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President's Recess Appointment of Cordray Gives Watchdog Teeth It Needs

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Kudos to President Obama for standing up for consumers this week by making a recess appointment of former Ohio Attorney General Richard Cordray to head the new Consumer Financial Protection Bureau. The President's action clarifies that the CFPB now has all its powers to protect the public from unfair financial practices, whether by banks or other financial firms, such as payday lenders and credit bureaus.

Since July 21, the CFPB -- a centerpiece of the 2010 Wall Street Reform and Consumer Protection Act -- had been up and running, but without clear full powers. It's the nation's first federal financial regulator with only one job -- protecting consumers -- including seniors, students and servicemembers -- from unfair financial practices.

Now, with a director in place, there can be no dispute that the CFPB has additional abilities that kick in -- including the right to supervise payday lenders, mortgage companies, credit bureaus, debt collectors, private student lenders and other non-banks. It also now has additional powers over banks and credit card companies.

Along with civil rights, labor, senior and consumer groups, we had long urged the Senate to confirm Cordray, the former Ohio Attorney General, to direct the CFPB. Recently, 37 state Attorneys General, on a bi-partisan basis, had sent a letter to the Senate urging confirmation.

Yet, at the behest of both the Wall Street banks and the payday lenders, some Senators had opposed confirmation of any CFPB director. In May, 45 Senators signed a letter to the president and told him that they would block confirmation of any director until and unless the CFPB's independence and authority were first restricted. They want the CFPB weak and powerless and with a tin cup in hand. Then, on December 8, 45 Senators blocked Cordray's nomination. (Final vote: 53 Aye - 45 Nay, but 60 Ayes needed to invoke cloture (defeat filibuster)).

Fortunately, President Obama has acted to protect consumers and rejected these outrageous demands to weaken the bureau.

Opponents were wrong to block appointment of a well-qualified director. They were also wrong to use the confirmation process to seek to eliminate the agency. Any disagreements over the power of the CFPB should be resolved through separate legislation, not by preventing it from doing its job.

Opponents claim that the CFPB is "unaccountable." Actually, the CFPB is already fully accountable to Congress and the American people. Its powers are similar to those of other bank regulators, although more limited in some ways that opponents don't like to admit. For example, while all other bank regulators have independent budgets that they can increase on their own, only the CFPB's independent budget is capped. Only the CFPB's decisions can be vetoed by other regulators.

The CFPB is a new kind of regulator designed to do one job and do it well -- protect consumers. The failure of the old bank regulators to stop predatory lending and other reckless Wall Street practices is widely recognized as a primary cause of the 2008 mortgage meltdown that caused the loss of millions of homes, millions of jobs and trillions of dollars in lost retirement income and triggered the current recession.

Many consumer advocates and experts consider establishment of the CFPB in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act as the most significant consumer financial protection since deposit insurance after the 1929 Great Crash.

Yet, without a director, the CFPB could not fully do its job. Too many members of the Senate failed to do their job, which is to confirm qualified nominees. They backed Wall Street's needs, not the needs of families, soldiers, seniors and students in the financial marketplace. The president did his job with the recess appointment of Richard Cordray to direct the CFPB. Now, the CFPB can do its job, protecting consumers from unfair financial practices.