Senate Republicans on Monday promptly rejected President Barack Obama's nomination of Richard Cordray to run the Consumer Financial Protection Bureau, a move that is likely to severely limit the power of the new federal agency.
There was some speculation that Cordray, a Democrat and former Ohio attorney general, would receive a friendlier reception from the GOP than Elizabeth Warren did. A White House adviser who helped design the CFPB, Warren is popular among liberal advocacy groups and was thought to be Obama's first choice. Moving on to Cordray has not swayed Republicans, for whom Warren has been a lightning rod.
But Warren has not been the chief problem for GOP Senators, who have repeatedly insisted that Obama make specific changes to the CFPB before they remove their blockade on any nominee to run the agency.
"For months he has ignored Republican concerns about the lack of accountability at the [CFPB] and its potential adverse effect on the economy. Until President Obama addresses our concerns by supporting a few reasonable structural changes, we will not confirm anyone to lead it. No accountability, no confirmation," Senate Banking ranking member Richard Shelby (R-Ala.) said in a statement provided to Roll Call.
The CFPB is charged with protecting consumers by regulating their interaction with financial institutions, such as banks and credit card companies. But Republicans believe that the financial regulatory overhaul law that created the agency gave it too much unchecked power.
Blocking Cordray — or any other nominee — will have the effect of denying the CFPB the ability to regulate non-banks, such as pay-day lenders and student loan providers. Because of how the financial overhaul law was written, an agency director is needed to implement those regulations.
"Until a Director is in place, the CFPB will not be able to level the playing field for responsible community banks and credit unions," Senate Banking Chairman Tim Johnson (D-S.D.) said in a statement, acknowledging that the new agency will be hamstrung without a director.
In May, 44 of the 47 Senate Republicans, including Minority Leader Mitch McConnell (Ky.), sent a letter to Obama vowing to block any nominee to serve as director of the CFPB absent key changes, including eliminating the director's position in favor of a board and forcing the agency to be dependent on Congressionally appropriated funds for its operating budget.
But since news of Cordray's nomination broke Sunday and was announced Monday afternoon, the administration has yet to reach out to Shelby or other top Republicans on this issue, according to Republican sources. Cordray has assisted Warren in setting up the CFPB, which the law requires to be fully operational within one year of being enacted. That anniversary is Thursday.