank. 

Also present: Representatives Royce, Green, and Maloney. 

Chairman NEUGEBAUER. Good morning. I will call the hearing to 

order. I would like to remind the Members that we will have 2 

minutes of opening statements on each side. I see that Mr. Royce 

is here, and I think Mr. Grimm will also join us. 

I ask unanimous consent that members of the full Financial 

Services Committee who would like to sit in on this hearing be allowed to sit and be a part of our panel this morning. 

One of the primary responsibilities, I believe, of government is to 

make sure there is transparency and accountability. And sometimes, those two terms can be mutually exclusive. 

This hearing today is about a new entity that was created in the 

Dodd-Frank Act—the Consumer Financial Protection Bureau. It 

was tucked inside the Federal Reserve, some say to preserve its 

independence. Others would say that in trying to preserve its independence, it put this entity in a place where there is a lack of 

transparency and accountability. And that we give one person a 

tremendous amount of authority to not only make rules and regulations but also to spend money without congressional oversight or 

really accountability to any other entities as well. 

So, what we hope to accomplish with this hearing today is to determine exactly what types of activities have been going on in the 

Consumer Financial Protection Bureau. 

With this understanding, a reminder to everyone that this is 

budget season; and in the beginning of this week, the President of 

the United States laid out a budget. And in that budget, it calls 

for another trillion dollar deficit. 

2 

So, this will be the fourth trillion dollar plus deficit in this term 

of this President. And this is an unsustainable route. 

Somebody asked, ‘‘What does a hearing today on the Consumer 

Financial Protection Bureau have to do with the deficit?’’ 

This is a reminder to everyone that the Federal Reserve (Fed) 

has gotten a great deal. It borrows through zero and it buys bonds 

and pays interest and creates an arbitrage and creates earnings for 

the Federal Reserve. And the Federal Reserve then takes that 

money and spends some of it for the operations of the Fed and then 

the balance of that money, and, by the way, it has been increasing 

at a pretty substantial rate here because the Fed has grown multifold since the beginning of the crisis. And so, those revenues come 

back to the Treasury, which is a part of the revenue source. 

If you go through the President’s budget, you will see where they 

are expecting the Federal Reserve to send them some money to 

spend which will either go for deficit reduction or for operations of 

this country. 

And so, to the extent that we make sure that the money that is 

being spent by the Consumer Financial Protection Bureau, because 

they get their money from the Federal Reserve, to the greatest extent possible is being spent as efficiently and effectively as we can 

is actually a deficit reduction opportunity for this Congress. 

I look forward to hearing from our witness today, Mr. Cordray, 

and having a very open and honest discussion about that. 

And with that, I yield to my good friend, the ranking member of 

the subcommittee, Mr. Capuano. 

Mr. CAPUANO. Thank you, Mr. Chairman. Mr. Chairman, thank 

you for having this hearing. Mr. Cordray, welcome. I am looking 

forward to hearing your testimony. 

I am using this hearing personally to kind of catch up on where 

you are. I do want to know more about your budget. I think our 

role as an oversight committee is important to make sure that we 

agree with generally where you are going and what you are doing. 

But at the same time, I expect that during this hearing, it is a 

little premature to draw our judgments. As I see it, you are kind 

of just getting started. And I would hope that this doesn’t become 

just a rehash of why people didn’t like your creation in the first 

place. If they don’t like it, repeal you, and we will see about that. 

But for me, I just kind of want to know where you are, where 

you are going, and what to expect in the next year or so. 

I will tell you unequivocally that I think the creation of the 

CFPB is a good thing for America. I am hoping that—just one little 

statistic. I am looking at a Pew report that says we lost $3.4 trillion in wealth relative to real estate during the last financial crisis. 

If we could have saved one tenth of that with the amounts of 

money that we spend in your agency, it would have been well 

worth it for the American people and for the world economy as a 

whole. 

So, as far as I am concerned, I look forward to this CFPB becoming a great and wonderful defender of American consumers and I 

am hoping that you are in the right track. I will also look forward 

to hearing your testimony today. 

Thank you. 

Chairman NEUGEBAUER. I thank the gentleman. 

3 

Now, the vice chairman of the committee, Mr. Fitzpatrick, is recognized for 2 minutes. 

Mr. FITZPATRICK. Thank you, Mr. Chairman. I appreciate your 

calling this hearing. I know we are all looking forward to the hearing in part because there is a lot of talk in this town about honest 

budgeting and transparency in government. 

And as a big believer in these ideals, I look forward to discussing 

them today with Mr. Cordray. 

As this committee has explored for the better part of the year, 

the CFPB is unique among not just regulators, but among most 

government agencies. And that uniqueness is what has drawn so 

much attention. 

Despite not being subject to oversight that comes with the normal, usual appropriations process, Congress still has a role to play 

to ensure that taxpayer dollars are being well-spent, which is arguably our most important role here in this town. 

I also believe that the taxpayers deserve to know how their 

money is being spent ahead of time rather than after the fact. 

Careful and thorough planning makes a goal much easier to 

achieve. Not only is that good fiscal management but it is also common sense. 

So, thanks, again, Mr. Chairman, for calling the hearing. I look 

forward to hearing from the witness. 

Chairman NEUGEBAUER. I now recognize the ranking member of 

the full Financial Services Committee, Ranking Member Frank. 

Mr. FRANK. Mr. Chairman, I would take, I guess, 5 minutes now; 

and we can reserve if any other of our Members come forward, if 

that is all right. 

I welcome everybody to what I think is the sixth or seventh hearing this year. It is the sixth or seventh oversight hearing in which 

people complain that there is no oversight. 

It makes me wonder. It raises philosophical questions, ‘‘Are we 

really here?’’ We are told that there is no oversight. And we are 

told repeatedly in meetings of the Oversight Subcommittee, in 

which we are conducting oversight, that there is no oversight. 

In fact the notion that this is unique is surprising to me coming 

from people who have been serving on a committee which has primary jurisdiction over the Office of the Comptroller of the Currency. The Comptroller of the Currency is an independent entity 

appointed by the President, funded not through the appropriations 

process but by fees that office gets. 

And, in fact, the previous Comptroller—an appointee of President 

Clinton—after using his authority, which we tried to curtail in the 

financial reform bill, to cancel all State consumer protection laws, 

then sent out a CD to State-chartered banks saying, in effect, 

‘‘come be chartered by me and you won’t be regulated.’’ And that, 

of course, enhanced his financial capability. 

That may or may not be right. But I do not remember any member of the Republican Party ever complaining about the status of 

the Comptroller of the Currency, which is exactly the same as that 

of the Consumer Bureau. 

And I would say if you look historically and talk to bankers 

about which agency is more important to them, particularly comVerDate Nov 24 2008 18:20 Sep 05, 2012 Jkt 075073 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 K:\DOCS\75073.TXT TERRIE
4 

munity bankers, it is the Comptroller of the Currency. The Comptroller of the Currency is a very significant figure. 

And while he is housed in the Department of the Treasury, he 

is independent, very analogous to the role of the Consumer Bureau 

in the Federal Reserve. 

As to one individual, not a board, having enormous power, once 

again, I would say that many people I think would believe that the 

Environmental Protection Agency, run by a single Administrator, 

has more authority that will affect the economy and people’s lives. 

People did not object to the Comptroller of the Currency because 

the Comptroller of the Currency had a very comfortable relationship with the banks. And there are people in this committee who 

believe that it is the job of regulators to accommodate the banks. 

What we did in the Financial Reform Bill was just say that 

where consumer protection is concerned, it is kind of a conflict of 

interest for the people who are the bank regulators to also be the 

Consumer Bureau. And so, we created a new Consumer Bureau. 

Now, by the way, on the budget—and I am going to ask Mr. 

Cordray for these numbers—the gross number for the budget is a 

little bit misleading if it is suggested that is all new spending, because one of the things that we did in the Consumer Bureau was 

to transfer legal authority and personnel from existing bank-regulating agencies. 

There are personnel who work now in the Consumer Bureau who 

had been at the Federal Reserve, at the Comptroller of the Currency and, I believe, at the FDIC. I am told the number is about 

200 of the 700 and some odd employees. In other words, more than 

25 percent of the employees now working and charged to the CFPB 

were budgeted for elsewhere. So, that is not a net increase. 

Finally, there have been some concerns raised about the fact that 

the charter is statutorily to deal with issues that are about fraud, 

deception or abuse. A number of Republicans have complained 

about abuse. And they have said very explicitly, ‘‘But that must 

mean that something which is not inherently dishonest is abusive 

as applied to some individuals.’’ 

Many of us believe that when 88-year-old semi-literate individuals are being pressured into certain bogus terms, that could be 

considered abusive. And, in fact, we recognize that in the investment area, where we have the qualified investor. So, investments 

that can be pitched to some people aren’t pitched to others. 

But there is this question, ‘‘Should the mandate of the Bureau, 

even from people who don’t like it, be limited only to fraud and deception, or is it legitimate to also give them the power to step in 

when there is a problem where things are abusive as applied to the 

particular individuals?’’ 

I want to read from a very distinguished economist whom I think 

supports that. He says, ‘‘In those systems that can be rationally defended where the States just do nothing, an effective competitive 

system—he a great advocate of competition—needs an intelligently 

designed and continuously adjusted legal framework as much as 

any other. 

‘‘Even the most essential prerequisite of its proper functioning, 

the prevention of fraud and deception including exploitation of igVerDate Nov 24 2008 18:20 Sep 05, 2012 Jkt 075073 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 K:\DOCS\75073.TXT TERRIE
5 

norance, provides a great and by no means yet fully accomplished 

object of legislative activity.’’ 

It was written before we did the Bureau. But I want to stress, 

again, this is a very distinguished economist arguing that, ‘‘Yes, 

you want to prevent fraud and deception.’’ But he includes in that 

the exploitation of ignorance. And that is the strong endorsement 

of the charter that the Bureau has. 

I yield back. 

Chairman NEUGEBAUER. I thank the gentleman. And I want to 

say that I agree with the gentleman that the EPA Director does 

have too much authority and I would be glad to work with him in 

a bipartisan way to eliminate that position. 

Mr. FRANK. Will the gentleman yield? 

Chairman NEUGEBAUER. I will. 

Mr. FRANK. Has the gentleman filed legislation, done anything 

before answering me to advance that? 

Chairman NEUGEBAUER. No. But now that I know you— 

Mr. FRANK. Oh, okay. 

Chairman NEUGEBAUER. I will. 

Mr. FRANK. Conversion is always proper even it is very circumstantial in its motivation. 

Chairman NEUGEBAUER. I now yield to the chairman of the full 

Financial Services Committee, Chairman Bachus. 

Chairman BACHUS. Thank you. 

Mr. Cordray, welcome to the hearing. I think this is your first 

appearance before this committee. 

In a well-publicized speech 2 months ago in Kansas, the President said we should be strengthening oversight and accountability. 

Now, I totally agree with that. There should be stronger oversight 

and accountability of every government agency. 

Unfortunately, the CFPB is designed in a way to avoid critical 

oversight and accountability. The ranking member of the full committee mentioned the EPA, and I know Mr. Neugebauer picked up 

on that and my antenna went up as well. 

And I think it was appropriate to mention the EPA. The CFPB 

actually has more sweeping authority than the Director of the 

EPA. Title 10 of the Dodd-Frank Act confers virtually unfettered 

discretion on the Director of the CFPB. 

As Mr. Cordray has said many times, ‘‘This is not about personalities. It is not about Elizabeth Warren. It is not about you.’’ But 

the Director, whoever it is, can identify financial products and services that he or she alone finds objectionable, ‘‘unfair, deceptive, or 

abusive’’ and ban them under a highly subjective standard that has 

no legally defined content. 

Without question, this gives the CFPB Director power that far 

exceeds that of any other financial regulator. We have seen the 

EPA do that, and Chairman Neugebauer, I commend you for holding this hearing. We have seen them do some things that the 

American people have said, ‘‘Whoa! Wait just a minute.’’ 

They are doing that to fire trucks now—volunteer fire departments. They put a new regulation that is costing volunteer fire departments, some of them, a whole year’s budget just to put a different restrictor on their exhaust systems and it is actually shutVerDate Nov 24 2008 18:20 Sep 05, 2012 Jkt 075073 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 K:\DOCS\75073.TXT TERRIE
6 

ting down fire trucks as they go out to fires and it has created a 

real problem. 

Now, will the CFPB do something as we have seen the EPA do 

in overreach? I don’t know. But if they do, with the EPA, political 

pressure can be brought on the President. He appoints the Director 

of the EPA as a Cabinet position. He can fire him. 

Mr. Cordray—even the President cannot fire him. The difference 

in this agency—another difference—is that EPA gets its appropriation from Congress. 

The CFPB isn’t under the appropriation process. If they spend 

$100 million on paper clips, we can’t even say, ‘‘Wait a minute, you 

can’t do that next year. We are going to cut your budget,’’ no matter what they spend money on. We have absolutely no control. 

And let me tell you, in a time of a budget deficit, oversight and 

accountability on spending is urgently important. In this agency, 

there is no accountability. There is no board and they have unfettered discretion to ban products or to declare them as unfair. 

And, ‘‘unfair’’ or ‘‘fair’’ could be a debate that could go on forever. 

But we actually have somebody who can just say, ‘‘Fair, unfair’’— 

one person, no accountability, not even to the President. 

Thank you, Mr. Chairman. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now, Mr. Lynch is recognized for 11⁄2 minutes. 

Mr. LYNCH. Thank you, Mr. Chairman. 

I would also like to thank Director Cordray for joining us here 

today. This is your first of what I expect will be many, many appearances before this subcommittee. I have a feeling you will be a 

frequent flyer here. 

We are here today to examine the Consumer Financial Protection 

Bureau’s budgetary process, something that was debated extensively during the Wall Street reform process in the last Congress. 

Before the Dodd-Frank Act was passed, there were seven different Federal agencies that had partial responsibility over consumer protections in the financial services sector and apparently 

none of them did a very good job at it. 

The Consumer Bureau was created to centralize that authority 

over consumer protection into one agency and to give that agency 

the necessary tools to carry out that mission effectively. 

To give the Consumer Bureau real teeth, we removed it from the 

appropriations process and created a funding mechanism whereby 

the Bureau draws the funds it needs from the Federal Reserve up 

to a statutory maximum. 

