WASHINGTON – The new Consumer Financial Protection Bureau has too much unfettered power and President Obama's choice to lead it will be blocked until the agency is made more accountable, Senate Republicans said Tuesday.
At a Banking Committee confirmation hearing on Richard Cordray's nomination, Republicans did not assail the credentials of the president's pick, a former Ohio attorney general. Instead, they complained that the bureau's director will have too much independence and said other federal financial regulators would be unable to curb the agency's actions, even if its rulings threaten to cause instability in the banking system.
"You're caught between a big substantive debate here, as you well know," the panel's top Republican, Sen. Richard Shelby of Alabama, told Cordray. "That's going to have to be resolved, I think, before we move this nomination farther."
Democrats said the bureau's authority was comparable to other federal regulatory agencies. They said the GOP was breaking new ground in blocking a nomination because they oppose the agency involved, and said their delays were scuttling the agency's ability to protect consumers who borrow money or make other financial transactions.
"The misleading claim of no CFPB accountability -- drummed up by special interests and put forth by a vocal minority -- should be exposed for what it is: An attempt to destroy the bureau's ability to do its job of protecting American consumers," said Sen. Tim Johnson, D-S.D., the banking panel's chairman.
The clash echoed the fight over legislation regulating Wall Street -- and creating the new agency -- that the president and Democrats pushed through Congress last year in response to the 2008 financial crisis. It is also a front in the broad partisan battle over the stalled economy and Obama administration efforts to use federal spending and regulations to revive it, a debate that will be pivotal in next year's presidential and congressional elections.
"There could not be a worse time to give an unelected and unaccountable bureaucrat a blank check to impose even more ill-considered rules that could further undermine our weak economy," Shelby said.
Johnson also tried using the economy to his advantage, saying, "The stability of our financial system, and of our economy, is simply too important to be put at risk by political games."
The agency is designed to protect consumers taking out loans, using credit cards and making other financial transactions. By law, the bureau cannot exercise all its powers without a director, including issuing new rules for payday lenders and other financial firms that are not banks.
Obama nominated Cordray, 52, to head the bureau in July, just as it was opening its doors for the first time. The president had appointed consumer advocate Elizabeth Warren to help set up the bureau, but decided not to nominate her to become its director in the face of strong opposition from Republicans, who considered her too much of an activist.
Republicans said the bureau's director will have too much discretion to determine which financial instruments it will curb, which rules it will issue and which lawsuits it will instigate.
"The director's decisions will impact whether Americans can buy a home, a car or even basic household goods," Shelby said.
GOP lawmakers from both chambers want several changes, including replacing the bureau's director with a bipartisan commission, making it easier for other financial regulators to overrule the bureau and giving Congress direct power over the agency's budget. Currently, the bureau gets its money from the Federal Reserve, of which it technically is a part.
In May, 44 Senate Republicans signed a letter saying they will oppose any nominee without a revamping of the bureau that would include such changes. Democrats who control the 100-member Senate can only count on 53 votes to end delaying tactics -- seven short of the 60 needed to do so.
"Almost all of this would go away if the administration would just sit down and put appropriate checks and balances in place," said Sen. Bob Corker, R-Tenn.
Democrats said the president can fire the director, pointed out that some other regulatory agencies have single directors and noted that the Wall Street overhaul law already allows a panel of other financial regulators to overrule the bureau.
"They only want to block his nomination, or anybody else's nomination, simply because they don't like the agency," said Sen. Sherrod Brown, D-Ohio. "They apparently don't want a consumer agency to be representing consumers."
Cordray has been the bureau's enforcement chief in recent months, and as Ohio attorney general brought headline-grabbing lawsuits against some of the country's biggest banks over their foreclosure practices. Amid rumblings that he might be interested in running for higher office in Ohio, Cordray told the senators that he has "no plans to run for any political office."
Cordray said his experience as Ohio attorney general taught him that litigation can be slow, costly and unnecessarily acrimonious. He said he would use lawsuits "judiciously," and noted that the bureau has other powers to resolve problems, including issuing rules, writing reports and examining large banks and many non-bank institutions.
In a bid to reach out to Republicans, Cordray also said that if confirmed, "I promise that you will have one person who will always be accountable to you for how we are carrying out the laws laid down by Congress and I will always be keenly interested in your thoughts about how we should do our work."