Consumer bureau nominee wins praise, but stalemate persists

By Charles S. Clark

September 7, 2011

Richard Cordray, President Obama's nominee to head the Consumer Financial Protection Bureau, spent his confirmation hearing on Tuesday taking in praise for his credentials and displaying his knowledge of his agency's workings. Still, key Republicans on the Senate banking panel carried on with their months-old strategy of blocking approval of any director for the new bureau, notwithstanding Democrats' outrage.

"The purpose of today's hearing should be to consider whether Mr. Cordray is qualified for that job," said Sen. Tim Johnson, D-S.D., chairman of the Senate Banking, Housing and Urban Affairs Committee. "Instead, a vocal minority is playing games with the process and holding Mr. Cordray's nomination hostage.

"This political gamesmanship is preventing Americans from receiving the consumer protections they deserve," he said. "This vocal minority insists on rehashing the same debate Congress had last year when it created the CFPB as an accountable yet independent regulator."

Sen. Richard Shelby, R-Ala., the panel's ranking member, countered that the hearing is "quite premature," noting that he and 43 other senators signed a letter in May promising to block any nominees until the Obama administration negotiates a reorganization of the agency to provide for greater input from Congress and the banking industry in bureau decisions.

"Because of the expansive jurisdiction of the bureau, every American will be affected by the director's decisions," Shelby said. "The director will single-handedly determine the financial products consumers can buy, as well as which consumers have access to credit, and which do not.

"Despite having such broad powers, however, there is no meaningful check on the director's authority," he said. "The director cannot be removed except on extremely limited grounds of inefficiency, malfeasance, or neglect of duty. In other words, the director cannot be removed for poor policy choices."

Johnson and other Democrats argued that the attacks on the agency, which opened July 25 after a year of preparations under acting director Elizabeth Warren, are "drummed up by special interests." Johnson displayed a chart asserting ways in which the bureau is accountable, including the facts that the Financial Stability Oversight Council (created last year under the Dodd-Frank financial reform law) has power to overturn CFPB regulations, the CFPB's budget is capped, and the president can fire the director.

Democrats argued that other independent agencies such as the Federal Housing Finance Administration, created in 2008, have a similar leadership structure. They also expressed concern that leaving the CFPB position vacant during the current foreclosure crisis leaves too many financial entities, such as non-bank lenders, unclear on how they're regulated.

Sen. Bob Corker, R-Tenn., said he was "shocked" at the Democrats' "spewing of half-truths, mistruths and untruths." He harkened back to his and Shelby's active participation in last year's contentious negotiations that led up to the financial reform law that most Republicans opposed. "Almost all of this would go away if the administration would sit down and put appropriate checks in place," Corker said.

Sen. Jack Reed, D-R.I., said it was unacceptable "to block an appointment simply to express disdain with either the process or substance of the law" created by Congress. "We can wait for sensible proposals for reform, but it's hard when the agency is not operating on the ground," he said. "If we waited until we got it perfect before we appointed a director, we would have delayed the election of George Washington."

Sen. Sherrod Brown, D-Ohio, who introduced Cordray, formerly Ohio's attorney general, said he had consulted the Senate historian, who told him that never in U.S. history has a minority in Congress blocked an appointment for an agency head because it opposed that agency's existence.

Cordray, who has been serving as the CFPB's enforcement chief, sought to assure the senators that he would consult regularly with Congress and other regulatory agencies and that he would seek to streamline regulations to reduce paperwork. He also said his performance would be informed by his experience working with Ohio banks during the depths if the financial crisis.

"I have found that Congress provided us with both a range of tools and the resources to analyze and address the problems that consumers face," he said. "As Ohio's attorney general, when I saw something wrong I typically had only two options to choose from: do nothing, or open an investigation that might lead to a lawsuit."

Cordray continued, "At the bureau, our bigger and more flexible toolbox includes research reports, rulemaking, market guidance, consumer education and empowerment, and the ability to supervise and examine both large banks and many nonbank institutions."

Corker expressed concern that under the law, "the only way oversight can challenge the director is if a rule threatens the entire financial system. That's a pretty high hurdle," he said.

Cordray replied that "it wouldn't be necessary to invoke [such a] super process," and that instead "we'll work hard toward a consensus."

Shelby told the nominee, "You're caught between a big substantive debate, and it will have to be resolved before we move on."


By Charles S. Clark

September 7, 2011

http://www.govexec.com/federal-news/2011/09/consumer-bureau-nominee-wins-praise-but-stalemate-persists/34844/