Still, the Consumer Bureau operates on a budget less than that 

of the OCC, the SEC, the FDIC, and the Federal Reserve. A recent 

report found that the Bureau costs each taxpayer less than $2 per 

year. That same report found that the financial crisis cost the 

American taxpayers $12 trillion in lost wages, lost home value, lost 

stock wealth, and fiscal costs. 

I would that less than $2 per year is a small price to pay for the 

protection that you will provide. The bottom line here is that the 

CFPB’s statutory mandate is to implement and enforce Federal financial consumer laws consistently for the purpose of ensuring that 

all consumers have access to markets for consumer financial prodVerDate Nov 24 2008 18:20 Sep 05, 2012 Jkt 075073 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 K:\DOCS\75073.TXT TERRIE
7 

ucts and services, and that those markets for consumer financial 

products and services are fair, transparent, and competitive. 

Apparently, that scares the heck out of a lot of people in the financial services industry. But I think that is a worthy goal. I wish 

you the best of luck in your duties and I hope that I can be a good 

partner for the Bureau in your work going forward. 

Thank you very much, and I yield back the balance of my time. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now, the gentleman from Texas, Mr. Canseco, is recognized 

for 11⁄2 minutes. 

Mr. CANSECO. Thank you, Mr. Chairman. 

Mr. Chairman, this is certainly a very important hearing as we 

look into just how the CFPB managed to spend $160 million last 

year and why it feels the need to spend an additional $330 million 

this year. 

The CFPB seems to have no concrete plan on how this money is 

going to be spent. But I guess, with this agency, that is par for the 

course. I am reminded too that the crafters of Dodd-Frank conveniently allowed the CFPB to spend however much it wants without 

any input from Congress or any other body for that matter. 

So, in effect, while today’s hearing is important, we as Congress 

sit here powerless and can only listen to Mr. Cordray as he lays 

out his priorities for how to spend money that could be used to reduce our national debt, which just crossed $15 trillion this year. 

And I am also reminded that Mr. Cordray is what is called a ‘‘recess appointment,’’ that occurred while the Senate was in session. 

And it has created even more uncertainty for the financial institutions and small businesses who now correctly believe that every 

rule handed down by the CFPB will be subject to judicial review. 

What we have is a rogue Director in charge of a runaway budget 

for an agency whose mission is still unclear. Mr. Chairman, this is 

a recipe for disaster that will only hurt our economy going forward. 

Thank you, and I yield back. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now, Mr. Ellison is recognized for 11⁄2 minutes. 

Mr. ELLISON. Mr. Chairman, thank you. 

And I want to thank the ranking member. 

Let me a tell you what a recipe for disaster is—allowing citizens 

to be lied to and bilked into subprime predatory mortgages, then 

repackaging those subprime mortgages into a mortgage-backed security, then somehow convincing someone to rate it AAA and then 

allowing banks to trade on their own accounts to buy those assets 

in proprietary trading and then, having some insurance-like product that would back it all up, but of course, they wouldn’t have any 

reserves to cover the losses. 

That is a recipe for disaster and that is exactly what happened. 

It is shocking to me that my friends on the other side of the aisle 

act like the financial crisis of 2008, 2009, and 2010 didn’t even happen. They don’t think anything should be done to try to rein in people who took advantage of consumers and destroyed whole neighborhoods. 

In the zip code of 55411, which is where I live, 48 percent of the 

houses are in foreclosure; not underwater, in foreclosure. This is 

8 

because of the bad behavior that you want to protect these people 

from. 

If your business model is not about bilking consumers, you have 

nothing to worry about from the CFPB; but if your aim and your 

goal is to hook them and crook them and take advantage of consumers, of course, you are horrified. 

And all this stuff about: ‘‘Oh, yes; they have too much authority. 

They have taken too much money. We can’t talk to them. We can’t 

control them’’—this is all nonsense. This is all just shilling and trying to run alibis and interferences for crooked individuals. 

I yield back. 

Chairman NEUGEBAUER. Thank you. 

And now, the gentlewoman from New York, Mrs. Hayworth, is 

recognized for 30 seconds. 

Dr. HAYWORTH. Thank you, Mr. Chairman. 

Mr. Director, I note that one of the key responsibilities of the 

CFPB is to educate consumers. And I would implore you that one 

key aspect of that financial education should be regarding the unintended consequences of Federal intervention in the markets, even 

when well-intentioned. 

I would welcome the opportunity to work with your staff in that 

regard because I do think that is a crucial piece of this entire picture, including, as the distinguished Member from Minnesota has 

just mentioned, the 2008 fiscal mortgage industry crisis which can 

certainly be laid at least in part and a major part at the feet of 

Federal intervention. 

Mr. Chairman, I yield back. 

Chairman NEUGEBAUER. I thank the gentlewoman. 

Now, I think the ranking member reserved—and I recognize him 

for 30 seconds. 

Mr. FRANK. Thank you, Mr. Chairman. 

Just a couple of points—first of all, this notion that the Director 

cannot be removed is fanciful. It says in the statute that, yes, the 

Director is appointed for a 5-year term, but can be removed by the 

President for insufficiency, neglect of duty, or malfeasance. 

No one doubts that if a change in Administration comes, and the 

new President disagrees with the existing Director, he or she can 

be removed. And proving that you were not inefficient, the burden 

of proof being on you, would be overwhelming. 

Secondly, just as we are having an oversight hearing about the 

lack of oversight, we capped the appropriation last year and we are 

now hearing that we can’t do that. This is just bizarre. 

Last year, in the appropriation in the budget, the amount that 

this agency can spend was limited by Congress and people keep arguing it wasn’t. Finally, I read a quote—because I know it has been 

controversial as whether or not the Bureau could protect people 

against ignorance, the abusive—I am talking about ‘‘unfair,’’ and 

we did say yes, there were some things that may be ‘‘fair’’ with regards to some people and not others. 

I read the quote that said that even the most essential prerequisite of the proper function of government, the prevention of 

fraud and deception including exploitation of ignorance, provides a 

great object of legislative activity. 

9 

And I forgot to mention that this endorsement of legislative activity to prevent the ignorant from being exploited was written, as 

I said, by a very distinguished economist. His name was Friedrich 

Hayek. 

I am quoting from the edition I have from the Library of Congress, ‘‘The Road to Serfdom,’’ and it is Mr. Hayek who says that 

he is against central planning but he believes strongly in the appropriate regulation including the prevention of ignorance. I don’t 

claim that Mr. Hayek, were he still alive, would have endorsed this 

particular wording, but the purpose of going beyond this fraud and 

deception and preventing exploitation of ignorance—and I have 

given out the quote—four pages of it because it is very much in 

context. 

I thank you. 

Chairman NEUGEBAUER. Thank you. 

Now, the gentleman from Florida, Mr. Posey, is recognized for 30 

seconds. 

Mr. POSEY. Thank you very much, Mr. Chairman. 

Mr. Cordray, I hope in your comments, you will address Judicial 

Watch and other public interest organizations that investigate and 

prosecute government corruption, address their issues—one thing, 

such as, let us know why an Associate Director of Consumer Education needs to make $251,288 a year for the entry-level position. 

Also many of us believe, unlike some on the other side, that the 

only way we are going to stop the crisis and corruption and the 

crony capitalism that we have seen in the past and we see going 

on now is to hold somebody accountable, and that means prosecute 

somebody for their bad deeds, which the Justice Department, obviously, has not seen fit to do, at least not yet, and I would like to 

know what your specific plans are. 

And if you think, maybe you can even get help from the Justice 

Department that other agencies apparently can’t, to bring some of 

these criminals to justice. I think most of us on both sides of this 

aisle want to see done. Thank you. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now, Mr. Royce from California is recognized for 11⁄2 minutes. 

Mr. ROYCE. Let me agree with Mr. Frank in terms of the observations made by Professor Hayek. But when we look at this situation, I think what Professor Hayek would also argue is that government intervention into regulation in order to achieve certain political ends could also create a problem. 

The problem that exists here is that we have sort of a bifurcated 

regulatory structure. At least in the opinion of many of us, what 

we have done with the CFPB is to dilute the power of the safety 

and soundness regulators in this situation. 

The concern we have is that it might morph into the type of situation we had with the bifurcated regulation when we had HUD on 

one side and NOFA on the other. 

The regulators wanted more power at that point in order to— 

they wanted it by statute so that they could better regulate safety 

and soundness. HUD, on the other hand, weighed in. And so, we 

ended up with the situation of the overleverage that existed with 

the GSEs of the zero down payment loans and so forth. 

10 

Unless this power rests not with the products’ regulator, but 

with the prudential safety and soundness regulator, it is much 

more likely that politics, government intervention will come into 

play and who knows, we could end up with the argument for the 

political allocation of credit. 

We could end up with the same kinds of assertions that were 

made over at HUD for zero down payment loans or for a 100 to 1 

leverage through the GSEs. Why? Because we are going to put everybody in a home and that was going to be everybody’s right 

whether they could afford to pay for it or not. 

So what we are actually talking about is trying to get some balance back in this so that the prudential regulator can step in and 

prevent the type of thing that all of us saw happen before. And I 

just wanted to make that point. 

Chairman NEUGEBAUER. I thank the gentleman. I would remind 

all Members that your opening statements will be made a part of 

the record. 

And now, we will hear from our one and only witness, Mr. Richard Cordray, Director of the Consumer Financial Protection Bureau. You are recognized for 5 minutes. Thank you. 

STATEMENT OF THE HONORABLE RICHARD CORDRAY, 

DIRECTOR, THE CONSUMER FINANCIAL PROTECTION BUREAU 

Mr. CORDRAY. Thank you, Chairman Neugebauer, Ranking Member Capuano, members of the subcommittee, and those members of 

the full committee who are here, for the opportunity to testify on 

the budget of the Consumer Financial Protection Bureau. 

Before I became Director, I promised Members of Congress in 

both chambers and on both sides of the aisle that I would be accountable to you for how the Consumer Bureau carries out the laws 

you have enacted. 

I said that I would always welcome your thoughts about our 

work and I stand by that commitment today. This is the 14th time 

that we have testified before either the House or the Senate and 

my colleagues and I look forward to continuing to work with you 

to provide the kind of oversight that allows you to understand the 

work we are doing and helps us improve our performance. 

We are committed to fulfilling our statutory responsibilities and 

delivering value to American consumers. This means being accountable and using our resources wisely and carefully. 

As you know, the Consumer Bureau is funded through transfers 

from the Federal Reserve. Under the new law, the cap on those 

transfers for Fiscal Year 2011 was 10 percent of the Federal Reserve’s 2009 operating expenses or $498 million. 

As this was our start-up year, we did not use all of our available 

funds. In fact, we only used $123 million, but we got under way 

and we continue to build toward a steady state that will allow us 

to accomplish the objectives set forth in the laws enacted by you, 

the Congress. 

The Government Accountability Office rendered an unqualified 

clean audit of our financial statements and an additional independent third-party audit found that the Consumer Bureau addressed all relevant budgeting requirements under Dodd-Frank. 

11 

Because we are committed to transparency, we have posted our 

budget justification, our financial statements, the GAO audit, and 

the independent audit on our Web site at consumerfinance.gov. We 

invite you and your staff to look at these documents and we will 

be glad to answer any questions you may have about them. 

Now that we have completed our statutory transition period and 

have become a full-fledged independent agency with the legal responsibility to protect American consumers in the financial marketplace, our expenditures have naturally increased. 

As you can see in our budget justification, however, our budget 

estimates remain considerably below our budget cap at $356 million for 2012 and $448 million for 2013. At this time, we have no 

plans to ask Congress for any additional funds, as we are authorized to do by law. 

While our budget is small relative to the other banking agencies, 

our mission is critical. Our budget is a means to an important end: 

to make life better for American consumers. Much is at stake. Consumer finance is a big part of the American economy, and it bears 

heavily on all of our lives. 

Mortgages allow people to buy homes and spread the payments 

over many years. Student loans give young people with talent and 

ambition, as well as those who may not be so young, access to an 

education. Credit cards are a convenient means of accessing money 

to make purchases. 

Products like these undeniably help people achieve their dreams. 

But as we have seen in recent years, they also can create dangers 

and pitfalls if they are misused or misunderstood. In State and 

local government, I was deeply engaged in consumer finance issues. 

I saw good people struggling with debt they could not afford. Sometimes, people made bad decisions. Sometimes, an unexpected event, 

like a loved one getting sick or a family member losing a job, can 

overwhelm even the most careful planning. 

Still other times, unscrupulous businesses obscured the terms of 

loans or engaged in outright fraud, harming unsuspecting consumers and even ruining lives and devastating communities. I am 

sure each of you hears every day from your family, friends, neighbors, and constituents who have these kinds of stories to tell. They 

are not looking for special favors. They just want a fair shake, and 

a chance to get back on track toward achieving the American 

Dream. 

They deserve a consumer financial system that actually works 

for consumers. Accomplishing our mission will take time. But we 

are already taking important steps to improve the lives of consumers. 

One of our main objectives is to make sure the costs and risks 

of financial products are clear. People make their own decisions, 

and nobody can or should try to do that for them. But it is the 

American way for responsible businesses to be straightforward and 

upfront with their customers, giving them all the information they 

need to make informed decisions. That is good for honest businesses and it is good for the overall economy. 

So another key objective is making sure banks and nonbanks get 

the evenhanded oversight needed to promote a fair marketplace. 

12 

Our supervisors are going on-site to examine their books, ask tough 

questions, and fix problems we uncover. 

The Consumer Bureau will also make clear that violating the law 

has consequences. We will use all the tools available in our effort 

to ensure everyone follows the rules of the road. Where we can cooperate with financial institutions to do that, we will. When necessary, we will not hesitate to use enforcement actions to uphold 

the law and right a wrong. 

We are listening closely to consumers and the businesses that 

serve them. We are holding events throughout the country. We 

have been to Philadelphia, Minneapolis, Cleveland, and Birmingham. Next week, we are going to be in New York City. We 

hope you will join us at these kinds of events as we come to your 

communities. 

Thank you, Mr. Chairman. I look forward to your questions. 

[The prepared statement of Mr. Cordray can be found on page 48 

of the appendix.] 

Chairman NEUGEBAUER. Thank you, Mr. Cordray. Your full written statement will be made a part of the record, and we appreciate 

that you stayed within the 5 minutes. 

We will now have the question-and-answer period for Members. 

I recognize myself for 5 minutes. 

Mr. Cordray, I have been looking through some of the requests 

that you made for advances from the Fed and up on the screen and 

I know it may be hard for Members to see, but it is one that was, 

I think, sent on September 28, 2011, and it requests $94,281,564 

be transferred and I guess that would be for operations for the first 

quarter of 2012. 

