GOP blocks Richard Cordray from becoming director of Consumer Financial Protection Bureau
WASHINGTON (AP) - The battle over the future of a new financial watchdog office escalated Thursday with Senate Republicans blocking confirmation of the man President Barack Obama named to head the office and Obama countering by holding out the possibility of appointing the nominee when Congress is on recess.
Senate Republicans were near unanimous in voting to stop a former Ohio attorney general, Richard Cordray, from becoming director of the Consumer Financial Protection Bureau, an agency they said had too much power and too little accountability.
The vote had immediate consequences. Without a director, the agency designed to shield consumers from the excesses behind the 2008 financial crisis is unable to operate at full strength.
Republicans said that until the Obama administration agrees to changes at the agency, they will keep blocking the president's pick from taking charge.
Obama said immediately after the vote that there was no reason to deny Cordray the top spot. He did not rule out a recess appointment, whereby a president makes a temporary appointment to a government post when Congress is not in session. Under such a move, an appointee can serve until the close of the next session of Congress, which would be the end of 2012.
Republicans this year have been successful in stopping the White House from making such appointments.
Obama said his message to the Senate was: "We are not giving up on this. We're going to keep on going at it. We are not going to allow politics as usual on Capitol Hill to stand in the way" of American consumers being protected from unscrupulous financial operators.
Democrats framed the standoff in political terms, saying Republicans wanted to gut an agency created to look out for consumer interests.
"Cordray and consumer protection are being blocked simply because Republicans want to protect Wall Street," said Sen. Robert Menendez, D-N.J.
The vote to overcome the GOP filibuster was 53-45, seven short of the 60 needed to advance the nomination. One Republican, Sen. Scott Brown of Massachusetts, joined Democrats in support of Cordray. Sen. Olympia Snowe, R-Maine, voted "present."
While the agency officially began business in July, the deadlock limits what it can do. It can oversee existing bank regulations. But without a director, it cannot issue new rules dealing with entities beyond banks, such payday lenders, private student loan providers and mortgage servicers that have been the source of predatory lending practices.
Raj Date, a special adviser to the treasury secretary, said the bureau is "already hard at work, helping to fix broken consumer financial markets." But, he said, "we are only able to supervise banks, not any of the nonbank companies that were responsible for many of the most problematic products and practices leading up to the financial crisis."
The agency was a centerpiece of the financial overhaul bill signed into law last year.
Republicans largely opposed that legislation and have since sought to change some of its provisions. They dismissed Democratic claims that they were favoring Wall Street over Main Street in blocking the highly regarded Cordray, now serving as enforcement chief at the bureau.
There's no disagreement, said Sen. Richard Shelby, R-Ala., about the need to bolster consumer protection. "The only real point of contention is whether the new bureau of consumer financial protection will be accountable to the American people," said Shelby, the top Republican on the Senate Banking, Housing and Urban Affairs Committee.
Last May almost every Republican senator signed a letter to Obama saying they would oppose any bureau nominee until changes were made in its operation.
They're pushing to replace the director with a bipartisan board. They want to subject the bureau, now under the Federal Reserve's jurisdiction, to the congressional appropriations process. They favor giving more banking regulators authority to overrule agency decisions.
"The president knew about these concerns months ago, and he chose to dismiss them," said Senate Republican leader Mitch McConnell of Kentucky.
Deputy Treasury Secretary Neal Wolin, at a White House briefing Wednesday, disputed the argument that the agency lacks accountability. He said it must consult with other bank regulators before issuing rules, has to assess the effect of its rules on small businesses and can have its rules overturned by the Financial Stability Oversight Council.
Responding to GOP demands that Congress control the agency's purse strings, Wolin said no federal bank regulators have congressionally appropriated dollars. "The reason for that is we want to make sure that our bank regulators are free of political influence," he said.
Already this year, one committee in the GOP-led House has voted to slice $200 million from the White House request for the Securities and Exchange Commission, which has a major enforcement role. The House has voted to hold the Commodity Futures Trading Commission, which oversees derivatives, to $171 million, less than two-thirds of what Obama sought.
Cordray, a five-time "Jeopardy" champion, was nominated to be the agency's first director in July. Obama bypassed Elizabeth Warren, the Harvard University law professor and consumer advocate who was instrumental in conceiving and setting up the agency.
Warren drew sharp opposition from Republicans who considered her too much of an activist. She is running for a Senate seat against Brown, the only Republican to support Cordray.