U.S. Senate Republicans on Friday pledged to block President Barack Obama’s choice to lead the consumer finance watchdog until Democrats agree to restructure it, ramping up an expected fight this year over the controversial new bureau.
The group of 43 Republicans, led by minority leader Mitch McConnell of Kentucky and Mike Crapo, an Idaho senator who is the top Republican on the banking committee, said the Consumer Financial Protection Bureau lacks congressional oversight.
Last week, Obama re-nominated Richard Cordray to lead the bureau. Cordray received a temporary appointment as director last year, but his position expires at the end of 2013.
“As presently organized, the CFPB is insulated from congressional oversight of its actions and its budget,” the Republicans said. “Far too much power is vested in the sole CFPB director without any meaningful checks and balances.”
The consumer bureau, which was created by the 2010 Dodd-Frank financial oversight law to oversee mortgage lending and other sectors that played a role in the 2007-2009 financial crisis, was controversial before it even opened its doors.
Republicans and business groups have criticized the bureau’s broad authority over a wide range of financial products, and they want it to be funded by congressional appropriations rather than through the Federal Reserve.
Republican senators blocked confirmation of a director when the bureau opened in July 2011, saying it should be led by a bipartisan board rather than a single director.
Obama used a procedural maneuver known as a “recess appointment” to install Cordray at the helm in January 2012. But business groups and Republicans pilloried the move because they said Congress was not in recess at the time, instead holding short meetings every few days with only a few lawmakers present.
One day after Obama nominated Cordray for a full term, an appeals court added fuel to the opposition when it ruled that similar recess appointments Obama made to another regulatory body were unconstitutional.
That ruling did not directly involve Cordray, but experts said the same logic could be used to challenge his appointment.
‘POLITICS AT PLAY’
Democrats showed no signs of giving ground and allowing changes to the CFPB in exchange for Cordray’s confirmation.
“The CFPB enjoys overwhelming public support, and there is no evidence that the bureau is unaccountable and that structural changes are necessary,” Senate Banking Committee Chairman Tim Johnson, a Democrat from South Dakota, said in a statement.
“Calls for changes to the CFPB are just politics at play,” he said.
Democrats argue the bureau needs independence to guarantee that consumers’ interests are not overwhelmed by well-funded Wall Street lobbying.
“The establishment of the Consumer Financial Protection Bureau was to make sure that average Americans, who do business with and have dealings with financial institutions, have somebody in Washington looking out for their interest,” said White House spokesman Jay Carney, who was asked about the issue during a briefing for reporters.
He said he was not aware of the letter.
For the most part, Republicans and business groups have said they do not oppose Cordray personally, saying he has been accessible and the bureau has tried to incorporate comments from both industry and consumer advocates in its rules.
But the senators said “common sense reforms” are needed before they will confirm anyone to lead the bureau.
In addition to changing the structure and funding of the bureau, the Republican senators want to allow federal bank regulators to verify that any new CFPB rules would not harm the safety and soundness of banks.
They made the same demands in a 2011 letter. Senator Jerry Moran, a Kansas Republican, on Friday introduced legislation he had initially announced in 2011 that would make those changes.
(Reporting By Emily Stephenson, Additional reporting by Roberta Rampton; Editing by Neil Stempleman and Leslie Gevirtz)