I was just kind of surprised that you can get $94,281,564 with 

just a one-page letter. There was no back-up as it was sent with 

that. 

And that is evidently not an estimated number. If I was going 

to get an advance on my budget, I would just say, ‘‘Well, send me 

$94 billion or $94 million.’’ Don’t you think that when you are 

going to be submitting for these kinds of funds, transfers, that 

there ought to be more documentation than just writing a letter? 

Mr. CORDRAY. Thank you, Mr. Chairman. The process that we 

have is that the Fed—a portion of its budget, a dedicated portion 

that Congress set by law is available to us for expenditures and our 

budgeting purposes. 

There are considerable controls around our budgeting process. As 

noted, we are subject to two outside audits: the GAO audit; and we 

also have an independent audit that you all put in to the law that 

is special to our Bureau, different from the other banking agencies. 

We are, of course, subject to congressional oversight. And one of 

the things that I would say is that I believe that the oversight that 

you all are exercising over us is meaningful. It is significant—the 

notion that, as was suggested earlier, we would spend $100 million 

on paperclips. 

And it would matter that we can be brought up here in front of 

you and have to answer for that publicly and embarrass ourselves 

if it turns out we were engaged in frivolous expenditures. That is 

a very meaningful oversight, I believe. 

13 

We also have just put out our budget justification. We have put 

it out for last year. We just put it out for the next year. That is 

on our Web site. All of these materials I have described are on our 

Web site. 

We are also putting out quarterly reports on our expenditures on 

our Web site which is something that the other agencies do not do. 

That is above and beyond for us. So I think there is considerable 

explanation and analysis of what our budget is. And I think the 

Federal Reserve folks have total access to all of that as well. 

Chairman NEUGEBAUER. I just would think—when I was in the 

private sector and I asked for an advance, I had to provide documentation. I want to go back to—I am glad you mentioned your 

budget justification plan. We did go online and I believe this is 

your—this is a 12-page budget justification plan. Do you recognize 

this? Is that your budget justification? 

Mr. CORDRAY. Yes. It is from our document. 

Chairman NEUGEBAUER. Yes. So, then we have looked at, for example, the CFTC and some of the other agencies, and this is the 

kind of document that they generate for their budget justification. 

I think when you are spending that amount of money—while you 

mentioned that those amounts are small relative to other agencies, 

they are still significant amounts of money. And so, when I look at 

what you are producing and what other agencies have to produce, 

it appears to me that you all could use a little beefing-up in your 

budget plan and performance because you are hiring a lot of people. You are spending a lot of money. 

And it would be hard to measure the performance of your agency 

from a document like this, and I would think it would be hard for 

you, as the Director, to hold accountable these various groups if 

they haven’t submitted to you some kind of a justification of what 

they are going to be doing with the money that they are asking you 

to request from the Fed. 

Would you agree that is an area where we should move in and 

get a little clearer plan; because, basically, you all have hired nearly 800 people and have requested several hundred million dollars? 

And when we requested from you a plan, you said, ‘‘We are developing a plan.’’ Generally, everybody else has to develop a plan and 

then they get that plan funded. Would you agree that you are behind the curve on that? 

Mr. CORDRAY. Mr. Chairman, I would agree that the general 

commentary you are providing is a fair concern. Understand again, 

that we are a start-up agency. Our budget justification provided 

last year was nine pages. We were brand new. We had just a few 

handfuls of employees at that time. 

The budget justification we just provided is much more fulsome. 

I think it runs 25 to 28 pages. It is not yet what we want it to be 

and what it will be in future years. So I think your comment is 

well taken. We are going to continue to provide more detail, more 

specificity. But I would refer again—the Government Accountability Office did audit our operations and they gave us a clean financial audit, and they found that we were appropriately handling 

and documenting our finances, but a problem may be in part with 

the fact that we were new. 

14 

They will continue to audit us every year and render opinions on 

that. We have a separate independent outside audit that Congress 

provided for us, I think to make sure that we would be highly accountable. That also was a good audit. But I think there is more 

we can provide, and more we intend to provide. We will continue 

to ramp that up. And I would be glad to remain in contact with 

you as we go forward to see if as we develop more detail, we are 

meeting your expectations. 

Chairman NEUGEBAUER. Just one follow-up—I am over my time. 

But would it be possible and appropriate, in say, 48 hours prior to 

requesting one of these advances, that you publish the request for 

advance and the backup for that? If you are, as you said, for transparency and accountability, would you think that would be a fair 

thing to do? 

Mr. CORDRAY. We will give that some thought. I think the key 

is that—the important thing is what are we spending and why; and 

we provide that in the budget justification. We provide it in the 

quarterly expenditure reports that we are posting on our Web site 

which also are becoming more fulsome. 

The actual letter you are referring to is merely a matter of the 

transfer of funds. That is sort of a ministerial act. The important 

thing is the kind of oversight that we are providing in our budget 

justification, in the audits that are being done of us, and the like. 

So we will be glad to go back and consider the point you have 

raised. But I think the mere transfer of funds itself is less to the 

point than the justification for our budget, the audits that are 

being done both forward- and backward-looking of our operations. 

But we will be glad to consider that. 

Chairman NEUGEBAUER. I just want to conclude by saying that 

I think either we are going to have to beef up the budget justification and performance, or we are going to need more detail on the 

advances; because this is still—you have doubled it from 13 to 25— 

and it is still, I think, woefully inadequate. 

With that, I recognize the ranking member of the subcommittee. 

Mr. CAPUANO. Thank you, Mr. Chairman. 

Thank you, Mr. Director. 

Mr. Director, the statute that created you, is that the statute 

that has capped the amount of money that you can spend? 

Mr. CORDRAY. That is correct. 

Mr. CAPUANO. And as I understood, it doesn’t matter what the 

amount is at this point in time. But am I correct in believing that 

at no time, have you even come close to reaching that cap? 

Mr. CORDRAY. That is correct. We are in a start-up phase as I 

said, although we are building and moving forward. 

Mr. CAPUANO. But up until now, you have—the last I heard, you 

are about $150 million below the cap which is, give or take, 20 percent, maybe more? 

Mr. CORDRAY. We remain considerably below the cap. Yes, sir. 

Mr. CAPUANO. Are there any other agencies that you know of 

that are equivalent to you that are capped by statute as to how 

much they can spend? 

Mr. CORDRAY. I know that there are none. 

Mr. CAPUANO. There are none? 

Mr. CORDRAY. Correct. 

15 

Mr. CAPUANO. You are the only one. So, we don’t do direct budgeting, but we allowed you to get off budget, which I think is a good 

thing, but we still kept some control over it. We can always go back 

tomorrow, change that statutory authorization, and make it any 

number we choose. Is that correct? 

Mr. CORDRAY. The Congress ultimately controls that. And yes, 

they require us to live within a specified budget. 

Mr. CAPUANO. In these audits and oversight via the Fed, Inspectors General (IGs) or whatever, have there has been any significant 

findings of deficiencies? 

Mr. CORDRAY. There have not. As I said, both of those were clean 

audits. We were pleased with that. As I said, we are in a start-up 

phase, and you are always a little concerned as you are getting 

your operations going and getting them organized. 

But there are things, in the give and take of that, that we 

learned from them that are improving our operations. We listen 

very, very closely and take very seriously every audit and team of 

auditors that is working with our agency. The same is true of the 

Inspector General. 

We were under two Inspectors General last year, both the Treasury and the Federal Reserve. Going forward, we will be subject to 

the Fed’s IG. We have begun having discussions with them to make 

sure we understand their interests, their concerns, and that we are 

providing them with the kind— 

Mr. CAPUANO. So if we had a hearing tomorrow with your auditors and the other two IGs who will be seeing you and asked them 

if there were material deficiencies in your activities or your reporting, you would expect them to say no? 

Mr. CORDRAY. That is as far as I know and as far as we are 

aware. Yes, sir. 

Mr. CAPUANO. Thank you. Honestly, I was listening to the chairman’s questions, and paper work for a justification is all well and 

good, but the truth is I don’t judge most agencies by what they say 

they want to do. I judge them by what they do, the EPA included. 

I have actually voted to cut some EPA funding in the past because I don’t like some of the things they have done. I like most 

of what they do but not everything, and I expect the day will come 

when I won’t like everything you do either and we will have that 

discussion when the time comes. 

At the same time, I think that I am looking forward, as I said 

earlier, I understand that you are in a start-up phase and there is 

really not a whole lot of substance I can ask you at this point in 

time; but this subcommittee spent a lot of time this year, and I 

think rightfully so, on trying to check out the MF Global situation. 

I understand that you don’t have any authority over that situation, but you have no authority over credit unions or community 

banks with less than $10 billion, and I respect that. I understand 

that. I wouldn’t expect you to do everything overnight, and maybe 

someday we will revisit all of that, but you have to start someplace. 

At the same time, my hope is that your agency is keeping an eye 

on these things, and I am wondering if you are, and if you will 

have either done it or plan on making any comments or suggestions either to the appropriate regulatory agencies or to this ConVerDate Nov 24 2008 18:20 Sep 05, 2012 Jkt 075073 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 K:\DOCS\75073.TXT TERRIE
16 

gress as to some things that you might find in any of the areas that 

you may not have specific authority to act. 

And again, I am not suggesting you broaden your authority, but 

you are the one who is out there dealing with consumers and understanding how it all goes together. I would hope that if you see 

things in areas you don’t have authority on, that you would be 

proactive in reaching out to other regulators or to this committee 

to make those suggestions. 

I guess I am just wondering, are you keeping an eye as best you 

can, knowing you are in a start-up, knowing your hands are full 

with what you have? I am hoping you are paying at least some attention to things you don’t have any specific authority over. Is that 

a fair question? 

Mr. CORDRAY. Thank you, Congressman. I appreciate that perspective, and we will take it to heart. We are focused primarily and 

almost exclusively, and certainly we should be, on doing our job, 

the job that Congress has provided for us implementing and following the law that we operate under. That is what any Federal 

agency should be doing. 

We also, by law—I sit on the Financial Stability Oversight Council. I sit on the FFIEC. These are bodies that were created in part 

to make sure that there is coordination among the Federal financial regulators, and that they do share perspective with one another. 

I have found those meetings already to be useful and of interest 

to our work, and I think we bring a consumer perspective that may 

help inform the work that others are doing. The same is true of the 

FDIC Board—the law placed us on that Board, myself as well as 

the Comptroller of the Currency, to bring our distinct perspectives 

to that work. 

That, I think, is useful. I think more collaboration by us with the 

other financial regulators is good for them. It is good for us. It is 

good for the American economy. It is good for the people we serve. 

But again, virtually entirely, our focus is on the jobs we have 

ahead of us, the big jobs, the important jobs that matter to the 

public that we both serve. 

Mr. CAPUANO. My time has expired, but I do want to make one 

last comment on that last point. I think that is great and I think 

that is exactly what you should be doing. But as you are getting 

started, remember that Congress wrote this law kind of going forward, too. We didn’t necessarily know everything that was going to 

come out of this. 

And as a strong proponent and supporter of the concept, if we 

miss something that we should have given you authority over, I 

would certainly like to know about it. 

The whole reason I supported the creation of this agency is that 

there were too many agencies doing their own little work in their 

own little silo, and too many things that fell in between the silos. 

And for me, I am hoping that doesn’t happen again ever. People 

can disagree on what to do about things, but at least if we know 

about them, we can have a debate and discussion if we want to do 

something and, therefore, what to do. 

So I am hoping that as you go forward, if you see areas particularly that may fall out of your purview that maybe should be in 

17 

your purview, if not you or someone else, that you let us know. I 

certainly don’t want to be back in the same situation we were in 

2008 when everybody was pointing at everybody else saying it 

wasn’t me, it was the other guy. And that is the whole idea in my 

mind as to why we created the agency in the first place. Thank 

you, Mr. Director. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now, the vice chairman of the subcommittee, Mr. 

Fitzpatrick, is recognized for 5 minutes. 

Mr. FITZPATRICK. Thank you, Mr. Chairman. 

Mr. Cordray, in your November letter last year, this committee 

asked the CFPB to explain its spending plan for the rest of Fiscal 

Year 2012 because we simply can’t do oversight by looking through 

the rearview mirror. 

On behalf of the Bureau, Raj Date refused to provide this plan 

until the President released his budget on the grounds that OMB 

policy bars the advance release of information that would be included in the President’s upcoming budget 

Mr. Date wrote, and this is a quote: ‘‘We will be happy to provide 

you with this update budget information for Fiscal Year 2012 at 

the appropriate time.’’ 

I have two issues with this. First, I don’t see how OMB policy 

can be a bar to the Bureau providing its current year spending 

plan to the Congress. Dodd-Frank specifically exempts the Bureau 

from any requirement that it seek OMB approval for its budget, so 

I don’t see that as an objection. 

And the second issue is that the Bureau’s promised spending 

plan for Fiscal Year 2012 is so limited as to be frankly almost useless. For example, on page 9, there is a table that identified something called ‘‘other services’’ for $130 million with no further explanation. On one other page dedicated to providing a justification, 

400 employees—no further information on a single page. 

We need more than what has been provided currently in order 

for us to do our due diligence. In contrast, we have a detailed 

Treasury spending plan which gives us information on every dollar 

spent and every new hire accomplished. This is the kind of information that we are looking for. 

You pledged to ensure transparency at the Bureau, and given 

that pledge, I would like to ask you to make two commitments to 

us today. 

First, can you commit to providing Congress with a better forward-looking spending plan for the current fiscal year, can you do 

that now? 

Mr. CORDRAY. Thank you, Congressman. On that point, one of 

the things that I wanted to point out is when this committee had 

that exchange with Deputy Director Date of the Bureau, we were, 

at that time without a Director, and therefore, we were part of 

Treasury by law. And so, we were subject to all of the same constraints that Treasury, as a Cabinet Department, has, including 

the OMB requirements that you note. 

Now, we have a Director, we are an independent agency; we are 

not part of Treasury. It is a different situation for us and so we 

will consider going forward what is the appropriate way to handle 

that situation and perhaps we can be more forward-leaning then 

18 

we were able to be, again, because we were legally required to adhere to the President’s budget process at that time. 

One of the things that we are doing, as I have noted, and this 

is something that the other agencies do not do, the appropriating 

agencies come up to you when they are appropriated on an annual 

basis—each quarter, we are posting on our Web site detail about 

our expenditures for that quarter. 

