December 7, 2011
This story was updated at 11:30 AM Dec. 8, 2011.
Last week President Obama bade a reluctant farewell to Donald M. Berwick, his frustrated Centers for Medicare and Medicaid Services Administrator who departed government after 16 months because he couldn’t win Senate confirmation. The issue? Republicans didn’t like his favorable views on the president’s health care reforms and the British health care system.
Now Obama is struggling to hang on to another key nominee, Richard Cordray, the acting head of the star-crossed Consumer Financial Protection Bureau created under the Dodd-Frank financial reform law. Cordray was put in charge in July after Elizabeth Warren, the president’s first choice, decamped Washington to return to Boston and a campaign for a U.S. Senate seat.
Senate Republicans on Thursday blocked efforts to confirm Cordray for the new post – a procedural move that prevents him from exercising many of his agency’s broad new powers. The Senate voted 53 to 45 to cut off debate and move to confirm the nomination, or seven votes short of the 60 needed to end a filibuster.
Warren, a Harvard law professor and consumer advocate, ran afoul of congressional Republicans and the business and financial communities, who viewed her as anti-business and overly combative. With no prospects for breaking the impasse, Obama escorted Warren to the door with best wishes and turned to Cordray, a straight shooting former Ohio attorney general with a strong consumer-protection record.
Cordray was endorsed by ten Republican attorneys general as well as Democrats, and was described by his supporters as “brilliant and balanced.” But Senate Republican Leader Mitch McConnell of Kentucky and most other GOP members have vowed to block Cordray’s nomination, not because they don’t like him, but because they don’t like the law that created his post.
Many Republicans feel the new director would be far too powerful and insulated from congressional pressure because he would receive his operating budget from the Federal Reserve and not Congress (something that consumer advocates say is just what is needed). And until the president agrees to go along with a major rewrite of the law, to weaken the consumer protection bureau by replacing the director with a five-member board beholden to Congress for its funding, 44 Republican senators say they will vote against Cordray’s confirmation.
“Nobody claims he’s not qualified,” Obama said during a speech in Kansas on Tuesday. “But the Republicans in the Senate refuse to confirm him for the job and 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?”
Republicans are holding fast.
“Current financial regulators already evade accountability by claiming independence or recusing themselves when they fail,” Sen. Richard C. Shelby (Ala.), the ranking Republican on the banking committee, said in a statement over the weekend. “The [CFPB] is unaccountable by design. We will continue to fight for accountability from regulators.”
Unless a compromise can be worked out to smooth the way to Cordray’s confirmation, the new agency could be seriously hamstrung, and Cordray may begin eyeing the door as well. By leaving him in limbo, Republicans are making it virtually impossible for the new consumer protection bureau to begin flexing its muscles as envisioned by the authors of Dodd-Frank, according to a study issued last weekend by the administration’s National Economic Council.
Without a confirmed director, for example, the CFPB cannot fully supervise non-bank financial institutions such as independent payday lenders, non-bank mortgage lenders, non-bank mortgage servicers, debt collectors, credit reporting agencies and private student lenders – many of them notorious for their predatory practices and usurious interest rates. Tens of millions of Americans – often poor or unsuspecting -- rely on non-bank financial institutions for their financial needs.
In the wake of the Senate vote, Obama could move to appoint him to the position during winter recess, a temporary action similar to how he put Berwick in his post back in July 2010. But Republicans could attempt to block Obama by holding brief “pro forma” sessions during the weeks when most lawmakers are away.
Obama told reporters after the Senate vote that “I will not take any option off the table” in getting Cordray confirmed, and that “My hope and expectation is that the Republicans who blocked this come to their senses.”