At a campaign-style speech on the economy at a high school in Shaker Heights, Ohio, Obama named Cordray -- who had been serving as CFPB's enforcement chief -- as "America's consumer watchdog," a move that "brings us closer to the economy we need, an economy where everyone plays by the rules," he said.
Obama maintained that Cordray was qualified, but was denied an up-or-down vote because a minority of senators didn't agree with the law that set up the new bureau in the first place.
The president said it was time for a recess appointment after waiting patiently as the Cordray nomination made its way through committee approval, through a blocked vote on the Senate floor, and through a move by Repubican senators to keep the Senate technically in session over the holidays.
Reaction to the move ranged from relief that the fledgling bureau would finally have full regulatory and enforcement authority to charges that the president acted unconstitutionally. If the appointment stands, Cordray can serve without confirmation for a full year after the congressional session in which he was nominated, or until the end of 2013. A new president could replace him.
"President Obama, in an unprecedented move, has arrogantly circumvented the American people," Senate Minority Leader Mitch McConnell, R-Ky., said in a statement. "This recess appointment represents a sharp departure from a long-standing precedent that has limited the president to recess appointments only when the Senate is in a recess of 10 days or longer.
"Breaking from this precedent lands this appointee in uncertain legal territory, threatens the confirmation process and fundamentally endangers the Congress' role in providing a check on the excesses of the executive branch."
Senate Banking Committee Chairman Tim Johnson, D-S.D., said in a statement that he looked forward to implementing consumer protections with Cordray, whom he described as "eminently qualified for the job, as even my Senate Republican colleagues have acknowledged."
The Senate campaign of Elizabeth Warren, the Harvard law professor who spent a year in Washington setting up the bureau and who many had wanted as its director, released a Twitter message: "Today, #CFPB gets full powers to protect people with Richard #Cordray. Let's tell Rich we're with him all the way."
For many in the financial industry, much is riding on Republican efforts to force a reopening of the 2010 Dodd-Frank Financial Reform Law with the goal of giving Congress greater oversight and dispersing power at CFBP among members of a board rather than bestowing it all on a director. In September 2011, Richard Hunt, president of the Consumer Bankers Association, said, "this is akin to a Supreme Court nominee for us. I believe this director has more power at any agency since J. Edgar Hoover."
The Independent Community Bankers of America, said, "with or without a director, ICBA will continue to weigh in with the CFPB to promote and protect the interest of the nation's more than 7,000 community banks. Regardless of what happens with the controversial appointment of Richard Cordray, ICBA will remain focused on its regulatory and legislative goals."
Thomas Donohue, president and chief executive officer of the U.S. Chamber of Commerce, issued a statement before Wednesday's announcement saying such a move "puts the authority of the director and the validity of the bureau's work in legal jeopardy."
Similar disappointment was expressed by Rep. Sam Graves, R-Mo., chairman of the House Small business Committee, who said, "small business owners say they need lending but are getting turned down, while banks are saying they have money to lend but aren't finding qualified applicants. Somewhere there is a disconnect --the new regulations from Dodd-Frank and the new CFPB have a lot to do with this problem."
But to leaders of Americans for Financial Reform, a coalition of 250 national consumer, labor, civil rights and senior citizens advocacy groups, the arrival of a leader is vital because CFPB is the "linchpin of the entire Dodd-Frank law," said Marcus Stanley, AFR policy director. "Loans to the consumer is where the rubber meets the road for financial products related to financial crash of 2007 and 2008," he said during a conference call with reporters before Obama's announcement.
Ed Mierzwinski, director of the consumer program at U.S. PIRG, praised Obama's "bold and independent decision" that rejected the efforts of Wall Street interest groups to "defang or defund the bureau."
Travis Plunkett, legislative director of the Consumer Federation of America, said that because of this "culmination of a long fight, the bureau no longer has to monitor financial abuses with one hand tied behind its back." He said he expected concrete results in 2012 from CFBP's efforts to research and publicize abuses of consumers, particularly military families, by predatory mortgage lenders and payday lenders and such issues as prepaid credit cards.
David Arkush, director of Public Citizen's Congress watch division, argued Cordray's appointment is legal. "The Senate is effectively on a five-week recess," he said. The pro forma sessions the chamber has been holding every three days "do not bar the president from making a recess appointment.
"Whether the current recess is viewed as five weeks or three days long, it is long enough," he said, adding that Harry Truman and Theodore Roosevelt both made appointments during recesses of three or fewer days.
Also weighing in was Brookings Institution Senior Fellow Sarah Binder, who wrote in a blog: "Although Republicans will likely challenge the appointment in court, it's hard for me to see the Cordray appointment as more than an aggressive use of executive power in face of the opposition's foot-dragging over confirming a nominee to the CFPB. The Constitution doesn't define what constitutes a valid recess for the purpose of the president's proper exercise of the recess appointment power, leaving it open to interpretation."
Binder cited Massachusetts Democratic Sen. Ted Kennedy's challenge to the appointment of William Pryor to the 11th Circuit Court of Appeals in 2004 on the seventh day of a 10-day intrasession recess. The move was upheld with the constitutional ambiguity of a "recess" cited.
The White House offered its view Wednesday morning in a blog by Communications Director Dan Pfeiffer, who described pro forma sessions as "a gimmick" to prevent the president from exercising his authority.
"The lawyers who advised President Bush on recess appointments wrote that the Senate cannot use sham 'pro forma' sessions to prevent the president from exercising a constitutional power," he wrote.
Norman Ornstein, a longtime observer of Congress at the American Enterprise Institute, predicted Republicans will retaliate by blocking all other Obama nominations. As many as half already were being blocked in December 2011, after Obama declined to promise to refrain from holiday season recess appointments, Ornstein said. "There are lots of well-qualified nominees left twisting in the wind, including one for ambassador to Russia, which is in turmoil," he said.
By raising the Cordray nomination as a public issue, "the president has the opportunity to make a bigger issue of the do-nothing Congress, saying it clearly is damaging the national interest."