We are trying to get those up within 30 to 45 days of the end 

of the quarter, and so there is going to be considerable information 

during the year prior coming back to you with that process but, 

look, we are actively considering how we can provide more detail, 

provide it sooner, and frankly satisfy what I think are legitimate 

requests you all have to know what we are doing, to know what 

we are spending, to know why we are spending it, and to know 

that it is consistent with our mission, which is the laws that Congress has enacted that we are carrying out. 

And so, I think that is a fair line of questioning and something 

that we will attentive to. 

Mr. FITZPATRICK. So for the current fiscal year, can we get updated spending projections? 

Mr. CORDRAY. We have already posted for the first quarter, 

which was the quarter from October 1st to December 31st. That is 

on our Web site. As the second quarter concludes, we will be posting. And so, we will be posting all along. 

We have just provided the budget justification, which I think was 

the advance information you all were looking for. We did post that 

on our Web site on Monday, and I know your staffs have had access to it, and I believe have been reviewing it. It is, as I have said 

to the chairman, more fulsome disclosure than we were able to provide in our first year. It is not as full a disclosure as I expect we 

will be able to provide next year. 

We are working towards that and we want it to be satisfactory 

to you and your colleagues. 

Mr. FITZPATRICK. And so, Mr. Cordray, our point—and we appreciate these quarterly postings, but they are looking back. I am talking about looking forward in the current fiscal year. 

Can you provide that update? 

Mr. CORDRAY. Yes, we have just provided the budget justification 

for the coming year, and as I have said in the exchange with the 

chairman, although it is more than we were able to provide in our 

first year, it is not yet what we will be able to provide next year. 

It will get fuller. And that is the forward-looking justification that 

I think you are looking for. 

Mr. FITZPATRICK. So then on October 1, 2012, which is of course 

the first day of the new fiscal year can we expect a revised and updated spending plan? 

Mr. CORDRAY. Let me say this: I would like to know in more detail exactly what you are looking for and when. I would be glad to 

have my staff work with your staff to see if we can reach a satisfactory conclusion of that issue. 

Mr. FITZPATRICK. I am sure we can discuss the detail of what we 

are looking for, but essentially, more than one line listing ‘‘other 

services’’ for $130 million. 

19 

Mr. CORDRAY. There is more than that on our Web site about our 

contract services, much of which is going to Treasury, because we 

are building off their IT and HR systems but, yes, sir, we will be 

glad to direct your staff to that so they know what is available. 

Mr. FITZPATRICK. Thank you, sir. 

Chairman NEUGEBAUER. Thank you. 

And now, Mr. Lynch is recognized for 5 minutes. 

Mr. LYNCH. Thank you, Mr. Chairman, and I appreciate that. 

Thank you, Mr. Cordray, for appearing before the committee and 

helping us with our work. Rather than ask a direct question, I just 

want to push back a little bit on this assumption that the funding 

of the Consumer Financial Protection Bureau is somehow diverting 

money from the Federal Reserve. 

I just want to point out that in contrast to the scrutiny that we 

are giving this agency that is assigned to protect consumers, the 

Fed has done oftentimes without the approval of Congress and 

without any oversight hearings. 

I want to point out that since 2008, the Fed has diverted, really diverted $868 billion to Barclays, that is a British bank, without 

any hearing, without any oversight on our part. It has diverted 

$541 billion to the Royal Bank of Scotland, again, a foreign bank. 

And think about this, this is funding that is supported basically by 

the good faith and credit of the United States Government but 

backed up by the United States taxpayer. The Federal Reserve actually did divert $354 billion to Deutsche 

Bank, a German bank, a foreign bank. I don’t know how the United 

States taxpayer gets to do that but we never had a hearing on the 

real diversion of the reserve funding to a foreign bank in Deutsche 

Bank; UBSAG—that is a Swiss bank—$287 billion. 

Did we have a hearing on that like we are having a hearing on 

this—10 percent or 12 percent of the Fed’s operating budget to protect consumers in this country who actually support that system? 

We never had a hearing on that. 

I am trying to point out the disingenuousness of these proceedings to go after Mr. Cordray, who is charged with the responsibility of protecting consumers. I will go on. Credit Suisse—we had 

the Fed divert $262 billion to Credit Suisse, a Swiss bank; the 

Bank of Scotland, $181 billion. The Federal Reserve diverted U.S. 

taxpayer money to them. BNP Paribas, a French bank, along with 

Society Generale, also in France—$125 billion for them; and 

Paribas, $175 billion. Dexia, a Belgian bank—$159 billion diverted 

from the Federal Reserve Bank. 

Do you think we had a hearing on any of these banks? The silence in this room is deafening. We never had a hearing, on a total 

of $3 trillion that the Federal Reserve diverted to foreign banks. 

Did this committee ever have a hearing on that to scrutinize 

where every single dollar is going? Zero, silence, nada, but here we 

have an agency that is set up to protect the American taxpayer, to 

protect the American consumer, and my colleagues across the aisle 

are going over every single line to make sure where the money is 

going, but the $3 trillion that the Federal Reserve gave to the foreign banks, silence. 

And so, I just want to point out the absurdity and the disingenuousness of this process to go after Mr. Cordray, who alone is asVerDate Nov 24 2008 18:20 Sep 05, 2012 Jkt 075073 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 K:\DOCS\75073.TXT TERRIE
20 

signed within that Federal Reserve Bank—is assigned to watch out 

for the consumers. 

I thank the gentleman for his time and I yield back. 

Mr. NEUGEBAUER. I thank the gentleman. 

And now, Mr. Renacci is recognized for 5 minutes. 

Mr. RENACCI. Thank you, Mr. Chairman. 

And I want to welcome my fellow Buckeye, Mr. Cordray, to this 

hearing. Thank you for being here. 

You have said several times in your testimony that you—and by 

the way, I want to go back to the purpose of the hearing. The hearing will be to examine your budget, and so, I am going to try and 

stay within that realm. 

You said you would be accountable to us and the American people in your opening statement. One of my colleagues on the other 

side said the statute allowed dollars to be spent and you are below 

the cap. I applaud you for that, but it doesn’t justify you spending 

those dollars unwisely or inappropriately, would you agree? 

Mr. CORDRAY. I agree. 

Mr. RENACCI. Audits, you said you have audits and the audits 

have come through and said that you are spending dollars appropriately and handling your expenditures appropriately but you 

would also agree that audits, outside auditors do not confirm that 

expenditures are justifiable, reasonable, it compares in other possible options, is that correct? 

Mr. CORDRAY. I think that is probably right. You have more of 

a background in accounting than I do, I am aware. There is a different issue I supposed, which is—but I think the GAO tried to assess this, which is, ‘‘What are our objectives that the statute provides? What is the job that Congress has told us we have to do? 

Are expenditures appropriate to doing that job rather than doing 

something else that isn’t our job?’’ 

And I think what they have said is that we are spending appropriately in light of our mission, and I think that is an important 

indicator of our responsibility. 

Mr. RENACCI. Thank you and not to—but I do think as a CPA, 

as someone who has done audits, that they are probably making 

sure that you are justified in spending within the purpose but they 

are not justifying and that is what this is really about, to talk 

about your expenditures. 

Mr. CORDRAY. Yes. 

Mr. RENACCI. You said in doing your job—does your job include 

appropriately spending your dollars? So you talked about what 

your job is; it is to take those dollars and spend them appropriately 

for the taxpayers. 

Mr. CORDRAY. It is and again our budget relative to that of the 

other Federal bank regulatory agencies, ours is smaller, and so, we 

have to be careful about how we are allocating our limited resources. And we are trying to do that, yes, sir. 

Mr. RENACCI. Thank you. So, I am just going to get down to a 

specific concern—one concern I have. Now, it relates to what some 

of my colleagues have also asked, too. Earlier, in 2011, the chairman asked the CFPB to give us information related to the construction or rehabilitation of its new headquarters. 

21 

At that time, the CFPB refused to give us the information. Can 

you give me a reason why it was not presented to the committee? 

Mr. CORDRAY. I don’t know that—I am not aware that we refused 

to give information. I would say that at that time—and it still remains true to some degree—the facility’s solutions for the Bureau’s 

needs were rather unsettled. 

We had been working to try to obtain a lease on a particular 

building. It is the former Office of Thrift Supervision building 

where we could consolidate our employees who currently are 

spread out at several sites because it is just difficult when you are 

a start-up agency. 

This does not involve the construction of any building but would 

potentially involve the renovation of a building that is about 40 

years old now. And as I understand it, unfortunately, some of the 

electrical and mechanical systems in the building have kind of 

reached their natural life span, and there are some code issues of 

bringing the building up to code. 

So there is some work that will need to be done and we are also 

going to double the prior density of that building to try to make 

it more efficient. It is a work in progress for us, and it is a source 

of some frustration to us and it will be probably for the next couple 

of years. 

Mr. RENACCI. It looks like in the President’s budget, there is $15 million to be spent in 2012, and $40 million in Fiscal Year 2013 

for land and structures. Will you commit to getting us the details 

of what the $55 million is going to be spent on so there is transparency to the American people and to Congress? 

Mr. CORDRAY. Yes, Congressman. I think that is a very fair request. We will do that. That is not yet in focus. We do not yet have 

contracts for that. As I said, we are still working to procure a lease. 

We hope to have more progress on that soon. We will be glad to 

update your staff regularly on how that is going to make sure that 

we are acting responsibly. 

Mr. RENACCI. Thank you. I would like to also follow up on another issue that is a little off topic but I believe is still in line with 

overall transparency. It might provide you an opportunity to give 

an example of how the Bureau is operating. 

Back in November when Raj Date testified before this subcommittee, I asked him whether the CFPB intends to provide guidance to States seeking to enact transitional licensing laws under 

the SAFE Act. 

Mr. Date seemed to appreciate the issue but was unable to answer whether the Bureau would provide guidance. In our home 

State of Ohio, I understand the Senate may soon take up legislation that would permit State bank regulators to issue transitional 

licensing. 

Can you please tell me whether States like Ohio should expect 

to hear from the CFPB on whether their efforts will be in compliance with the SAFE Act? And if so, what is your timing for providing the guidance? 

Mr. CORDRAY. It is a good question, Congressman. And it is 

something that we are focused on as one of the issues we have inherited from other agencies. As I understand it, we are working 

closely with the State regulators and, in some cases, as you note, 

22 

there are State legislatures which are potentially active in this 

area. 

We are glad to consult with them at any time as to whether proposed legislation would be in compliance with the SAFE Act. That 

is the purpose of their legislating; they obviously need and want to 

know that. So, I know we have had extensive consultation with the 

States. 

We have now signed a memorandum of understanding with, I believe, 46 or 48 of these 50 State banking superintendents and regulators who often are overseeing this type of licensing as well. 

So if people want to be in touch with us, if you want to put constituents in touch with us or legislators to talk back and forth 

about what they are trying to do and whether we are going to have 

some difficulty that they wouldn’t want to know about later, they 

would rather know about it now, we are happy to do that. 

Mr. RENACCI. Thank you, Mr. Cordray. 

I yield back. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now, Ms. Waters is recognized for 5 minutes. 

Ms. WATERS. Thank you very much, Mr. Chairman. 

I would first like to thank Director Cordray for being here today 

and tell him how pleased we are that the President took the necessary action to fill the vacancy. 

I was a member of the conference committee that established the 

CFPB. And I think it is one of the most important actions this Congress has taken in many years and certainly the most important 

action to give some protection to our consumers. 

And so, despite the fact that there are those who have tried to 

interfere with the establishment of this Bureau, I want you to 

know that you have a lot of friends, a lot of support not only in 

this committee and on this side of the aisle, but I was at a huge 

public meeting this past weekend where I did a public thank you 

to the President about your appointment and got a standing ovation with people yelling out all kinds of things about credit cards 

and payday loans and operations, etc. 

So I am just awfully pleased that you are here. Mr. Cordray, I 

have spent a lot of time learning about servicers. As a matter of 

fact, I went so far as to get the permission of some of my constituents who had problems trying to get loan modifications to allow me 

to interact with servicers. 

And during that time, a couple of television stations followed my 

actions in trying to get to a servicer where I spent hours being sent 

on a menu to all kinds of places in one of the banks trying to locate 

the servicer. It took hours and I learned a lot. 

I have learned, number one, that many of our constituents can 

reach a servicer and I don’t understand how this loss mitigation operations are in the banks. They operate in all kinds of different 

ways. In addition, the lost paperwork, the over requirements of 

seniors who were trying to straighten out fraud that has taken 

place, all of this. 

We desperately need you to look at and do something about the 

servicers. Having said all of that, I have a couple of pieces of legislation I would like you to take a look at, as it relates to servicers. 

23 

H.R. 1567 is a servicer’s reform piece of legislation dealing with 

loss mitigation and single point-of-contact. 

And talking about a dedicated 1–800 number and, of course, I 

have H.R. 3841 talking about principal reduction. With all that you 

have to do, if you can get a handle on how we regulate servicers, 

how we can create some kind of consistency in how they operate 

so that constituents would know, number one, how to get to them 

and what to expect of them, it would be the greatest thing we could 

do for consumers. 

So I have no questions for you. All that I have for you is to say, 

God bless you. We are so glad that you are here. Your work is not 

going to be easy. There are going to be those who are going to picket you and try and talk about your budget and try to manage your 

budget, all of that. 

But I hope that you don’t get disgusted with all of this, that you 

will stick with it. It requires some fighting and some of us are 

fighters and we are prepared to fight with you because we think 

that your job is just so extremely important. So, welcome, welcome, 

welcome. 

Chairman NEUGEBAUER. I thank the gentlewoman. 

And now, the gentleman from New Mexico, Mr. Pearce, is recognized for 5 minutes. 

Mr. PEARCE. Thank you, Mr. Chairman. 

And thanks, Mr. Cordray, for your service, and for being here 

today. I noticed that although you reported a clean audit, there 

were deficiencies. What were the deficiencies? 

Mr. CORDRAY. There were a number of things as— 

Mr. PEARCE. Give us the highlights. 

Mr. CORDRAY. —come up in any audit where there are suggestions for improvement. And, again, that was an audit that was 

done on the Bureau at the very preliminary stage. As I say, it was 

a clean audit but every auditor worth their salt, when you look at 

your operations carefully, they are going to have suggestions. They 

are going to have proposals. 

