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.
[Related article: GOP to Wall Street: "Richard Cordray Sleeps with the Fishes"]
“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.”
[Consumer Resource: Your credit standing can save you money. Learn where you stand with Credit.com's Free Credit Report Card.]
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.”
[Credit Cards: Research and compare credit cards at Credit.com]
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