In a Senate banking panel hearing, Richard Cordray tried to ease Republican… (Joshua Roberts, Bloomberg )
Reporting from Washington — President Obama's nominee to head the new Consumer Financial Protection Bureau vowed to be accountable to Congress, but his confirmation was stalled by Republicans who worried more about the power of the position than who fills it.
At a Senate Banking Committee hearing Tuesday, GOP members cordially greeted former Ohio Atty. Gen. Richard Cordray but cautioned that there was little he could do to overcome the nearly unanimous opposition by Senate Republicans to filling a job they believed was far too powerful.
"I'm sure that you have a good background ... but you're caught between a big substantive debate," Sen. Richard Shelby (R-Ala.) told him. "And that's going to have to be resolved, I think, before we move this nomination farther."
The stalemate over confirmation of a director is preventing the agency, which began operations in July, from exercising all the new authority granted to it by last year's sweeping reform of financial regulations.
That has sparked anger from Democrats and the White House and accusations that Republicans are misusing the nomination process to fight a legislative battle they lost last year over the agency's powers.
"In my opinion, Mr. Cordray's background and his experience show he's the epitome of a public servant," said Sen. Charles E. Schumer (D-N.Y.). "And it will not only be bad for consumers if his nomination is hijacked, it will be bad for the country if he continues to be treated as a pawn in a cynical Washington game."
The agency was created to consolidate consumer protection powers from seven federal agencies that are widely believed to have failed to do their jobs in the years leading up to the subprime mortgage crisis and the Great Recession.
But nearly all congressional Republicans and much of the financial industry opposed the agency, arguing it would wield too much power over banks and other companies and limit the availability of credit cards, loans and other products.
"The director will single-handedly determine the financial products consumers can buy, as well as which consumers have access to credit and which do not," said Shelby, a leading opponent of the agency. "It is staggering the amount of control the director will exert over the daily financial choices available to Americans."
His five-minute opening statement did not even mention Cordray.
In May, 44 Senate Republicans — enough to mount a successful filibuster — vowed to block the confirmation of any nominee to head the agency unless major changes were made in its structure. Those changes include replacing the single director with a five-member bipartisan commission and making it easier for other banking regulators to overturn the director's decisions.
Senate Democrats and the White House oppose those changes. Despite the filibuster threat, Obama moved ahead with a nomination.
The confrontation is significant for consumers because the law doesn't allow the bureau, without a Senate-confirmed director, to use some of its broad powers, such as regulation of mortgage brokers, payday lenders and other largely unregulated parts of the financial system.
Cordray tried to ease Republican concerns.
He promised to be accountable to Congress, avoid imposing too many burdens on community banks and avoid being overly aggressive in taking on banks and other financial institutions.
He said he would use government lawsuits "judiciously" after learning in Ohio that they can be "a very slow, wasteful and needlessly acrimonious way to resolve a problem."
"My main objectives in consumer protection, in particular, were to help empower people to make better-informed financial decisions for themselves and their families and to stop the scams and frauds that not only cheat consumers but also undercut law-abiding businesses," he said.
Cordray, 52, was one of the most aggressive state officials in taking on banks and mortgage companies after the crash of the housing market, and he touted that experience Tuesday. He was hired last year to be the head of enforcement for the consumer bureau after narrowly losing reelection in Ohio last fall.
Obama nominated Cordray in July after administration officials became convinced that former Harvard Law School professor Elizabeth Warren could not overcome strong Republican opposition if chosen to be the agency's first director. A darling of liberals, Warren originally proposed the creation of a consumer agency in 2007 and was appointed as a special administration advisor last year to help launch it.
She stepped down after Cordray's nomination to return to teaching at Harvard.
But Republicans reiterated Tuesday that they would oppose Cordray and any other nominee unless the agency's powers were curtailed. Sen. Sherrod Brown (D-Ohio) said blocking a nomination to force changes in law was unprecedented.
"Nobody questions his qualifications, his background," Brown said. "They only want to block his nomination, or anybody else's nomination, simply because they don't like the agency."
Consumer and public interest groups called on senators to confirm Cordray's nomination.
"It's time for Congress to set aside politics and confirm Richard Cordray so the CFPB can fully protect consumers," said Pamela Banks, senior policy counsel for Consumers Union. "Holding up this nomination may be good for the big banks and shady lenders, but not for the families whose finances are drained by high-cost loans and other unfair financial practices."
The U.S. Chamber of Commerce, however, said there were still many unanswered questions about the bureau's "unique and ill-advised structure" and urged senators to "press for stronger checks and balances" for its operation.