And if the agency is worth its salt, it will listen carefully to those 

proposals and look to implement— 

Mr. PEARCE. Anything to do with internal controls? 

Mr. CORDRAY. They found that our internal controls were appropriate at that time. But I think that my personal view is—and we 

are hard at work on this—that there is much more we can and 

should do in order for me to have confidence that the Bureau is 

both spending money appropriately, which I believe we are, but we 

want more controls on that, and also that we are following through 

on the policies that we have adopted to make sure that we are living those policies day in and day out. 

Mr. PEARCE. Hold on just a second. Excuse me. I noticed the second audit that came from ASR Analytics. On page one, they note 

that some members have ongoing efforts to achieve minimum hours 

of continuing professional education that directly relates to government auditing. 

So somebody in the agency hired an audit firm that did not have 

the required internal expertise. Who made that decision? 

Mr. CORDRAY. I would have a different vantage point on that. 

This was— 

24 

Mr. PEARCE. I just want to know who made the decision to hire 

this firm. I can read the report where they say they don’t have the 

background. So I don’t care about someone’s interpretation. Who 

made the decision? 

Mr. CORDRAY. Okay. I think they have a considerable background but I would be glad to— 

Mr. PEARCE. No. Sir, if you would just tell me who made the decision. 

Mr. CORDRAY. Yes. 

Mr. PEARCE. We will have our differences of whether they do or 

not. 

Mr. CORDRAY. Sure. 

Mr. PEARCE. They are the ones who point out they don’t have the 

expertise. 

Mr. CORDRAY. Yes. 

Mr. PEARCE. So, who made the decision? 

Mr. CORDRAY. They have expertise. But that was done before I 

was Director— 

Mr. PEARCE. Would you mind answering the question, sir? Just 

who made the decision? There ought to be a name or a position. 

I don’t care which. 

Mr. CORDRAY. I don’t know offhand. That was before I was— 

Mr. PEARCE. If you would give me the information on who did 

that, I would really appreciate it. Did you as Director kind of find 

fault with—was there no one in the auditing community in the 

whole Nation with expertise? Did you come back and find fault 

with this or you did not? 

You are just getting your feet on the ground. There are a lot of 

great concerns. Wouldn’t you want to check the box that said yes, 

they are qualified, and everybody who comes out here has the background, wouldn’t you want that to kind of reassure people that you 

are taking troubled waters and you are beginning to calm them 

down? 

Mr. CORDRAY. Shall I answer? That firm is a very qualified firm, 

that some of their folks are keeping up with their continuing education requirements is one thing. But we will look again at your 

request at the firm we will use in the next year. 

That was a competitive process and I think it was an appropriate 

process. No one to date, until your question, has found any fault 

with that. But we will be glad to look at it and I will get the answer to your staff that you asked of me. 

Mr. PEARCE. Thank you. 

On page 16 of the GAO—that is actually page 21 of the GAO report—but on page 16 of your pages, it talks about how the people 

that you supervise have larger participation in nonbank supervision, especially as it relates to Federal consumer financial protection laws compliant with that. So explain to me what kind of 

nonbank groups that you supervise. 

Mr. CORDRAY. Sure. Congress specified in the law certain 

nonbank—first of all, Congress specified in the law that we should 

regulate financial products and services in the marketplace without 

regard to whether it is a bank or a nonbank, recognizing that in 

a lot of these markets, there are nonbank participants who compete 

directly with banks, but they are not subject to the same regulaVerDate Nov 24 2008 18:20 Sep 05, 2012 Jkt 075073 PO 00000 Frm 00030 Fmt 6633 Sfmt 6633 K:\DOCS\75073.TXT TERRIE
25 

tion. So you are regulating part of the market and leaving part of 

the market unregulated. That is not a formula that works. 

So Congress specified us to be overseeing nonbank participants 

in the mortgage market which can be mortgage originators, mortgage brokers, mortgage servicers. They also specified that we would 

oversee payday lenders. And Congress specified that we would 

oversee private student lenders. 

Mr. PEARCE. Do you have anything to do with Fannie Mae and 

Freddie Mac, do you have any oversight? 

Mr. CORDRAY. That is a good question to the extent that they 

would be servicers. We could have oversight over them, yes. Other 

than that, many other financial industries not specified by Congress in which Congress said to us, ‘‘You should oversee them as 

well, but you should first identify who are the larger participants 

in those industries and those are the ones that will be subject to 

direct supervision by you.’’ 

So that can be other fields such as debt collection, check cashing, 

debt relief and settlement, credit reporting, and a number of others. 

But that is something that we have to do by rule. We are in the 

process of getting under way with that. We didn’t have any of that 

authority until we had a Director in place. It is fairly early days 

for us. 

The other thing I wanted to mention, sir, and it is probably near 

to your heart, is our Office of Servicemember Affairs, which has 

been working aggressively to bring attention to the kinds of financial exploitation of servicemembers, often when they are on active 

duty which is inexcusable—foreclosures that were inappropriate on 

servicemembers, interest rates that exceeded the Military Lending 

Act requirements, and other problems. 

Ms. Holly Petraeus has been hard at work on those issues and 

I think is doing a terrific job of bringing those to the attention of 

the Congress and the public at large and other regulators, as well 

as things we can do directly. 

Mr. PEARCE. Thank you. It is near and dear to my heart. And 

I hope that you will push that. Also, financial exploitation of hog 

farmers is pretty near and dear to my heart. And so, I hope that 

you will go back and ask the other regulatory agencies why—ask 

the Justice Department why they have never had an interview on 

MF Global. That is near and dear to a lot of farmers across the entire United States. 

But I thank you, Mr. Chairman, and I yield back. 

Chairman NEUGEBAUER. I thank the gentleman. 

Now, Mr. Miller is recognized for 5 minutes. 

Mr. MILLER OF NORTH CAROLINA. Thank you, Mr. Chairman. 

CFPB is hardly alone in having a dedicated source of funding, in 

fact, all the financial regulators appear to have a very similar 

budget process with a dedicated source of funding and then require 

justification. 

Mr. Cordray, have you had the chance to review the OCC’s Fiscal 

Year 2013 budget justification? 

Mr. CORDRAY. I have not had the opportunity to do that in detail. 

I am generally familiar with the broader outlines of their budget. 

26 

Mr. MILLER OF NORTH CAROLINA. That document and your budget justification were strikingly similar in how they are organized. 

And their budget justification for more than a billion dollars in 

spending is 23 pages long, including the cover sheet, and the title 

and the table of contents. Whereas yours, to justify $448 million, 

less than half of that amount, is 25 pages long, including the cover 

sheet and the table of contents. Have you heard any complaints 

about the lack of completeness in the OCC’s budget justification? 

Mr. CORDRAY. I have not heard any to this point. I am not sure 

they would be directed at me, but I have not heard any. 

Mr. MILLER OF NORTH CAROLINA. The only financial regulator 

that appeared to be subject to appropriations from Congress, that 

it depends upon Congress for their annual appropriations was 

OFHEO, the late, unlamented regulator of Fannie and Freddie. 

And it appears that OFHEO was completely captured by Fannie 

and Freddie. Fannie and Freddie clout really prevented them from 

getting the resources that they needed and OFHEO was perhaps 

the most captured of all the regulatory agencies. 

The OCC sets a high bar for capture, but it appears that OFHEO 

truly was Fannie and Freddie’s monkey. They got exactly what 

they wanted from Fannie and Freddie. 

Other oversight, Mr. Cordray—do you have an Inspector General? 

Mr. CORDRAY. Yes. Actually, last year, uniquely, we were subject 

to two Inspectors General because we were both in Treasury without a Director, but also within the Fed and by statute. 

Going forward, we are subject to the Inspector General of the 

Federal Reserve. We have had meetings with the Inspector General, a very capable individual, with a very capable team. And they 

will have full access to information to assess our performance. 

Mr. MILLER OF NORTH CAROLINA. Did they review your budget 

submissions, your budget submission? 

Mr. CORDRAY. I am not certain of that, but my staff could tell 

you. 

Mr. MILLER OF NORTH CAROLINA. But they certainly can review 

your budget? 

Mr. CORDRAY. They can review anything they want to review. 

Mr. MILLER OF NORTH CAROLINA. All right. Under the IG statute, the Inspector General statute, the head of the agency is provided all IG reports, but also Congress. Is that correct? 

Mr. CORDRAY. Correct, yes. 

Mr. MILLER OF NORTH CAROLINA. So we will get a copy of any 

IG report? 

Mr. CORDRAY. Yes, sir. 

Mr. MILLER OF NORTH CAROLINA. How about the effect of the 

APA? Are you subject to the APA for rulemaking, the Administrative Procedures Act? 

Mr. CORDRAY. We are and therefore it is subject to review by the 

courts. 

Mr. MILLER OF NORTH CAROLINA. Okay. So there is a notice of 

proposed rulemaking, there is a comment period, and there is a 

final rule and comment after that as well? 

Mr. CORDRAY. I don’t know that there is comment after the final 

rule, but we are subject to all those same processes. 

27 

Mr. MILLER OF NORTH CAROLINA. And then, there is a judicial 

review after that? 

Mr. CORDRAY. Yes. 

Mr. MILLER OF NORTH CAROLINA. How about for any—there was 

some reference on the other side to sanctions that the CFPB might 

have imposed and it sounded like it was an ‘‘Off with your head’’ 

kind of power. But are you subject to contest the case procedures 

under the APA for sanctions, any fines that you imposed? 

Mr. CORDRAY. Sir, everything we do, anything we do that constrains anyone is subject to judicial review if they want to challenge it in court. And we would be held to all of those procedures. 

I should add in response to your question about our rulemaking 

process, we are subject to some special constraints as well that are 

unique to us as a banking agency. No other banking agency is subject to SBREFA panels to consider the impact on small providers 

of our rules. There are only two other agencies in government subject to that. And so, I think that there is considerable oversight of 

our rulemaking. 

Mr. MILLER OF NORTH CAROLINA. Have you heard any problem 

at the Federal Reserve Board or the FDIC or the OCC—that they 

were spending entirely too much on paper clips? 

Mr. CORDRAY. I have never heard that allegation, and I hope I 

will never hear it about our Bureau as well. 

Mr. MILLER OF NORTH CAROLINA. Okay. I yield back. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now the gentleman from Florida, Mr. Posey, is recognized 

for 5 minutes. 

Mr. POSEY. Thank you very much, Mr. Chairman. 

Mr. Cordray, you mentioned in your remarks that one way to be 

assured that you would be held accountable is that you were going 

to face a couple of audits. I would hope that you would know, as 

most of us know, that audits will tell you if any money was blatantly stolen—in the classic sense of the word, if anybody took cash 

or equipment. 

But they don’t generally tell you how efficient an agency is or 

how well taxpayer dollars are spent or if agencies plunder the public, the Trust, and the Treasury by overpaying employees and giving exorbitant bonuses that aren’t necessary and aren’t earned and 

things like that. You usually don’t see those in audits. 

Audits didn’t work with the SEC when 20-some investigators and 

30-some examiners and untold members of management or maybe 

those numbers are reversed, it is not really important, turned a 

blind eye to Bernard Madoff for over a decade after they were given 

an open-and-shut case. 

Audits didn’t care about the poor victims of the MF Global scandal. And audits have not yet exposed, and there has been no prosecution for the crony capitalism of the crooked deals like Solyndra 

that have burdened our taxpayers unnecessarily. And so, my question to you is, do you plan to actually prosecute any wrongdoers, 

and if so, how and when? 

Mr. CORDRAY. Sure. And let me say a couple of things. First of 

all, I didn’t mean to misspeak. I don’t mean to suggest that the two 

audits here, even though it is more audits than the other banking 

agencies are subject to, are sufficient oversight. 

28 

I do think that the active oversight by Congress, as exemplified 

by having me testify here today—and I testified in front of the 

House Oversight Committee a couple of weeks ago—and I assume 

we will be here frequently. I think that is entirely appropriate. I 

welcome that. That is an important part of the oversight as well. 

In terms of the issue you raised in your opening statement, and 

I think it is an important issue to raise, is what is being done to 

hold people accountable for violations of law in the financial marketplace? That is something that our Bureau has the authority to 

do. 

We are under way in our Enforcement Division, which I headed 

up before being appointed as Director. I can say that there are a 

number of investigations we have inherited and they are working 

in a coordinated way with other agencies. 

And a number that we have initiated ourselves, I can’t, of course, 

give details on those. But we take very seriously our obligation to 

require people to comply with the law. And when they don’t, we 

will take action. It will be strong action. It will make sure that consumers as much as possible are recompensed for the harm that was 

done to them by a violation of the law. 

And I see that function particularly important as supporting all 

the other responsible businesses in that market who themselves 

are not violating the law, who are very careful to comply with the 

law. 

Often, it costs them money to do that. It means they can’t cut 

corners and cut costs in some ways that the violators do. It is unfair competition. And so, I think when we enforce the law 

evenhandedly and reasonably, we support all the good businesses 

in that marketplace, and typically, they welcome that. 

Mr. POSEY. Do you expect and should we expect any subprime investigations and prosecutions? 

Mr. CORDRAY. I want to be careful here because I know I am not 

supposed to talk about ongoing investigations or give any details 

or potentially move the markets by saying something that I 

shouldn’t. 

What I would say is if you or your staff have particular areas of 

concern that you want to bring to our attention, we are all ears. 

We are interested in that perspective, not only from you all who 

hear a lot from your constituents that we may not hear although 

we hear a lot from the same people but also from the public at 

large. We have a whistleblower portal on our Web site now. 

Mr. POSEY. I only have a minute left. 

Mr. CORDRAY. I am sorry. 

Mr. POSEY. Do you plan on overseeing errant regulators? We 

have errant regulators whom I think have gone way beyond the 

scope of their authority and have caused havoc in our community 

banking industry. And there seems to be an inability of the agencies to rein them in. 

Mr. CORDRAY. I would say this, first of all, I think our primary 

responsibility is that we not become some sort of errant regulator 

ourselves, and I think that is important. And I want to hear from 

you if people are bringing to your attention ways in which we are 

erring in that regard. 

29 

We don’t have the authority to control other regulators, per se, 

but we work with them, we collaborate with them, and we also collaborate and work cooperatively with State regulators in a lot of 

these areas. 

So to the extent we can set an example by working with them 

to make sure that things are being done appropriately, we will. Beyond that, I do want us to treat community banks and the smaller 

institutions appropriately, recognizing that their different size, 

their different model, and their community roots often make them 

very different from the largest institutions and we want to try to 

preserve and encourage that model. 

