WASHINGTON, D.C. – In advance of a full Senate vote on Richard’s Cordray’s nomination to head the Consumer Financial Protection Bureau, U.S. Sen. Sherrod Brown (D-OH) conducted a hearing entitled, “Consumer Protection and Middle Class Wealth Building in an Age of Growing Household Debt” today. Brown, chairman of the U.S. Senate Banking Subcommittee on Financial Institutions and Consumer Protection, held the hearing to examine how increased oversight and transparency of financial products can create jobs and support financial stability.

“Widespread household debt remains a major roadblock to our nation’s economic stability,” Brown said. “As we work to encourage responsible borrowing, the new Consumer Financial Protection Bureau will be a critical tool to help American families rebuild some of the wealth that they have lost over the last decade.”

In September, Brown attended the Senate Banking Committee hearing on the nomination of Richard Cordray to serve as Director of the Consumer Financial Protection Bureau (CFPB). The CFPB is aimed at helping to prevent another meltdown by cracking down on financial tricks and traps designed to deceive consumers. Following passage of the Wall Street Reform and Consumer Protection Act, Brown joined 11 senators in urging President Obama to nominate someone with a proven history of standing up to unfair and abusive practices in the financial industry, particularly in the area of consumer protection.


Douglas Fecher, president and CEO of Wright-Patterson Federal Credit Union, will testify at today’s hearing along with: Atif Mian, associate professor of economics and finance, Haas School of Business and Department of Economics, University of California, Berkeley; Katherine Porter, professor of law, University of California-Irvine School of Law; Robert Lawless, professor of law, University of Illinois College of Law; Ray Boshara, senior advisor, Federal Reserve Bank of St. Louis; G. Michael Flores, president and CEO, Bretton Woods, Inc.; Ida Rademacher, vice president, Corporation for Enterprise Development; and Susan Weinstock, project director, The Pew Charitable Trusts.

Below is full text of Brown’s hearing statement as prepared for delivery.

With our economy still recovering from the financial crisis, it’s critical to understand how excessive household debt remains a burden to our nation’s full recovery. But in understanding it, we can better put our nation back on the road to prosperity.


Credit can be an undeniably good thing.  It allows people to borrow against their future earnings to purchase essential goods and services.  It allows families to buy homes, students to go to college.  It helps people pay for food and clothing.


But it can also cause irreparable harm when those future earnings never materialize, due to job loss or stagnant wages. It can undermine our economy, when it is offered on terms designed to take advantage of consumers, rather than to help their wealth grow.


It’s that capacity for wealth to grow that makes America a prosperous and stable country.  And it’s that capacity to generate wealth and pass it down to future generations that built and preserves our middle class. But over the last three decades, and the last decade in particular, the pathway to a strong economy – a strong middle class – has been more and more difficult to travel.


From 2000 to 2010, median income for working-age households fell by more than 10 percent. From 2000 to 2010, poverty increased overall by 3.8 percentage points. These are merely averages. The statistics are far worse in Hispanic and African American households than they are in white households.


Behind the statistics are stories of Americans forced to try to borrow as a substitute for stagnant wages and declining household asset values. And some were preyed upon by a burgeoning predatory lending industry.


Ohio cities like Cleveland and Dayton are clear examples of this devastating combination. In Cleveland, the same year that the LTV steel plant was filing for bankruptcy, Cuyahoga County officials were begging the Federal Reserve to crack down on predatory mortgage lenders.


Likewise, in Dayton, as Mr. Fecher knows all too well, we lost GM’s Moraine plant at the same time that groups like the Miami Valley Fair Housing Coalition were going door to door educating the West Dayton community about the dangers of predatory refinancing schemes.


The growing reliance on debt led to a vicious cycle – our declining manufacturing base contributed to the dangerous growth of the financial sector. Financial services industry output went from 15 percent of U.S. gross domestic product in 1980 to 21 percent in 2010.   Over that same period, manufacturing has declined from 20.8 percent to 11.7 percent of GDP.


Encouraged by predatory lending practices and flawed government policies – including financial deregulation and free trade agreements – household debt reached 133 percent of personal income by 2007, the highest level since the onset of the Great Depression.


The ensuing financial crisis exposed failures throughout the financial sector, and it continues to affect families across Ohio and this nation who have been hurt by the tremendous destruction of jobs, wealth, and assets.


Just last week we learned that household incomes dropped during the month of August. While we had good news that the manufacturing sector expanded, wages declined in manufacturing, services and goods-producing industries, and Americans were forced to tap into their savings to cover those losses.


The need to address these issues could not be clearer. I hope that we can find some areas of agreement today, as I know that Senator Corker shares some of my concerns about over indebtedness.


In her testimony, Professor Porter notes that while Wall Street is “too big to fail,” American families are “too small to save.”It is important to remember that excessive household debt is dangerous to individual families but it is also a problem for all of us.


In many ways, household indebtedness is the canary in the coalmine of our economic security. I look forward to exploring ways that policy makers can encourage responsible borrowing and sensible consumer protections.


I am confident that the new Consumer Financial Protection Bureau will be a tool to help American families rebuild some of the wealth that they have lost over the last decade.


That is why it is time for some in the Senate to cease their obstruction and confirm Ohio’s Rich Cordray as the first Director of the CFPB. We must ensure that our financial system promotes wealth building rather than wealth extraction. That is good for American families, and it is good for the American economy.