On Friday, 43 Senate Republicans -- as they did in the last Congress -- again sent the President a letter saying they would not confirm Richard Cordray to a full term as Consumer Financial Protection Bureau (CFPB) director unless the agency's powers and independence were first gutted. Their intransigence means more market uncertainty that further delays recovery from the Wall Street-induced worldwide economic collapse of 2008. It also ignores the views of a growing number of responsible financial industry leaders who know at least three things the Senators either don't know or don't care about.
First, the financial industry now knows that the CFPB's actions in Director Cordray's first year as a recess appointee have been fair and balanced. He and the bureau have been accessible, careful and transparent.
Second, the banks and other firms know that delaying his confirmation -- especially under the specter that a recent "radical" appellate decision concerning the National Labor Relations Board may eventually lead to voiding his recess appointment entirely -- adds uncertainty to the marketplace that hinders their ability to make loans and offer new products that can build the economy. Senate approval of Cordray makes that uncertainty go away.
Third, the banks know that they lose and predatory payday lenders and other non-banks win if the director's appointment is voided by the courts. Big banks are fully regulated by the CFPB regardless of whether it has a confirmed director. On the other hand, the bureau's full powers over non-banks -- including payday lenders, credit bureaus, mortgage companies and others -- may only be exercised with a director in place. That situation would create an unlevel playing field that harms consumers, markets and good actors, since the CFPB was intended to protect you no matter where you purchase your financial products (at a bank or a non-bank). (Note that at least one leading CFPB expert at the National Consumer Law Center believes the CFPB has all its authority regardless of whether it has a director.)
But those 43 Senators opposed to consumer protection don't recognize any of these points. Instead, they are presuming that the court decision adds impetus to continue their reign of uncertainty. But as Public Campaign suggests, the $143 million in Wall Street campaign cash those opponents have received probably doesn't hurt, either.
In 2008, Congress used taxpayer dollars to bail out the big banks. While the bailout saved Wall Street, it didn't save the economy. In 2010, Congress finally enacted sweeping reforms intended to prevent another collapse with passage of the Wall Street Reform and Consumer Protection Act (more in U.S. PIRG's Wall Street Reform Guide).
A centerpiece of that reform was establishment of the CFPB as the first federal financial regulator with only one job -- protecting consumers. Since 2010, House and Senate opponents of consumer protection (although the Senate letter brazenly claims to be from consumer protectors) have attempted to turn back the clock and re-litigate the creation of the CFPB.
As Mike Konczal of the Roosevelt Institute explains in his blog, and Professor Arthur Wilmarth details in a law review article, arguments that the CFPB is unaccountable are specious. First, the new agency was given the same independent funding as the other bank regulators (actually, CFPB is already less independent, since only the CFPB's funding has a hard cap ceiling, while the other regulators can raise additional funds without Congressional authority). Second, its single director structure is not unique; the most important of the other bank regulators, the Office of the Comptroller of the Currency (OCC), also has a single director. Further, only the CFPB's decisions are subject to a unique veto power by other regulators. And, only the CFPB is subject to additional small business regulatory requirements before it can take action.
Regardless, the Senate opponents again want to condition Cordray's confirmation on further limiting the CFPB's authority to protect the public. First, they want the CFPB to be the only bank regulator subject to the highly-politicized Congressional appropriations funding process. That makes Wall Street lobbyists more powerful. Second, they want to convert its single director to a 5-member commission. That's a debatable policy question, but it has already been asked and answered. Finally, they want to strengthen the existing one-of-a-kind authority of the other regulators to veto CFPB's decisions. Again, we've been there and done that.
Holding Director Cordray's nomination hostage to unreasonable policy demands can have only result: greater uncertainty that harms consumers, banks, the economy and the democratic process. In 2010, all these demands were considered and defeated. Yet, the minority of Senators persist in their unreasonable demands to tie the confirmation to policy changes, despite growing evidence that their views are those of an ever-diminishing minority.
- Consumers Back the CFPB: Two recent polls, one by Consumers Union and one by Americans for Financial Reform, AARP, the Center for Responsible Lending and National Council of La Raza, have demonstrated continuing overwhelming consumer support -- across party, across age, across race and across income -- for the CFPB.
- Small Businesses Back the CFPB: Eighty-four percent of small business owners (a majority of them Republicans) support the bureau, according to another new survey.
- Industry Officials Are Backing the CFPB: Many financial industry leaders have praised CFPB as a fair and reasonable regulator. And David Stevens, the president of the Mortgage Bankers Association, for example, recently paid tribute to “the deliberative, inclusive, transparent process” of its work on rules to prevent a resurgence of the unaffordable mortgages that produced the 2008 financial crisis and the foreclosure epidemic.
It's worth noting that most of those advocating or “predicting” a deal to weaken the CFPB are not bank employees or even staff of industry trade associations. Instead, they’re self-interested lawyers and lobbyists (who prefer and profit from endless political and legal uncertainty) and their friends on Capitol Hill. This situation arises for only one reason – because a minority of Senators, nearly all of whom who voted against financial reform and against the CFPB’s creation, are now trying to hold the President’s well-qualified nominee hostage to their efforts to nullify the law and eviscerate a duly created, badly needed, effective consumer protection agency.
Any Senators who oppose a simple up-or-down vote on this nomination – or who try to bargain for weakening changes in the CFPB – are playing politics with the pocketbooks of the American people and the safety of our economy. There should not be any negotiating with those who hold that dangerous and untenable position.
By the way, several Senators who signed the letter linking Cordray's confirmation to their unreasonable political demands, including John McCain (AZ), Roy Blunt (MS), Susan Collins (ME) and Richard Burr (NC), have argued that they will oppose a filibuster on Chuck Hagel, the nominee for Secretary of Defense. Blunt, who opposes Hagel, went so far as to say, according to the New York Times:
“For a cabinet office, I think 51 votes is generally considered the right standard for the Senate to set, and at that level, I think he makes it,” Senator Roy Blunt of Missouri, a member of the Republican leadership, said Friday on Fox News, even as he announced his opposition to Mr. Hagel."
Why propose to use the 60-yeas-required filibuster rule to fight one nomination and not the other? Why Cordray but not Hagel? Their inconsistency has no justification except to continue the reign of uncertainty they have placed over the CFPB's efforts to protect consumers and markets.
Kudos to President Obama and Senate Banking Chairman Tim Johnson, who've both pledged to fight for Cordray's confirmation without accepting the demands in the opponents' letter. The opponent-senators face a simple choice: they can change their views and allow an up/down vote on Richard Cordray’s nomination -– or they can continue to demand the unreasonable policy changes that were defeated in 2010. Their insistence on weakening the CFPB serves Wall Street, but not consumers who want protection no matter where they purchase their financial products. Their insistence on weakening the CFPB serves payday lenders, but not the banks that will be regulated no matter what.
Take a look at the CFPB's website and at what it has done for consumers and markets in the year-and-a-half since it started work in July 2011 and the year since it has had a director. It is taking complaints from financial customers, fining banks that break the law and returning ill-gotten gains to their customers, cleaning up the mortgage marketplace, providing mortgage and student loan customers with "know before you owe" tips, protecting servicemembers and their families from rip-offs and even regulating the previously-mysterious credit scoring marketplace. It's doing all this with a refreshing candor and transparency and outreach to the public and financial firms, while submitting to innumerable oversight hearings on Capitol Hill. The CFPB should be allowed to go forward, under current law and under the direction of Richard Cordray, who deserves immediate Senate approval for a full term.