Mr. POSEY. Thank you. I see my time is up. 

Chairman NEUGEBAUER. Thank you. 

Mr. Ellison is now recognized for 5 minutes. 

Mr. ELLISON. Thank you, Mr. Chairman. 

I would like to yield 15 seconds to Congressman Miller. 

Mr. MILLER OF NORTH CAROLINA. Thank you, Mr. Ellison. 

I would like to ask unanimous consent to place in the record the 

OCC’s justification for Fiscal Year 2013, a 23-page document explaining how they expect to spend a little more than $1 billion. 

Mr. FITZPATRICK [presiding]. Without objection, it is so ordered. 

Mr. ELLISON. Thank you. 

Thank you, Mr. Miller. 

Mr. Cordray, could you talk about how consumer protection figures into safety and soundness? 

Mr. CORDRAY. Thank you, Congressman. It is a subject that we 

have all been thinking a lot about at the Bureau because one of the 

premises of Dodd-Frank was that consumer protection in the financial marketplace was largely—‘‘ignored’’ is maybe too strong a 

word—but it was a lower priority for the existing Federal regulatory agencies because their primary focus, appropriately so, since 

this was their mandate, was on safety and soundness. 

And so, there were issues that just got missed or didn’t get 

enough attention. Mortgage servicing, as was described earlier, is 

a tremendous example. A lot of the practices in the mortgage market that in fact, looking back on, led to and precipitated the financial crisis, were caused in part by the fact that people were not focusing on what was happening with the actual consumers. 

To me, safety and soundness and consumer protection go together. They go in tandem in the following way: Safety and soundness sort of takes a snapshot of an institution at a point in time 

and looks at its books, looks at its capital reserves, looks at its ongoing revenues and the like, and looks at the risks. 

But you can’t really get a good picture of safety and soundness 

if you aren’t looking at how that institution treats its customers 

over time, and whether that is a sustainable business model or 

whether it is taking advantage of customers in the short term in 

ways that cannot be sustained in the future. 

So, for example, when you give loans to people and you do not 

require any documentation of income and you do not require any 

kind of underwriting standards to be met, you can make that loan, 

and for a moment, it will look okay on your books. But over time, 

that loan is not going to succeed and you will not be a safe and 

30 

sound institution. Why? Because you are mistreating your customers in ways that cannot be sustained. 

So, to me, consumer protection is an important part of this. As 

we work to protect consumers, I think we will help strengthen the 

financial system and strengthen the economy. We want people to 

be treated in ways that are sustainable over time for them and for 

the institution. That is good business, that is the way most businesses look at how they do their work, and that is part of what I 

think the reforms in Dodd-Frank were intended to accomplish. 

Mr. ELLISON. Thank you. Also, the chairman, before he left, held 

up two documents: one appears to be your budget justification, 

which looks like some white pieces of paper stapled together; and 

the other one is a thick color-coded document. 

If you redirected the resources of your office, could you come up 

with a big, fat, shiny, fancy document that might please some people in this committee? 

Mr. CORDRAY. I— 

Mr. ELLISON. You don’t have to answer that. 

Mr. CORDRAY. Yes, it is always a question of how much detail 

and how much presentation do you provide and whether that is the 

best use of your resources. 

Mr. ELLISON. What do you think, Mr. Cordray, about simplicity? 

I remember talking about the—in the health care debate, a lot of 

my friends on the other side of the aisle were going on and on 

about how thick it was. And now, we get a thick document and 

they don’t like that. 

So, I am just trying to figure it all out and this is not a question, 

just sort of help trying to figure out when is a big, fat, thick document a good thing and when is it a bad thing? 

If it helps consumers get simplicity and frugality help for something, I don’t know. I am just asking a question for all of us to ponder. I am sorry. 

Mr. CORDRAY. I know before your old project, we were trying to 

streamline the mortgage forms, trying to streamline credit card 

agreements, trying to streamline student loan forms so that consumers can really understand the most important information that 

they really want to know before making a choice. I think simplicity 

counts. Maybe there are times where length counts but we are 

happy to take guidance on that as we go. 

Mr. ELLISON. Right. And we you did point out there that part of 

what you are doing is trying to make documents shorter and simpler, and this is part of the mandate, that this is an important 

function. 

Let me ask this: If the CFPB funding were subject to appropriations and could be significantly cut, what do you think the impact 

would be on our servicemembers, older Americans, and consumers 

generally? 

Mr. CORDRAY. We will look again. We start from a budget that 

is capped unlike every other Federal banking agency. It is capped 

at a much lower level than the other Federal banking agencies. Of 

course, we have different functions, they have different functions. 

But if we were forced to make really tough choices, can we protect servicemembers, would we have to choose between them and 

older Americans, would we have to choose between trying to fix the 

31 

problems in the mortgage market or taking a closer look at things 

like payday lending or credit cards or student loans, all of which 

are problems in various ways and pose issues for consumers. 

Those will be pretty tough choices to have to make. And we will 

have to make them because we have limited resources as it is. But 

to cut our budget tremendously would really cripple our ability to 

protect consumers and the marketplace. 

Mr. ELLISON. I have to yield back, Mr. Cordray. Thank you very 

much, and I am absolutely overjoyed that you are in the role you 

are in. 

Mr. FITZPATRICK. The Chair recognizes the gentleman from Delaware, Mr. Carney, for 5 minutes. 

Mr. CARNEY. Thank you, Mr. Chairman. Thank you for having 

this hearing today. 

Mr. Cordray, it is good to see you again. We met in my office 

some months ago. I am delighted to see you as the Director of this 

new Bureau. I think you were the Chief of Enforcement at the time 

we had a conversation about your priorities, and I want to get to 

that in a minute, but I also want to start with some conversation 

about the budget. 

So, your budget is tied to the Fed’s operating budget at 12 percent. You mentioned that you spent $350 million, or thereabouts, 

in 2012, and something over $400 million in 2013. Your cap would 

have been $597 million, if my numbers are right. 

How do you see yourself budgeting in the future? My orientation 

is State government like yours and I am pleased that you bring 

that experience to the table here. 

How do you see yourself budgeting and staying within the budget 

that you have in the years to come? 

Mr. CORDRAY. Congressman, it is a great question. It is a challenge for us as it is a challenge for any agency. Although most are 

not subject to a budget cap, they may be subject to caps imposed 

by the appropriations process. 

I think we will do it in the same way that I did it when I was 

attorney general in Ohio, when I was a treasurer in Ohio, the same 

way you did it in the different offices you served in, in Delaware, 

where you were subject to oversight by the legislature there, which 

is we have— 

Mr. CARNEY. And the budget director, the governor’s budget director. 

Mr. CORDRAY. Absolutely, and the Secretary of Finance perhaps. 

But we will have to set priorities, we are doing that. We have obviously had to do that already. We will look carefully at the mission 

that we are trying to carry out, the objectives Congress has set out 

for us, that is our touchstone, what is it that Congress has told us 

to do because that is the law we are obliged to carry out. 

We will look at the progress we are making in different areas. 

Sometimes, things become priorities because you think you can 

achieve something faster. Sometimes, you recognize you need to 

study it, probably know more about it before you go folding in. 

We will look at the input that we are getting from you and your 

colleagues. You are hearing from the same people that we hear 

from. 

Mr. CARNEY. Absolutely. 

32 

Mr. CORDRAY. You are serving the same people we serve, so your 

insight into whether we are addressing the kinds of problems we 

should be addressing or whether we are missing things that will 

inform us. But it is an iterative process; it is something we will 

learn from as we go. 

Some of the things we start with are mandated for us, so we 

don’t really have a choice, although I think that there are good 

choices Congress made. Fixing a number of specific problems in the 

mortgage market is going to take up a lot of our rulemaking time 

over the next year. 

Obviously, examining these institutions to make sure that they 

understand what is expected of them and what the law requires 

and that they are carrying that out is a very important function 

and that encompasses many of our personnel. 

Mr. CARNEY. Let us talk about a couple of those areas that you 

and I talked about some time ago. One other concern that I hear 

from my constituents is payday lenders, these basically high-risk 

individuals who are trying to get access to loans. What is your approach going to be and do those clients of lenders—nonbank lenders, if you will—where does that fit in your priority and what is 

your approach going to be? 

Mr. CORDRAY. It is a key part of our priorities because Congress 

told us that it needs to be. Congress told us that in some of these 

markets, you have banks and nonbanks competing directly against 

one another, but they are under very different regulatory regimes. 

That is not appropriate. And it is part of the system that was broken before. 

There are other markers where it is virtually all nonbanks and 

you don’t have much in the way of a bank competition. Those markets matter a lot to consumers as well. 

So, for example, we conducted our first field hearing in Birmingham, Alabama, last month on the topic of payday lending. We 

are looking carefully at how those products work. We understand 

and acknowledge and we heard a lot of testimony that there is a 

strong demand for short-term consumer loans in our society, that 

is a real need people have. 

What we want to make sure is that the products that are fulfilling that need are actually helping consumers rather— 

Mr. CARNEY. So how do you draw that line? We had a hearing 

right here about just that subject. 

Mr. CORDRAY. Yes. 

Mr. CARNEY. And there are basically poor people who are trying 

to get from here, from this week, the next week or whatever it 

might be, but the annual rates are off the charts even with the 

pilot program the Treasury has? 

Mr. CORDRAY. Yes. 

Mr. CARNEY. How do you strike that balance, I guess, and what 

do you—? 

Mr. CORDRAY. It is a tough issue in some ways and that is part 

of why we started with the field hearing to try to gather a lot of 

input. We got a balanced input on both sides of the question: payday lenders themselves as well as customers who like the product; 

and others who were critical of the product and have seen some of 

33 

the devastating consequences for some people of getting trapped in 

the debt cycle. 

One of the things we think there is a need for is to try to foster 

competition in the small-dollar loan market. Some of the banks are 

providing products. We want to scrutinize those carefully. 

But if they are good products, maybe they will help ease some 

of the strain of this. It is something to which frankly, we don’t have 

all the answers. That is why we did a field hearing. We are going 

to continue thinking about it. We are interested in input from you 

all and your perspectives to help inform us. 

But some of these are not the easiest problems in the world to 

figure out. 

Mr. CARNEY. Thank you very much for your hard work. You have 

a tough job. We wish you well and hope that your door and your 

phone will remain open to us as we hear from—as you say, these 

are our constituents, and I look forward to working with you. It is 

great to see you today. 

Thank you. I yield back. 

Mr. FITZPATRICK. Thank you. I recognize the gentleman from 

Texas, Mr. Green, for 5 minutes. 

Mr. GREEN. Thank you, Mr. Chairman, for the recognition. I also 

thank the chairman and the ranking member for the opportunity 

to sit with the subcommittee today, as I am not a member of the 

subcommittee. 

Mr. Director, welcome to the committee and, hopefully, this will 

be one of many visits that you will make. 

The debate today and for some time now has really been about 

how independent the CFPB will be. It is really about independence. 

And in this country, we decide that certain agencies—because of 

the sheer importance that they hold in the orderly function, 

functionality, if you will of the country—we decide how independent they will be. 

We decided that we wanted our Judiciary to be exceedingly independent; hence, they are appointed for life. Federal judges are appointed for life, conditional to good behavior. They can be removed, 

but the appointment is for life. Assuming that they behave themselves, they will be there for life, unless they choose to do otherwise. 

So, it is not unusual for us to have agencies and offices with a 

great amount of tenure. 

The Comptroller General who heads the GAO is appointed for 15 

years. That is because we want independence. 

This agency, in my opinion, merits a great deal of independence 

given what we went through with the debacle as it relates to financial institutions and the crisis from which we are still recovering. 

But notwithstanding the independence that I believe you have 

and should have, there is still accountability. 

You are appointed by the President for 5 years, and you can be 

removed for cause. You have to testify before Congress semi-annually. You have an annual GAO audit. Your enforcement measures 

can be appealed, meaning enforcement against some party. That 

party has a right to take it before the courts and have an independent judge make a decision as to whether or not what you have 

done was correct. 

34 

Your actions are subject to judicial review, meaning, if you implement some sort of rule, that can be reviewed in the judicial system. 

You have other regulators that can literally veto your actions, such 

as the FSOC. Any member of the FSOC can petition to veto an action that you might take. 

No other agency, as I understand it, has other agencies that can 

override the rules and regulations that they promulgate. 

Mandatory rulemaking consultation: you can’t just decide to do 

something as it might appear based on some of the things that we 

have heard. You are forced to consult with the Federal banking 

agencies before you produce a final product. 

And you have to perform a cost-benefit analysis of your rules. 

You are required to conduct a cost-benefit analysis of all proposed 

rules. 

There seems to be a fair amount of checks and balances in the 

process. 

But in the final analysis, if I don’t like the idea of a CFPB, then 

I don’t want you to be independent. I want you to have to report 

to me. I want to control your budget. I want to determine whether 

you can have an appointment of 5 years or some smaller amount 

of time. 

On the other hand, if you believe as I do, that 3/27s and 2/28s 

didn’t help consumers, if you believe that prepayment penalties 

that coincide with teaser rates were abhorrent at that time, and if 

you believe that no-doc loans and certain other products that were 

promoted and produced were detrimental, then, you probably want 

to see someone looking out for the consumer, someone whose job 

it is to put the consumer first. 

The prudential regulators had the opportunity to do this. They 

had every opportunity. And this is not to demean them in any way. 

But it is to say that history shows a need for what you do and what 

you are about to do. 

So, I thank you for accepting the challenge. I believe you ought 

to have independence and I look forward to your many visits in the 

future. 

I yield back. 

Chairman NEUGEBAUER. I thank the gentleman from Texas. And 

the gentlewoman from New York, Mrs. Maloney, is recognized. 

Mrs. MALONEY. I want to thank the chairman and the ranking 

member for calling this important hearing and for recognizing me. 

I am not a member of this subcommittee, so you are giving me a 

great honor and privilege. Thank you so much. 

First, I would like to welcome Mr. Cordray, and really observe 

that during this entire confirmation process where there have been 

many challenges and obstacles put in place, none of the criticism 

in any way, shape, or form has been directed towards your life in 

public service, your commitment to doing the job, or your qualifications. You are really able to do the job, and everyone thinks you 

are great. 

And I would like to add my voice to that, and add my concern 

that for the first time in my lifetime, I have seen the confirmation 

process used as a way not to confirm a person but as an attempt 

to change the underlying bill, in this case, the creation of the 

CFPB. 

