Is your staff big enough for the task at hand?
That's something we're going to have to continue to see. We're building the agency, we're in our early days. And we're trying to build sensibly and on an appropriate time frame. So it would take us another year or two to get to full strength.
What kind of budgetary oversight will the agency have?
We have considerable budgetary oversight. We have multiple audits that we are required to undergo and that are made available to Congress. We have required testimonies and reports to Congress. We also have a firm fixed cap on our budget, the money that we get from the Federal Reserve. It's a fairly low cap, relative to the budgets of the other banking agencies. If we desire to have any funds to do our work above that fixed cap, we are required to go to Congress and the appropriation process, which is not true of any other banking agency. [Read more about the Cordray Appointment.]
How would creating a board of directors affect the agency?
We have a director at present. I personally think that's a very accountable model. Members of Congress can speak to me and know exactly what we're doing and know that their concerns have been heard. If that model were ever to change, we would implement the law, whatever the law is.
Are you concerned with overregulation?
The last thing we would want to do, and what would discredit our work as a bureau, is to pile on a bunch of optional regulations that actually cost more to businesses than they bring benefit to consumers. We are looking at the rather significant forest of regulations that we've inherited from the other agencies to see where we can streamline those. And I do not take it as a given that just because someone else wrote a rule that we will agree that the value to consumers outweighs the burden on industry. But the other side of the coin that needs to be remembered is that the ineffective or distorted regulation of markets that occurred before the financial crisis helped cause the financial crisis.
Can you elaborate?
The fact that mortgage brokers were making loans that were ridiculous because they had no skin in the game and didn't have to care about ability to repay, and those mortgages were cycling through the economy and into securitizations and the like, and ended up sinking some of our largest, most sophisticated institutions in the quagmire, shows the high cost of not having the regulatory regime right. So, we do think that had this bureau been in place 10 years ago, looking carefully at the mortgage market—mortgage origination and servicing—things may well have been different.
Are you worried that the controversy surrounding your appointment will affect your job?
I'm not. What had affected our role before was that we were only able to exercise part of our authorities and it did not allow us to do our work the way the law intended. Now that we have a director, we are moving forward.