Senators Wrangle Over Consumer Protection
Senate Democrats believe their push this week to confirm Richard Cordray to lead the Consumer Financial Protection Bureau will build momentum for their message that they are guardians of the middle class.
“We are going to increase the pressure to get the best vote possible,” a Senate Democratic leadership aide said Monday, arguing that any GOP “no” votes would enable Democrats to argue that Republicans were “pawns of the financial industry.”
“We think this is a bellwether vote to determine if you are on the side of consumers,” the aide said.
Senate Republicans argue the effort is a political stunt geared toward scoring rhetorical points rather than a genuine effort to get Cordray confirmed.
Democrats “have not reached out to Republicans to address our concerns,” including their unease with the amount of power given to the CFPB director under the Dodd-Frank financial regulation law, a Senate GOP leadership aide said.
Senate Democratic leaders have been in discussions with the White House on the nomination for about three weeks.
Senate Majority Leader Harry Reid (D-Nev.) is expected to move to cut off debate on the nomination today, which would set up a vote on Thursday.
It is unclear whether Democrats can win enough Republican votes to overcome a filibuster, which would require 60 votes.
Sen. Scott Brown (R-Mass.) supports Cordray. But 44 of the 47 GOP Senators earlier this year sent a letter to President Barack Obama expressing their concern over the CFPB director’s authority.
The Democratic aide said the move to confirm Cordray and to extend the payroll tax cut is part of the same effort to address income inequality, which Democrats believe will be a defining issue in the 2012 elections. Democrats argue that upper income earners have been the beneficiaries of GOP policies.
Senate Republican aides dismissed the notion that GOP policies favor the upper echelons of society and are anti-consumer.
“Republicans are trying to increase the accountability of a largely unaccountable agency,” a Senate GOP aide said. “I don’t think the [Democratic] argument holds water.”
On Sunday, the White House National Economic Council released a report arguing that a CFPB director is crucial to protect consumers.
“Without a director, the CFPB cannot fully supervise non-bank financial institutions such as independent payday lenders, non-bank mortgage lenders, non-bank mortgage servicers, debt collectors, credit reporting agencies and private student lenders,” the report said.
For example, “some studies have found that payday lenders on average charge fees of roughly $16 for a $100 two-week loan,” the report said. “This translates into an annual percentage rate of roughly 400 percent for borrowers often already struggling with debt. The fact that the CFPB cannot currently supervise payday lenders creates a serious regulatory gap that puts consumers at substantial risk.”
The White House also said Sunday that it would step up outreach on the issue in seven states in particular: Alaska, Indiana, Iowa, Maine, Nevada, Tennessee and Utah.
In these states, the White House intends to articulate “the consumer protections that would be put in place if Mr. Cordray is confirmed and the tangible consequences for families in those states if the Senator who is elected to represent them in Washington, D.C., sides with the financial industry and votes to block his nomination,” Principal White House Deputy Press Secretary Josh Earnest said.
White House officials scheduled a special briefing on Monday for Washington D.C.-based print journalists from these states, and on Thursday, television anchors from these states are expected to interview the president.
“By the end of the week, [the president] will have met with more reporters on the issue than Senators,” a GOP leadership aide said.
Members of the National Association of Attorneys General will also hold conference calls and participate in public events this week in favor of Cordray, a Democrat and former Ohio attorney general.
Last month, more than three dozen state attorneys general, including eight Republicans, signed a letter calling for Cordray’s confirmation.
Mayors and other elected officials from these states are also expected to speak out this week on behalf of Cordray.
But Republicans said that without any effort to address their issues regarding the CFPB director’s authority, they would not back anyone to head the agency.
“Current financial regulators already evade accountability by claiming independence or recusing themselves when they fail,” a spokesman for Senate Banking ranking member Richard Shelby (R-Ala.) said. “The CFPB is unaccountable by design. We will continue to fight for accountability from regulators.”
Republicans believe the CFPB should be set up like other financial regulators, which are run by boards. An example is the five-member Securities and Exchange Commission, the members of which, including one who serves as chairman, are appointed by the president and confirmed by the Senate.
To ensure that such commissions retain partisan balance, no more than three commissioners may belong to the same political party.
Democrats argue that those decisions were made last year when Dodd-Frank was debated and signed into law, and it goes against the will of Congress — and tradition — to hold up the confirmation of a director.
Republicans contend that Congress is different now.
“There are a significant number of people [now] in Congress who want” to change the Dodd-Frank law, a Republican aide said.
Republicans also cite their concern that the CFPB should be funded through the appropriations process, which would give Congress more input over the agency. Currently, CFPB is funded through the Federal Reserve System.