Senate heads for showdown over consumer bureau chief

President Barack Obama announces the nomination of former Ohio Attorney General Richard Cordray, right, to serve as the first director of the Consumer Financial Protection Bureau (CFPB), Monday, July 18, 2011, in the Rose Garden of the White House in Washington. AP Photo/Manuel Balce Ceneta

More than five months after opening its doors for business, the Consumer Financial Protection Bureau still lacks a director. That is unlikely to change Thursday, with Senate Republicans threatening to block a possible vote to confirm former Ohio Attorney General Richard Cordray to head the new federal watchdog.

The White House raised the heat on lawmakers this week to install Cordray to lead the CFPB, which Congress created last year under the Dodd-Frank financial reform law to shield Americans from financial fraud and abuse. To that end, President Obama called out Republicans for obstructing the appointment in his speech Tuesday in Osawatomie, Kan.:

[T]he Republicans in the Senate refuse to confirm him for the job; they refuse to let him do his job. Why? Does anybody here think that the problem that led to our financial crisis was too much oversight of mortgage lenders or debt collectors?

Everyday we go without a consumer watchdog is another day when a student, or a senior citizen, or a member of our Armed Forces -- because they are very vulnerable to some of this stuff -- could be tricked into a loan that they can't afford -- something that happens all the time. And the fact is that financial institutions have plenty of lobbyists looking out for their interests. Consumers deserve to have someone whose job it is to look out for them.

Congressional Republicans also opposed the nomination of former interim CFPB chief Elizabeth Warren, credited with having conceived the bureau, for the top job. The GOP saw Warren, a noted consumer advocate and Harvard University law professor who is now running for the Senate in Massachusetts, as hostile to the financial industry. With Warren's Senate approval in doubt, Obama instead nominated Cordray in July to lead the CFPB.

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Republican lawmakers, who sought to block the creation of the CFPB during the bitter partisan fight last year over financial reform, say they have no objections to Corday, whose two-year tenure as Ohio attorney general ended in January. But they now refuse to support his confirmation unless Congress strengthens its control of the agency.

Specifically, Republicans want the CFPB to be led by a board, like the Securities and Exchange Commission, rather than by a single director, and for congressional committees to have stricter oversight for the bureau. In addition, Republicans favor funding the CFPB through Congress instead of the Federal Reserve, as mandated under Dodd-Frank. Said Senate Minority Leader Mitch McConnell, R-Ky., during a Senate Banking Committee hearing Tuesday to discuss the progress of financial reform:

The director of the CFPB, by design, is set to lead one of the least accountable and most powerful agencies in Washington. What we're saying is no single person who's unaccountable to the American people should have that much power.... We don't need any more unelected, unaccountable czars in Washington.

Advocates of the CFPB reject GOP claims that the bureau lacks accountability, noting that other financial regulatory agencies, such as the FDIC and Office of the Comptroller of the Currency, are led by one director. The bureau also must answer to a council of other banking and government agencies, which in some cases can override the CFPB's authority, while Congress may change its rules. In addition, the CFPB must periodically report on its activities to lawmakers and is audited by the Government Accountability Office. Its budget is also strictly capped.

Meanwhile, allowing congressional committees to scrutinize every bureau decision would subject it to intense political pressure, undermining its independence, the CFPB's defenders say. 

In his speech, Obama vowed to veto any effort to "delay, defund or dismantle the new rules" establishing the CFPB. Republicans, too, show little sign of moderating their opposition. Only one GOP lawmaker, Sen. Scott Brown, R-Mass., has formally said he will vote to confirm Cordray. That leaves Senate Democrats short of the 60 votes short they would need to defeat a Republican filibuster.

If the stalemate persists, as appears all but certain, Obama could use a so-called recess appointment to name Cordray to the post when lawmakers break for the holidays later this month. But that, too, is uncertain to work, with Republicans previously having threatened to deter such an appointment by keeping Congress technically in session.

  • Alain Sherter On Twitter»

    Alain Sherter is an award-winning business journalist who has written for The Deal, MarketWatch and Thomson Financial Media.

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