President Won’t Take No for Answer on Cordray

Will President Obama finally appoint Richard Cordray as director of the Consumer Financial Protection Bureau during the next congressional recess, which will begin by Jan. 3?

Will President Obama finally appoint Richard Cordray as director of the Consumer Financial Protection Bureau during the next congressional recess, which will begin by Jan. 3?

Or will the debate continue in Congress? As expected, the Senate voted against the nomination on Dec. 8, falling seven votes short of the 60 needed. Sen. Lindsey Graham (R-S.C.) even made the comment that the CFPB is like “something out of the Stalinist era.”

“Some people think the Obama campaign will delay moving quickly on Cordray so that the president can enjoy the benefits of the fight longer. It fits right in with his new narrative about fighting for a fair economy,” wrote David Arkush, director of Public Citizen’s Congress Watch division.

Bloomberg reports that the Senate will once again attempt to remain “open” so that the President can’t make a recess appointment. Senate Majority Leader Harry Reid (D-Nev.) has kept the Senate in session on a pro-forma basis during recesses through all of 2011. (A glance at the Senate calendar shows pro-forma sessions scheduled through Jan. 20.)

A spokesman for House Speaker John Boehner (R-Ohio) said that chamber was not expected to go into recess, either.

In his Dec. 10 radio address, Obama said he refuses to take no for an answer on Cordray and urged members of Congress not to go home for the holidays until they confirm him. “Financial institutions have plenty of high-powered lawyers and lobbyists looking out for them. It’s time consumers had someone on their side,” he said.

The President is serious enough about Cordray that the White House issued a white paper titled Improving Americans’ Security: The Importance of a CFPB Director.

In it, the Obama administration says:

CFPB’s inability to exercise its full authority while it awaits a Director affects the lives and financial security of tens of millions of American families who rely on non‐bank financial institutions for their financial needs. … A CFPB without its full authorities is also hamstrung in its ability to help level the playing field between small banks and nonbank financial service providers. For too long, banks were playing by one set of rules, while other parts of the financial industry, like some payday lenders or independent mortgage brokers, were playing by another, often with little or no oversight.

The rest of the report provides statistics on the impact of non-bank financial services providers, and looks at specific industries, including payday lending, money services businesses, prepaid card providers, non-bank mortgage lenders and servicers, debt collectors, and credit bureaus. In keeping with CFPB’s stated priorities, the report also describes how service members, older Americans, students and Latinos are adversely affected by non-banks.

In an interview published in American Banker on Dec. 14, CFPB interim head Raj Date said, “Obviously without a director, we are behind where I would like us to be in terms of our non-depository supervision.” He continued:

During the course of the credit bubble, many of the most problematic mortgages were originated not by banks, and not for banks and credit union and thrift balance sheets, but originated by non-banks on the one hand, and executed in the capital markets either by the GSE’s or by the street on the other. But already memories of the importance of non-depositories in consumer finance are starting to fade. But they haven’t faded for us, and in my mind it’s a shame that we’re not executing non-depository supervision today.

Fredrikson & Byron Law