35 

A number of my colleagues on the other said of the aisle and the 

Republicans in the Senate have publicly said, and said in writing, 

that if we would change the underlying bill, which they were not 

able to achieve in a vote in Congress or in the Conference Committee, then Mr. Cordray would be confirmed. 

I believe it is a severe abuse of a confirmation process. The confirmation process should center on the qualifications of an individual, not on attempting to change the underlying bill. 

But I would like to return to the subject of today’s hearing and 

the budget. As I understand it, the CFPB’s budget is capped at 

$557 million for Fiscal Year 2012. Do you anticipate using all of 

that? And do you happen to know what the budget cap is or what 

the budget is for the OCC, the FDIC or the FHFA? 

Also, I understand that you are the only regulatory agency that 

does have a budget cap. Could you clarify and comment on those 

questions? 

Mr. CORDRAY. Sure. Thank you, Congresswoman, for the comments and the questions. 

First of all, we do not anticipate spending through our budget 

cap either this year or next year. We are building up, as you know, 

as a start-up agency, building up from really zero as of July 2010 

when Dodd-Frank was enacted. 

So, it will take us some time to get a steady state. 

We are the only banking agency whose budget is capped on a 

hard cap. It is lower than the budget of the OCC, the FDIC, or the 

Federal Reserve. We are a fraction of the Federal Reserve. 

There are some different functions that agencies perform certainly. But there are some different functions we are expected to 

perform such as overseeing and supervising nonbank firms in a 

number of financial fields that are not touched by the other regulators at all. And, of course, the consumer protection function is one 

that I happen to believe Congress, obviously, believed is incredibly 

important. It is important to protect consumers. I think it is important to protect responsible businesses that do compete fairly in 

these markets. 

And I think that attention will strengthen our economy by avoiding the kinds of problems we saw that lead to the financial meltdown, the kinds of irregular mortgage practices that Congressman 

Green was just detailing a moment ago that should not have happened and, I believe, would not have happened or not have metastasized to the point they did had the Consumer Bureau been in 

place 10 years ago. 

Mrs. MALONEY. Thank you. I join some of my colleagues in really 

believing that consumer protection is a very, very important part 

of the safety and soundness of our financial institutions. And, certainly, we need safety and soundness. We need these services for 

our economy. 

But as you pointed out earlier, the subprime crisis was a threat 

to consumers and also to the overall economy of our country. 

So, my question is, what are you doing now or what has the 

agency done to help fix the mortgage industry to promote transparency and to help curb servicing abuses? 

Mr. CORDRAY. Thank you. That is, in some respects, our single 

highest priority, in part, because Congress told us it should be; in 

36 

part, because we can look at the financial crisis and see what 

caused it; and in part, because that is the single biggest expenditure many consumers make. 

We are going to be adopting a number of rules that Congress has 

told us to put in place to address some of these abuses, to make 

sure loans are made with ability to repay in mind, to make sure 

that mortgage servicer statements are given periodically and that 

they do disclose the kinds of fees and up-to-date status on where 

your mortgage is. Many people have received very little communication in that regard. 

There are other protections we are going to be putting in place 

to address the mortgage servicing problems that have been widely 

documented, very severe problems. GAO has documented them. 

The other banking agencies have recognized now that there were 

abuses going on for years; and that they have hurt consumers and 

hurt the system. 

And, actually, as you say, consumer protection issues that became safety and soundness issues because they began to loom so 

large and were so widespread and had been unaddressed for so 

long. 

So, this is a high priority for us. 

We also have examination over both bank and nonbank mortgage 

servicers now going forward. And we have the authority to enforce 

the law, which is a very important thing as well. 

Mrs. MALONEY. Thank you. I think that is a tremendous step forward. I think all of us can agree on both sides of the aisle. 

And just in closing, I have a tremendous amount of respect for 

my colleagues on the other side of the aisle who run for office and, 

certainly, for people who serve in government to put your ego, your 

reputation, and, in many cases, the finances of your family to take 

tremendous hits to serve this country. And I really applaud public 

servants. 

I thank you for what you are doing, Mr. Cordray. And I just really appreciate it. It is meaningful and important for the overall 

economy, the safety and soundness of our economy, and really the 

protection of consumers, too. 

So, thank you very much. 

Mr. CORDRAY. Thank you. 

Chairman NEUGEBAUER. I thank the gentlewoman. We are going 

to do another quick round here. 

Mr. Cordray, I want to go back to kind of something I was talking about earlier. I am looking at, I believe this might be the current plan, the budget justification for 2013. And, I believe, it shows 

that you estimate that you are going to have 1,359 employees by 

the end of 2013, if I am reading that correctly. Is that correct? 

Mr. CORDRAY. Correct. 

Chairman NEUGEBAUER. And so, what do you think the total 

number of employees will be at the Consumer Financial Protection 

Bureau? Were you maxed out at say, 1,400 people? Is that where 

you are headed? 

Mr. CORDRAY. I am not certain how to answer that question at 

a specific number level. I think we are getting into the range by 

the end of 2013 of what we—first of all, of what we can actually 

do under our budget cap. 

37 

And also, second, I think in having the resources we need to perform the responsibilities that Congress has laid out for us. 

So, I think that at the end of 2013, we will be getting probably 

pretty close to the limits of our resources. And we are going to have 

to make those stretches and make sure we are doing the job we are 

supposed to do. 

Chairman NEUGEBAUER. And so, I will go back to this planning 

process. If this is your planning document, how did you determine 

that 1,400 is the number? 

Mr. CORDRAY. We have a detailed and iterative process within 

the Bureau. And, frankly, I would say very candidly that we are 

getting better at this as we go along. Every division is required to 

assess, analyze; look at the work that they have ahead of them; put 

forward their projections in terms of what they need in terms of 

hiring. That is scrutinized by the chief operating officer and their 

team. It is a very experienced team, a very capable team. 

We had sort of a staff estimate process that we went through in 

the fall. It took a number of months and there were some tough 

discussions. There were people who wanted things who were told 

‘‘no.’’ 

Some of the things that we recognized were important weren’t 

immediate priorities for the Bureau, so we had to make choices. I 

think this goes on in any organization, whether public sector or private sector, and it goes on for us as well. 

I think the ultimate measure is whether if you match up the responsibilities Congress has told us by law we have to carry out and 

match up the way in which we are spending our resources and 

what the employees are actually devoting their time to, whether 

those correspond and I think that is what the GAO said. At that 

stage, they thought that we were doing that very well but it is 

something that is a challenge for us, and obviously goes to the responsibility that we are talking about today. 

Chairman NEUGEBAUER. I would love for you to furnish to the 

committee those departmental analyses of how you got to those 

numbers. I think that would maybe help us to better understand 

the objectives, because quite honestly, it is really kind hard at this 

particular point. 

I understand you are new in that position, but a huge amount 

of resources are committed, you are committed, and obviously, if 

you are going to have this many people, you are going to have to 

find space for those people, so I think it would be extremely helpful 

for the committee to have the background documents on how you 

are going to get to those numbers, and what those people are going 

to be doing and what level of business expectation that you have 

for those people. 

In other words if you are hiring people to be in the call center 

or something like that, how many calls that those individuals 

would be expected to have. So I assume you would furnish that? 

Mr. CORDRAY. Yes, and in fact if you look at the budget justification that we just put out, which I think is the document you are 

looking at, there is considerably more detail there then there was 

in the first year. 

A lot of it is going into what we are doing to build an institution; 

what we are doing to deliver tangible value, and what some of our 

38 

accomplishments were. It goes through, and there are specific descriptions of what is going on in supervision and fair lending; what 

is going on in consumer education engagement; what is going on 

in research-markets regulations. 

I do expect that detail to become fuller and even more comprehensive as we go along, but in the meantime, if your staff wants 

to work with our staff to make sure that they think that they have 

the kind of insight and information about what we are doing and 

why, I think that is totally appropriate, and we will be glad to 

work with you and provide that. 

Chairman NEUGEBAUER. I want to ask one last question. There 

has been some discussion, and in fact I think the chairman of the 

full committee has introduced a piece of legislation that recommends that rather than going from a single Director who has 

very broad authority on rule making and making these decisions, 

that you switch to, say, a CFTC model where you have commissioners and that you have more than one person making those decisions. 

You have the benefit of multiple people so that when a rule or 

a change in the direction of determining whether a financial is 

predatory or not, one person is not making that decision. Would 

you agree that having a panel or a group of people would give 

some—one, I think could make the system better but certainly for 

those people who are being regulated and for the people who are 

relying on good decisions to come from this agency, that the multiple-panel scenario makes sense? 

Mr. CORDRAY. It is an interesting question, Congressman. I understand it was debated, Mr. Chairman, very extensively in DoddFrank itself; and so there are four main banking agencies now in 

the Federal Government. There is also the NCUA, but of those 

four, two are headed by a single official, our Bureau and the Comptroller of the Currency, the same model. Two are headed by a 

Board or a Board of Governors, in the case of the Federal Reserve. 

And so, obviously organizations can function differently at different models— 

Chairman NEUGEBAUER. I know the history, Mr. Cordray, I have 

to ask, do you support that? Yes or no? 

Mr. CORDRAY. I actually think that having a single Director 

makes me more accountable to the Congress. If I come up here, I 

am responsible for what we do. I can’t say, well, there are three 

others on the commission who feel this way or that way. 

It is a model. When I was a State treasurer and State attorney 

general in Ohio, I was singularly accountable for what I did, and 

so, I see the advantages of that model. There are also advantages 

to the other model. Whatever Congress does, we will carry out that 

law. 

Chairman NEUGEBAUER. So your opinion is that you being in 

charge is a better model? 

Mr. CORDRAY. It is the same model as the Comptroller of the 

Currency, it is a 100-year-old model and nobody is proposing to 

change that. I don’t hear anybody suggesting that here today. It 

seems to work for them and I think it will work for us. 

Chairman NEUGEBAUER. So that is a ‘‘yes,’’ correct? 

39 

Mr. CORDRAY. Again, whatever you all decide to do as to our 

structure, we will carry it out. I will say it is a big job. It is a hard 

job but I have come to see that, and I don’t know that I fully appreciate it yet. 

We have a team approach at the Bureau. We have a team of senior executives who are excellent. I rely on them heavily. I think you 

would be crazy to try to run an organization like this if you didn’t 

do it that way. They are all accountable to you as well and you can 

speak to them at any time. 

We have broad experience from the public and private sectors 

there but whatever model you would give us, whatever the law is, 

that is what we will carry out and we will do it cheerfully. 

Chairman NEUGEBAUER. I recognize Mr. Fitzpatrick for 5 minutes. 

Mr. FITZPATRICK. Thank you, Mr. Chairman. 

Mr. Cordray, I also want to thank you for your service both in 

Ohio and now to the country. And I agree with Mrs. Maloney, you 

are making a sacrifice and I am sure you understand that our obligation here, not just on this committee but in Congress, is to make 

sure that we are watching the dollars and that for every dollar that 

our residents, our constituents and folks back home and taxpayers 

send here, they get a dollar in value in return. 

Are you familiar with the principles and the procedures of performance based budgeting? 

Mr. CORDRAY. I am. I first became familiar with those when I 

was the county treasurer in Franklin County, Ohio, and found that 

when we went into our budget process, it was something that I had 

not known before because I had not been an executive before. We 

found it very useful. It turned out when I was in the State office 

that was being used, and the legislature was holding us accountable for that. More and more I understand it has now been a Federal Government model for at least a decade or more. 

Mr. FITZPATRICK. In Fiscal Year 2011, before you ran the agency, 

was the agency engaged in the use of performance based budgeting? 

Mr. CORDRAY. In a manner of speaking, that is what we were 

working toward when we were in our very first year. It was difficult to implement that in a meaningful way because obviously, 

the year before we didn’t exist at all, and so, we didn’t have any 

objectives so then trying to measure us against non-existing objectives doesn’t make a lot of sense. 

I would say that within 3 and 4 years here, as we are building 

out and becoming more familiar and rendering a more comprehensive budget justification and like we want you to be able us to that 

and hold ourselves to that but it is for us it is a start-up process. 

That is my only cautionary note. 

Mr. FITZPATRICK. So in Fiscal Year 2011, when your agency, in 

excess of $160 million, for instance, was there a strategic plan in 

place? I just wanted the basics of performance based budgeting. 

Mr. CORDRAY. There was in a sense, in a rudimentary sense. It 

is not the kind of strategic plan that you should rightfully expect 

from us and that we are putting together now and it is something 

that we have been working on over the last several months and we 

40 

will be providing you. And I think that is a fair expectation of us 

going forward. 

Again, what I would simply say is put all this, please, in context 

of the fact that we started from nothing in July of 2010. We were 

an information team, not even an agency until July of 2011. We did 

not have a Director until January of this year which meant that 

quite a bit of what we are supposed to do under the law we could 

not under the interpretations in place at that time. So be patient 

with us but that is what we intend to do and I think it is fair for 

you to hold us accountable for doing that. 

Mr. FITZPATRICK. Looking back at 1 and 11⁄2 years, do you have 

any comment on the agency’s drawing on the reserve, I think it 

was an extra $28 million. We are about 28 percent over what was 

estimated. And how would the existence of a strategic plan have 

changed that? Would you have blown though that budget estimate 

with the strategic plan in place and how would that change going 

forward? 

Mr. CORDRAY. There were some things that came up that were 

not anticipated and maybe couldn’t have been anticipated. And so, 

for example, it was mentioned earlier that we ended up with—I 

think, in the end, at this current count, it is 232 transfer employees from other Federal agencies, including predominantly the Federal banking agencies. 

The Federal Reserve contacted us and indicated that for those 

folks to transition into the Federal Reserve’s pension system, there 

was going to have to be a negotiation and an adjustment made 

which would result in a payment by us to them that was in the 

eight figures and that was part of what led to the revision of the 

budget at that time. 

There were also some IT needs. We have, as I said, been contracting with Treasury, that is the bulk of our expenses to provide 

IT and HR at a time when we really didn’t have them in place. We 

will be transitioning off of those. Some of those expenses were not 

fully understood or estimated at the outset when we were just getting started, and so, there was some of that in the first year. 

