Consumer watchdog nominee advances; Cordray faces GOP blockade on Senate floor

October 6, 2011

In a largely symbolic vote along party lines, the Senate banking committee on Thursday approved former Ohio attorney general Richard Cordray to lead the new federal consumer watchdog agency even as Republicans reiterated their pledge to block him on the floor.

Cordray’s nomination has become a flash point in the larger political battle over how the Consumer Financial Protection Bureau should be structured. The agency was the centerpiece of President Obama’s plan to overhaul the nation’s financial system, but it cannot employ many of its powers until a director is named.

Senate Republicans have vowed to block any candidate unless the CFPB is revamped. They are seeking to replace the director with a five-member commission and require tighter oversight of the bureau by other agencies. They are also seeking to fund the CFPB through the congressional appropriations process, rather than through the Federal Reserve.

“We are simply asking that this enormously powerful new agency have checks and balances in place that protect the country from an overly zealous director,” Sen. Bob Corker (R-Tenn.) said in a statement Thursday.

The CFPB’s role has been debated this week as Bank of America and other financial institutions said they plan to levy a fee on consumers who shop with their debit cards, as a way to recoup revenue lost from tougher new rules. Obama blasted the charges Thursday and said banks should not blame Washington.

“People have been using financial regulation as an excuse to charge consumers more,” he said at a news conference. “They have that right, but it’s not a good practice.”

Obama said the CFPB would provide accountability and transparency for financial products, and he has urged the Senate to approve Cordray, who heads the bureau’s enforcement division.

But Sen. David Vitter (R-La.) said the controversy over the debit card fees highlighted the potential power of the new agency.

“The president’s comments this week underscore our concerns that the CFPB is more about micromanaging banks than protecting consumers,” he said in a statement Thursday.

The battle over the agency has left Cordray in limbo. According to Senate aides, the banking committee’s chairman, Sen. Tim Johnson (D-S.D.), is reaching out to Majority Leader Harry M. Reid (Nev.) to discuss scheduling a floor vote. But Republicans have enough support to block it with a filibuster.

Some consumer advocacy groups and lawmakers have called on Obama to declare Cordray director through a recess appointment. That probably would allow him to serve until December 2012, at the end of the next session of Congress, rather than a full five-year term. But the Senate has not taken an extended recess since spring, leaving the president little room to maneuver.

On Thursday, Obama praised Cordray’s record in Ohio and stressed the urgency of confirming him but offered no details of how he planned to break the Republicans’ blockade.

“I’m going to be fighting every inch of the way here in Washington to make sure that we have a consumer watchdog that is preventing abusive practices by the financial sector,” he said.

Ylan Q. Mui is a financial reporter at The Washington Post covering the Federal Reserve and the economy.
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