December 8, 2011 8:40 pm

Republicans block consumer finance nominee

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Senate Republicans have blocked President Barack Obama’s choice to lead a new consumer finance regulator, setting the stage for an election year battle over the direction of financial reform.

The confirmation of Richard Cordray, a former Ohio attorney-general who has sued big US banks for alleged mortgage misdeeds, was prevented because supporters failed to muster the 60 votes needed under Senate rules to end debate and proceed to a final majority vote on the issue. Of the 100 senators, 53 are Democrats and aligned independents.

Mr Cordray was nominated to lead the Consumer Financial Protection Bureau (CFPB), an agency created by last year’s Dodd-Frank financial reform law. The bureau, which consolidated powers from a variety of regulatory agencies, is meant to protect borrowers from abusive lenders.

Mr Obama in recent weeks has adopted a more populist tone and tried to portray Mr Cordray’s confirmation vote as an example of an obstructionist Republican Party devoted to protecting the interests of financial institutions and the wealthy at the expense of the middle class.

“This is a big deal,” Mr Obama said of Thursday’s vote. “We’re going to keep on going at it. We are not going to allow politics as usual on Capitol Hill to stand in the way of American consumers being protected by unscrupulous financial operators.”

The outcome was not unexpected. Senate Republicans have long opposed the creation of the consumer regulator and earlier this year pledged to block any nominee until the agency’s structure was altered, its budget pared back and its authority limited. Democrats scheduled a vote anyway, a part of their election-year strategy.

As part of its public push, the White House released a report on Sunday highlighting the industries, such as so-called payday lenders, that continue to escape oversight due to the lack of an official leader for the new agency. The White House has been aware of the problem since January, when a Treasury report detailed the restraints caused by the lack of a confirmed chief. The White House declined to devote much public attention to the issue until this month.

Analysts say the White House may bypass the Senate and appoint Mr Cordray on an interim basis when the Senate goes on holiday through a manoeuvre known as a recess appointment. However, the House of Representatives has stymied the Senate from going on an official recess through a previously little-used manoeuvre, hampering Mr Obama’s chances of making recess appointments.

Asked if he would bypass the Senate for Mr Cordray, Mr Obama replied: “I will not take any options off the table”.

Harry Reid, Senate Democratic leader, said: “This was the first time in Senate history a party blocked a qualified nominee solely because it disagrees with the existence of an agency that was created by law.”

Elizabeth Warren, a Harvard bankruptcy professor now seeking to represent Massachusetts in the Senate, conceived of the agency and led the charge for its creation. Mr Obama however declined to nominate her to lead the consumer bureau, disappointing his supporters.

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