That is diminishing. I wouldn’t expect that to be true going forward, but I think that any time you see any kind of adjustment or 

difference it is highly appropriate for you and your staffs to call us 

in and talk to about it, and exert that oversight. And frankly, that 

will give me confidence that if you are satisfied with what we are 

doing, then I can be satisfied with— 

Mr. FITZPATRICK. There have been a number of comparisons between the Bureau today and the OCC and the FDIC, but the difference is the OCC and the FDIC can’t go and demand money within a day and receive it as the Bureau can, is that right? 

Mr. CORDRAY. I actually don’t know how the FDIC and the OCC 

effectuate the transfer of funds and spend within their budget. I 

don’t know whether that is something they can do quickly or not. 

Once you— 

Mr. FITZPATRICK. One of the other distinctions— 

Chairman NEUGEBAUER. Just very quickly because we don’t 

have— 

Mr. FITZPATRICK. Maybe that the dollars don’t affect the annual 

operating deficit of the Federal Government. I am looking at the 

41 

Fiscal Year 2013 budget that was delivered by the President this 

week. General fund receipts is a line item in the budget deposited 

by the Federal Reserve System, their earnings that paid down the 

debt or go against the annual operating deficit estimated this year 

to be about $81 billion, estimated for Fiscal Year 2013 to be $80 

billion. And so, it goes down by $1 billion. 

Is it fair to say that for every dollar your Bureau spends from 

the Federal Reserve, that is $1 less that will be returned to the 

Federal Treasury? So for every $100 million your agency spends, 

that is $100 million less that will go to pay down the annual budget deficit? 

Mr. CORDRAY. I don’t know if that is the full picture or not. I 

know the Federal Reserve is unique because they conduct open 

market operations, they have assets, they make earnings on assets 

and the like and money comes back to Treasury. 

I don’t know if that is true of the OCC or the FDIC— 

Mr. FITZPATRICK. But is it true of the Bureau that for every dollar that you spend from the Federal Reserve, it is $1 in their earnings that will not be returned to the Federal Treasury? 

Mr. CORDRAY. What I know is, for example, our expenditures 

have not approached our budget cap, and so, we have not made the 

full demands that we could upon the Fed for funding. I don’t happen to know exactly what the Fed then does with money that is 

not spent or whether it is returned to the Treasury or whether they 

hold it in and then use it in the next quarter or just what. 

I am not as familiar with the Fed’s—the details of their expenditures as I am with the Bureau. 

Mr. FITZPATRICK. I appreciate you being here. According to the 

President’s own budget, it is returned in earnings to the Federal 

Treasury. 

Mr. CORDRAY. Yes. 

Mr. FITZPATRICK. So the dollars your Bureau spends are dollars 

not returned to the taxpayers. We just need to make certain that 

every dollar is accounted for and that every dollar is wisely spent. 

That is our obligation. 

Mr. CORDRAY. Agreed. 

Mr. FITZPATRICK. Thanks for being here. 

Mr. CORDRAY. Agreed. Thank you. 

Chairman NEUGEBAUER. Thanks, gentlemen. 

And I now recognize the gentlewoman from New York, Mrs. 

Maloney. 

Mrs. MALONEY. One of the proposals that my good friends on the 

other side of the aisle are working very hard on is to make the 

CFPB subject to the appropriations process. 

And this is very troubling to me, because the other regulators— 

the Fed, the FHFA, the FDIC, the SEC—are not subject to the appropriations process. And the appropriations process oftentimes can 

become very political and it could be that it could result in significant cuts to your ability to help people. 

So I would like to ask you, what do you think the impact would 

be on your programs to service the Office of Servicemember Affairs, 

the Office of Older Americans, and for consumers generally? What 

is the impact on how you would be able to service them if the 

42 

CFPB did not have the capped budget—was subject to the yearly, 

daily appropriations spites that we are involved in? 

Mr. CORDRAY. It is a good question, Congresswoman. I would go 

back to, I say, two things. 

First, I would go back to the debate over the original Dodd-Frank 

Act, and I know that this was extensively discussed and debated 

and the determination was made that the Consumer Financial Protection Bureau, as a bank regulatory agency, should be treated like 

the other bank regulatory agencies. 

In some other cases, the Comptroller of the Currency—the Federal Reserve—they go back to approximately a century and it has 

been determined over time that those should be nonpolitical in 

their budgeting and appropriations. 

I think the other issue that was raised earlier today which is the 

cautionary tale was OFHEO. OFHEO was an appropriated agency 

which was supposed to exert oversight over Fannie Mae and 

Freddie Mac. 

This Congress reviewed that situation and found it highly unsatisfactory in the last decade, and therefore moved to a model where 

the FHFA is now the overseer of Fannie Mae and Freddie Mac and 

is not subject to appropriations because they found that the 

politicization of the OFHEO mission had impeded its ability to 

oversee these large and sophisticated and quite powerful financial 

institutions. 

We are now overseeing from the consumer protection standpoint, 

some of the largest and most sophisticated financial institutions in 

our country. Several of them have assets in excess of $1 trillion. 

Doing the same kind of work with a different emphasis as our fellow banking agencies, it feels to me we should probably be on a 

par. And if we are not on a par, it is dangerous to the confidence 

with which people could expect to us to carry out our work. 

Mrs. MALONEY. Thank you. 

Also, could you comment on the oversight of the Fed’s IG on your 

agency, the CFPB? And can you talk about how much is the IG in 

contact with you and your staff, what types of activities the IGs office looks at and what the IG has found in any report or investigation the office has completed? 

Mr. CORDRAY. Sure. 

The Inspector General model is a new model to me because I 

don’t have background and experience with the Federal Government before coming to this Bureau. At the State level, we were always subject to oversight by our State auditor and they had the 

ability to come in and look at any aspect of our operations. 

They could set the priorities—that was entirely appropriate. And 

we always worked very closely with them, not only because we 

thought it was important to have clean audits for the public’s trust 

and confidence, but also because that was a measure of whether we 

were doing things right. 

And if there were disagreements about how to do something, we 

would typically defer to them. At this level, my understanding, the 

Inspector General is—it is a broad authority to give the public and 

the Congress confidence that we are operating appropriately and 

effectively and efficiently. 

43 

We will be an open book to our IG. We already have been open 

to both the Treasury and Fed IGs who both oversaw us last year. 

We have met with the Federal Reserve’s Inspector General, who 

is our IG—impressive individual; impressive staff; obviously going 

to take their work very seriously. I take it seriously as well. 

I have let them know that they should bring anything they want 

to my attention personally at any time. I would be accountable in 

that way. And I think Congress obviously will look very carefully 

at their work— 

Mrs. MALONEY. My time has almost expired. I do want to know 

to what extent is the CFPB subject to Federal contracting procurement and other laws. And is it comparable to other similar agencies? Are you subject to the procurement laws of the Federal Government? 

Mr. CORDRAY. We are, again, analogous to the other banking 

agencies. We are an independent agency, not part of the Executive 

Branch, per se. We are closer to Congress, but we are, again, akin 

in that respect to the other Federal banking agencies. 

Mrs. MALONEY. So, are they subject to the contracting procurement laws of the country? 

Mr. CORDRAY. I know that we are subject to procurement laws 

and the constraints and I believe they are the same ones as the 

other banking agencies. 

Mrs. MALONEY. Thank you very much. I yield back. Thank you. 

Mr. FITZPATRICK. I recognize the gentleman from Florida, Mr. 

Posey, for 5 minutes. 

Mr. POSEY. Thank you, Mr. Chairman. 

Just a follow up on a question from earlier in our first round— 

did you indicate you plan to seek criminal and civil penalties for 

wrongdoing? 

Mr. CORDRAY. Congressman, we do not, under our statute, have 

the authority to bring any criminal actions. What we are authorized to do and in fact told to do by our statute is if we uncover any 

conduct that we believe could be criminal in nature, we are to refer 

it to the Department of Justice which I think is akin to what you— 

Mr. POSEY. Yes, because most of the people I represent, they resent the civil penalties without criminal penalties. They don’t like 

to see the big, rich people who are exploiting them buy their way 

out of this stuff. 

And I know the agencies like to levy the penalties there because 

then they have it as revenue. It doesn’t go directly back into the 

Treasury like it should. And I hope that someday Congress will 

have the political will to do that because that is just right. 

There were some discussions earlier about the level of detail expected for your agency. And, while there may be people in this 

Chamber who would be glad to check out of a grocery store and 

have the cashier look at the basket and arbitrarily say, ‘‘Well, your 

bill is about $200 or so,’’ but most people would like to have an 

itemized receipt. They don’t need to know the ingredients that are 

in every item that they buy, but they would like to have some kind 

of accountability for that. 

Accountability changes behavior. Bureaucrats who don’t perform, 

don’t change behavior. The SEC has over 200 lawyers. They handle 

an average of 600 cases a year. 

44 

I hope that your attorneys that you have talked about will be capable of handling more than an average of a half a case a year. In 

the private sector, they carry a much greater load than that. And 

if something else, I think that next to the general public is suspect. 

And speaking of general public suspect, again, I talked about the 

article in Judicial Watch that discussed the salaries that you began 

paying some of these new employees. And I noticed an intern was 

hired at $42,000 a year. 

Most of the interns in our offices work for nothing. If all the 

agencies start paying interns that kind of money, we will never get 

any interns to work for the experience which is typically what they 

like to do. 

I noticed we had a new employee, $251,388—an Associate Director for Consumer Education. Now, that is over 5 times the average 

household income for working people who play by the rules back 

in my district. 

How do I justify that? How can I explain that to my constituents 

as being reasonable? 

Mr. CORDRAY. Certainly. To begin with, I worked as an intern for 

Senator John Glenn years ago and I was unpaid, so I am familiar 

with what you are describing. 

The salary levels for the Consumer Bureau are fixed by law by 

Congress. And we are required by law to have a comparable salary 

structure and benefit structure to that of the Federal Reserve. 

Congress did it, so Congress would know better than I why it 

was done, but it was done, I believe, to make us comparable and 

competitive with the fellow Federal banking agencies so that we 

wouldn’t consistently lose better and more experienced employees 

to them. 

The other thing that needs to be understood is that the work 

that we do is attempting to oversee, again, the most sophisticated, 

the most powerful—and many of them, very extensive financial institutions in our society. And we need to be able to do the kind of 

sophisticated work that involves examining banks with a trillion 

dollars or more in assets, multiple— 

Mr. POSEY. No. But this is for a Consumer Education Associate 

Director, over a quarter of a million dollars a year. That doesn’t 

pass a straight-face test. 

Mr. CORDRAY. Yes. 

Mr. POSEY. And are you telling me that Judicial Watch was 

wrong when they said records show workers starting at twice the 

maximum pay specified by the Office of Personal Management? 

Mr. CORDRAY. Again, we have broad pay bands and we don’t always—we typically try to pay to the midpoint of our pay range, not 

at the very top. So I would like to look at the particular incidents 

that you are describing. 

But what I will say is we are required by law to have pay bands 

and a pay structure that is comparable to the Fed. As of last account, as I was preparing for this hearing, we on average are about 

1 percent below the Fed in our pay bands and we are about 4 percent below them in average salary. 

So, we are complying with the law. That is what we are supposed 

to do. 

45 

If you have concerns about individual positions or individual salaries, we would be happy to take them up, go back and review 

them, and get your staff whatever information you require. 

Mr. POSEY. Yes. I have a lot of concerns and a lot of questions 

about them. But if the Fed has an Assistant to the Director of Consumer Education that they pay over $251,288 a year, I would like 

to know about it. And if they do, I would bet it is not an employee 

who just started at that. If another employee made that in the Fed, 

I would guess they would probably have been there a lifetime to 

accumulate that. I hope I am right. 

Mr. CORDRAY. We will go back and review that particular incidence that you are noting. I assume that out of all of our employees, your staff has looked carefully, and if there are others that 

they want us to look at, we will do that as well. 

Mr. POSEY. I have a pretty good-sized file here. I will just use 

that as an example. 

Thank you. My time is up. 

Mr. CORDRAY. Thank you. 

Mr. FITZPATRICK. Mr. Cordray, there are no other questions. I 

want to thank you for your attendance and for your responsiveness. 

The Chair notes that some Members may have additional questions for this witness, which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 30 days 

for Members to submit written questions to this witness and to 

place his responses in the record. 

This hearing is adjourned. 

[Whereupon, at 12:21 p.m., the hearing was adjourned.] 

(47) 

A P P E N D I X 

February 15, 2012 

48 


75073.001
49 


75073.002
50 


75073.003
51 


75073.004
52 


75073.005
53 


75073.006
54 


75073.007
55 


75073.008
56 


75073.009
57 


75073.010
58 


75073.011
59 


75073.012
60 


75073.013
61 


75073.014
62 


75073.015
63 


75073.016
64 


75073.017
65 


75073.018
66 


75073.019
67 


75073.020
68 


75073.021
69 


75073.022
70 


75073.023
71 


75073.024
72 


75073.025
73 


75073.026
74 


75073.027
75 


75073.028
76 


75073.029
77 


75073.030
78 


75073.031
79 


75073.032
80 


75073.033
81 


75073.034
82 


75073.035
83 


75073.036
84 


75073.037
85 


75073.038
86 


75073.039
87 


75073.040
88 


75073.041
89 


75073.042
90 


75073.043
91 


75073.044
92 


75073.045
93 


75073.046
94 


75073.047
95 


75073.048
96 


75073.049
97 


75073.050
98 


75073.051
99 


75073.052
100 


75073.053
101 


75073.054
102 


75073.055
103 


75073.056
104 


75073.057
105 


75073.058
106 


75073.059
107 


75073.060
108 


75073.061
109 


75073.062
110 


75073.063
111 


75073.064
112 


75073.065
113 


75073.066
114 


75073.067
115 


75073.068
116 


75073.069
117 


75073.070
118 


75073.071
119 


75073.072
120 


75073.073
121 


75073.074
122 


75073.075
123 


75073.076
124 


75073.077
125 


75073.078
126 


75073.079
127 


75073.080
128 


75073.081
129 


75073.082
130 


75073.083
131 


75073.084
132 


75073.085
133 


75073.086
134 


75073.087
135 


75073.088
136 


75073.089
137 


75073.090
138 


75073.091
139 


75073.092
140 


75073.093
141 


75073.094
142 


75073.095
143 


75073.096
144 


75073.097
145 


75073.098
146 


75073.099
147 


75073.100
148 


75073.101
149 


75073.102
150 


75073.103
151 


75073.104
152 


75073.105
153 


75073.106
154 


75073.107
155 


75073.108
156 


75073.109
157 


75073.110
158 


75073.111
159 


75073.112