Consumer bureau gets new lease on life with Senate vote
With Richard Cordray’s confirmation as director, the Consumer Financial Protection Bureau will be able to exercise its full authority over large banks and a range of non bank financial firms, including payday lenders and mortgage originators.
WASHINGTON — The Senate on Tuesday confirmed Richard Cordray as director of the Consumer Financial Protection Bureau, ending a nearly three-year fight that cast a pall over the agency created by the 2010 Dodd-Frank Act.
The 66-34 vote lifts the threat of legal challenges to the bureau’s rules and enforcement actions since some of the agency’s powers, including those over non-bank financial firms, take effect only under a confirmed director.
“The political stalemate is over,” said Sen. Elizabeth Warren, the Massachusetts Democrat who conceived the idea for the agency and was President Obama’s first choice to lead it. “There is no doubt the consumer agency will survive beyond the crib.”
Banks and financial firms opposed the bureau, which was established with the explicit aim of regulating the kind of risky consumer financial products that contributed to the 2008 financial crisis.
Over the last three years, Republicans attacked the agency for being unaccountable and overly powerful, for spending too much money, and for collecting too much data on consumers.
A Senate deal on Cordray averted a showdown Tuesday over a potentially historic overhaul of the filibuster maneuver, a longstanding delaying tactic used by the minority party.
In exchange for acting on Cordray, Democrats and the White House agreed to withdraw two National Labor Relations Board nominees who were Obama’s recess appointments and replace them with new choices.
Senators will move toward confirmation votes on several of Obama’s other nominees, including Gina McCarthy to head the Environmental Protection Agency, Thomas Perez as the secretary of labor and Chairman Mark Gaston Pearce for another term on the National Labor Relations Board.
The deal came after days of acrimony over Majority Leader Harry Reid’s threat to change the filibuster rules if Cordray’s nomination didn’t achieve the 60-vote threshold required to proceed to confirmation.
“We are pleased that the majority decided not to exercise the nuclear option,” said Minority Leader Mitch McConnell, R-Ky, referring to Reid’s threat to open up a Pandora’s box of partisan tit-for-tat.
For days, Reid implied he’d pursue the so-called nuclear option, a complicated maneuver to change Senate rules to make it more difficult for the minority party to filibuster nonjudicial nominees and easier to confirm them by simple majority votes.
The Nevada Democrat said the move was necessary because of what he viewed as Republican obstruction of Obama’s nominees, including unsuccessful filibusters of Defense Secretary Chuck Hagel and CIA Director John Brennan.
Senators retreated to the ornate old Senate chamber Monday night in a last-ditch effort to avert Reid’s pulling the option trigger. Lawmakers emerged from a 3½-hour meeting without a deal, but they continued to talk.
Seventeen Republicans and two independents joined with all Senate Democrats in voting to advance Cordray’s nomination.
Some senators remain wary of an outbreak of bipartisanship blossoming from Tuesday’s deal.
“While this addresses an immediate need for the president of the United States to have his Cabinet and other senior officials confirmed,” said Sen. Bernard Sanders, a Vermont independent, “we should be clear that the agreement only addresses one symptom of a seriously dysfunctional U.S. Senate.”
Sen. Bob Corker, R-Tenn., said he would still push for changes to the consumer bureau’s structure, which he said could come if his party becomes the Senate majority after elections in November 2014.
Sen. Jeff Merkley, D-Ore., said the Senate deal ensures the consumer bureau will take shape as the authors of Dodd-Frank intended.
“For two years, since it was formed, there has been a battle over whether it would be fully formed and become a part of the landscape, the executive branch landscape, defending the rights of Americans against predatory practices,” Merkley told a group of reporters.
Republican senators refused for more than two years to permit a confirmation vote on Cordray, demanding that the bureau be restructured to put more curbs on the director’s power and impose congressional controls over its budget.
“They don’t like the fact that this first-ever financial watchdog with the explicit mission of protecting consumers instead of bankers is doing exactly what it is supposed to,” said Lisa Donner, executive director of Americans for Financial Reform, an umbrella group of labor unions, civil-rights groups and consumer advocates.
The agency was popular with the public, in part because of the unpopularity of the large banks that got federal bailouts from the financial crisis, according to a new poll by Washington, D.C.-based Lake Research Partners.
Eight in 10 voters support the bureau’s work, according to the poll, which was conducted among 1,004 likely voters from July 8 to 11, and has a margin of error of 3.1 percentage points. Public support cuts across party lines, the poll found, with 91 percent of Democrats, 71 percent of Republicans and 79 percent of independents backing the agency.
Through enforcement actions against companies including Capital One, American Express and U.S. Bancorp, the consumer bureau has returned more than $432 million to defrauded consumers.
It has also set up a system for registering complaints with banks, student lenders, credit bureaus and debt collectors, a tool at least 125,000 people have used since its inception a year ago.
The agency has also written rules aimed at cleaning up the mortgage market that was at the heart of the financial crisis. The new regulations cover underwriting, servicing and loan-officer incentives.
With Cordray’s confirmation, the bureau will be able to exercise its full authority over large banks and a range of non-bank financial firms, including payday lenders and mortgage originators, without any legal threat to its authority.
Dodd-Frank gave the bureau authority to supervise banks with more than $10 billion in assets. It can also write regulations and enforce laws to protect consumers from abusive practices.
Michael Thurman, an attorney with Loeb & Loeb in Los Angeles, said confirmation would “eliminate any doubts” about the agency’s authority. Cordray, a former Ohio attorney general, will use it, Thurman said.
Obama first nominated Cordray in July 2011 when it became clear Warren would not win Senate confirmation. After a first Senate procedural vote failed that December, Obama installed Cordray as director a month later, using a so-called recess appointment, which bypasses Senate confirmation.
Later this year, the Supreme Court is expected to hear a legal challenge to recess appointments Obama made the same day to the NLRB, a case that critics said could have been used to invalidate Cordray’s appointment as well.
Includes material from McClatchy Washington bureau