The fact is that if you take a good look back at the financial crisis that began in 2008 and continues today, most of it is attributable to predatory and irresponsible mortgage practices that were deplorable but NOT illegal. In other words, I believe that the most important role of the CFPB in this regard is the creation of new policies and rules to protect individual borrowers and consumers, not to enforce existing laws that were and are—obviously—inadequate. In particular, the mortgage crisis makes it clear that no one had to break the law to con us. The vast majority of those creative option-ARMS were perfectly legal, terribly innovative and clearly, as Warren Buffett labeled them, weapons of mass destruction. So while it is obviously very important to enforce the law, it is more important to make effective laws and rules that can then be efficiently enforced.
Additionally, one of the other root causes of our current financial malaise was the lack of financial literacy among the general population in this country. The victims of the legal con run by all those avaricious bankers and brokers were excellent targets, because they really didn't know much about money, or mortgages, or borrowing in general—but unfortunately now they're getting a crash course in foreclosure. There is no law, however wise and rigorously enforced, that can substitute for a financially educated populace. Knowledge is, after all, power. In sum, in order to prevent a repeat of recent financial history, the CFPB must ensure that Americans know as much about financial matters as they do about Kim Kardashian, and it must make and enforce new rules that protect consumers within every financial strata, not just the folks who buy the bonds issued by firms like Merrill Lynch.
[Related article: 3 Ways the CFPB Can Help Protect Young Consumers]
The good news is that Richard Cordray is a really smart, dedicated, and talented public servant. Although when first appointed as Enforcement chief, he described his tenure as a "layover in Washington" until he could return to Ohio to run again, it is likely that the power and prestige of his new position will inspire him to change his mind and engage his considerable intellect. Lost in the excitement and gravity of recent events is the trivia factoid that Cordray was a five-time Jeopardy champion!
I don't know about you, but I've always felt that anybody who could win Jeopardy, especially a five-time champion, could do anything they might want to do if they put their mind to it.
[Related article: How the CFPB Should "Regulate" Credit Reporting and Credit Scoring]
This work is the opinion of the columnist and in no way reflects the opinion of ABC News.
Adam Levin is Chairman and cofounder of Credit.com and Identity Theft 911. His experience as former director of the New Jersey Division of Consumer Affairs gives him unique insight into consumer privacy, legislation and financial advocacy. He is a nationally recognized expert on identity theft and credit.