Home > 2012 > Personal Finance

Strong Reactions to Obama’s CFPB Appointment

Advertiser Disclosure Comments 0 Comments

Republicans and business groups howled in protest, while Democrats and consumer advocates cheered in victory, after President Obama formally appointed the first permanent director of the Consumer Financial Protection Bureau. By appointing Richard Cordray, the former Ohio attorney general who recently led the federal agency’s enforcement efforts, the president escalated a long-simmering war with Republicans in the first week of an important election year.

“The only reason Republicans in the Senate have blocked Richard is because they don’t agree with the law that set up a consumer watchdog in the first place,” Obama said during a speech at Shaker Heights High School in Ohio on Wednesday. “That makes no sense. Does anybody think that the reason that we got in such a financial mess, the worst financial crisis since the Great Depression, the worst economic crisis in a generation—that the reason was because of too much oversight of the financial industry?”

The reaction from both sides was strong and swift. Within hours of the appointment, Democrats, Republicans, business lobbying groups and consumer advocates all heaped their scorn and praise on the president.

“President Obama actually created one job today,” Sen. Richard Shelby (R – Ala) said in a prepared statement. “Unfortunately, this new employee is an unaccountable bureaucrat who will have immense power over the economy. President Obama’s philosophy is clear: government knows best, and the bigger, the better.”

Cordray’s supporters in Congress saw the move as comeuppance for Republicans’ stalling techniques.

“We asked for a fair up or down vote on Richard Cordray’s nomination,” Sen. Sherrod Brown (D – Ohio) said in a statement. “But too many senators are willing to stand instead with Wall Street, blocking a qualified nominee for the first time in the history of the Senate based on opposition to an agency’s very existence.”

Meanwhile, consumer advocates who had grown tired of the president’s slow action (the CFPB was created by Congress 17 months ago; Cordray’s nomination has languished since July) praised the administration’s announcement.

“It’s long overdue,” Travis Plunkett, a lobbyist for the Consumer Federation of America. “We don’t want this agency helping consumers with one arm tied behind its back, which is what it has been doing.”

Without a director in place, the bureau lacks the power to write new regulations, or to oversee non-bank financial institutions like payday lenders and private student lenders.

“The importance of this day has less to do with me personally and much more to do with you—and the millions of individuals and families across the country who access consumer financial markets every day to participate in our economy and to pursue their dreams and aspirations,” Cordray said in a prepared statement emailed to reporters. “That’s because now, with a Director, the CFPB can exercise its full authorities—with respect to both banks and nonbanks—to help those markets operate fairly, transparently, and competitively.”

Cordray’s supporters said that his combination of intelligence and respect for opposing opinions may be able to defuse this political stalemate, and win over Wall Street firms and Republican leaders who are wary of the bureau.

“Gosh, if it can be done, a person like Rich can do it,” Holly Hollingsworth, who served as Cordray’s spokeswoman when he was treasurer and attorney general of Ohio, said in an interview.

At the moment, a lawsuit appears more likely than an agreement, however.

Within minutes of the announcement, rumors started to circulate that the U.S. Chamber of Commerce would sue the administration to try and block the appointment. A statement released by the chamber makes it clear that such a challenge is possible, but avoids directly stating that the group will sue.

“(W)e have not made any decisions yet, although we have not ruled anything out,” Bryan Goettel, a spokesman for the chamber, said in an email to Credit.com, “but this unprecedented action makes it almost a given that at some point it will be decided by a court.”

If there is to be a legal challenge, it may revolve around the question of what it means for the Senate to be in recess. The president has the Constitutional power to avoid Senate blockades of his nominees by appointing them while Congress is in recess. In this case, Republicans sought to block the recess appointment by running “pro forma” sessions, during which members gaveled both houses of Congress into session for as little as 30 seconds before immediately closing them again. Democrats used the same tactic to block appointments during the administration of George W. Bush.

Obama could have made the appointment on Tuesday, between the first and second session of the 112th Congress, when the pro forma maneuver fails to prevent Congress from going into recess. But since a recess appointment only keeps the nominee in power until the end of the next Congressional session, Cordray would have had just one year in office.

Instead, by waiting to make the appointment on Wednesday, the president assured Cordray almost two years in the director’s chair, since his appointment doesn’t end until the end of the next Congressional session, according to the Congressional Research Office.

“By waiting for this day, he does get an extra year out of the appointment,” Ed Mierzwinski, director of the consumer program at the U.S. Public Interest Research Group, said in an interview on Tuesday. “And the fact is, we all love Rich.”

It remains to be seen which side will win the fight with voters in November. Republicans have been making the case for months that the bureau will stifle job creation and consumers’ financial options, both hot-button issues in the 2012 election cycle. The bureau “will have an unprecedented reach and control over individual consumer decisions,” Sen. Mitch McConnell (R – KY) said in a prepared statement.

Obama clearly reads the polling tea leaves differently.

“Without a director in place, the consumer watchdog agency that we’ve set up doesn’t have all the tools it needs to protect consumers against dishonest mortgage brokers or payday lenders and debt collectors who are taking advantage of consumers,” the president said during his speech in Ohio. “And that’s inexcusable. It’s wrong. And I refuse to take no for an answer.”

Image: ProgressOhio, via Flickr.com

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team