Republicans Defeat Consumer Watchdog - Showdown Ahead

Senate Republicans, nearly united, blocked the nomination of Richard Cordray to be the first head of the newly-formed Consumer Financial Protection Bureau (CFPB), but President Barack Obama made clear Thursday the fight is not over, that a recess appointment to install his nominee without the consent of the Senate remains a viable option.

"I will not take any options off the table when it comes to getting Richard Cordray in the Consumer Financial Protection Bureau," Obama promised. "My hope and expectation is that the Republicans who blocked this nomination come to their senses. I know some of them have made the argument that well, we just want to make some modifications to the law. Well, they're free to pass a bill."

The root problem Republicans say they have with the nomination is not Cordray, himself, rather the need for major reforms of the watchdog agency, created under the financial industry reform law known as Dodd-Frank, after its lead sponsors. To the contrary, numerous Republicans praised Cordray for his intellect and abilities.

Defending his nominee, Obama told reporters in a hastily-called news conference, "We passed a law last year that said we need this law in place to make sure consumers aren't taken advantage of," adding, "This makes absolutely no sense."

"All today's vote is about is accountability and transparency," Senate GOP Leader Mitch McConnell said, defending the blockade. "It's a debate about whether we think Americans need more oversight over Washington or less."

Republican aides made clear they will fight any attempt to recess appoint Cordray. GOP leaders are expected to insist that the Senate not recess, and instead remain in "pro forma" sessions throughout the holidays. Still, Democratic officials tell Fox that the White House is actively exploring ways to make the appointment.

But one senior Senate GOP aide made clear that such an action could cause bigger problems down the road. "They think relations are frosty now? They'd really be asking for trouble" if the Senate is circumvented, the aide warned.

Democrats focused on the qualifications of Cordray, former Attorney General and Treasurer of Ohio, and what they said was an unprecedented filibuster imposed on a nominee in objection to the actual agency the individual was intended to head. "He has bipartisan support and is imminently well qualified," defended Senate Majority Leader Harry Reid, D-Nev. "He has a long history of protecting consumers against unfair practices by financial predators."

Leading the GOP filibuster, Sen. Richard Shelby, top Republican on the Banking Committee. On Thursday, the Alabama lawmaker accused Democrats of being "more concerned with insulating bureaucrats from accountability and rewarding political allies than looking out for consumers."

Nearly the entire GOP conference, excluding Scott Brown of Massachusetts who supports Cordray, signed a letter more than seven months ago outlining for President Obama what they said needed to be changed in the CFPB before they could support any nominee, and McConnell accused the president of ignoring them to play politics.

"He's suddenly making a push to confirm his nominee, because it fits into some picture he wants to paint about who the good guys are and who the bad guys are here in Washington," McConnell charged.

Republicans demanded, in the letter, that the president appoint a board of directors, rather than a single director; that the agency receive its budget from and be subject to the oversight of Congress; and that rule-making be essentially supervised by a group of federal regulators, as a backstop against agency overreach.

"The agency could sock it to the taxpayer," warned Utah Sen. Orrin Hatch, top Republican on the Finance Committee.

Supporters of the CFPB scoffed at the need for a board and said they were concerned that non-bank lenders, like controversial "pay-day lenders," cannot be regulated without an agency director in place, something Republicans dispute. 

In numerous floor speeches, Democrats echoed the essence of the "Occupy Wall Street" message to fight back against GOP opposition, and a number said they were happy to take this political fight to the American people.

"The allies of Wall Street moved the goal post, time after time," charged Sen. Sherrod Brown, D-Ohio, who has known Cordray for years, noting that Republicans got many of their demands put into the current financial regulatory law. "My colleagues...chose Wall Street special interests over Main Street consumers, and they should be ashamed of themselves."

"Republicans...would leave consumers without a watchdog to guard against the greed of Wall Street," Reid accused. "That's unfortunate."

"This is a family values' issue...but today, the 1% won," cried Sen Jeff Merkley, D-Oreg.

"Clearly, they want to use the bureau as a political issue," Shelby charged.