President Obama will nominate former Ohio Atty. Gen. Richard Cordray to head the new agency to protect consumers in the financial marketplace, acting just days before it is set to begin operations.
After months of speculation about who would lead the powerful Consumer Financial Protection Bureau, the White House announced Sunday that Obama decided to bypass Elizabeth Warren, the liberal Harvard law professor who in 2007 proposed creating the agency. She has been working as a special administration advisor for nearly a year preparing the agency for launch Thursday.
Warren, an outspoken consumer advocate who has drawn Republican ire, was seen as too controversial to be confirmed by the Senate. Obama opted for Cordray, who lost his reelection bid in Ohio last fall and was hired by Warren this year to be head of enforcement for the consumer agency.
“Richard Cordray has spent his career advocating for middle-class families, from his tenure as Ohio’s attorney general to his most recent role as heading up the enforcement division at the CFPB and looking out for ordinary people in our financial system,” Obama said Sunday.
But Cordray’s nomination also faces problems in the Senate.
In May, 44 Senate Republicans — enough to mount a successful filibuster — vowed to block any nominee to head the agency unless Obama agreed to major changes to its structure. In particular, Republicans believe the director, who has a five-year term, is too powerful and they want the position replaced by a bipartisan five-member board.
While Cordray isn’t nearly the lightning rod that Warren is, his nomination still comes without those changes, which the White House has said it opposes.
Sen. Richard Shelby (R-Ala.), who has led the Republican opposition to the consumer agency, said Sunday that the promise to block any nominee still stands. “Until President Obama addresses our concerns by supporting a few reasonable structural changes, we will not confirm anyone to lead it. No accountability, no confirmation,” Shelby said. The consumer agency was the centerpiece of last year’s overhaul of financial regulations. It will take over enforcement of consumer financial protection laws from banking regulators, who have been criticized for failing to use their power in the years leading up to the financial crisis.
The agency also will have broad new authority to regulate mortgage brokers, payday lenders and other financial institutions outside the banking system that have been accused of preying on consumers and helping contribute to the financial crisis.
But the agency begins operations Thursday with limited power. It can enforce consumer financial protection laws that existed before last year’s Dodd-Frank financial reform law was enacted. But it cannot use the new power granted in that law, which includes the ability to ban products or practices found to be “unfair, abusive or deceptive,” until a director is in place.
Cordray, whose nomination formally will be announced Monday, could not be confirmed by Thursday even if he had broad support.
With Republicans still vowing to block the nomination, Obama could try to install him without confirmation during the next Senate recess, a controversial practice known as a recess appointment.
But Republicans have tried to avoid such appointments for the consumer agency and other key vacant positions by blocking the Senate from going into a formal recess.
Obama on Sunday thanked Warren for her “extraordinary work” in preparing the agency for operations and for her “years of impassioned leadership” on consumer protection.
“This agency was Elizabeth’s idea, and through sheer force of will, intelligence and a bottomless well of energy, she has made, and will continue to make, a profound and positive difference for our country,” Obama said.
Warren praised the choice of Cordray.
“Rich has always had my strong support because he is tough and he is smart — and that’s exactly the combination this new agency needs,” said Warren, who reportedly has been approached by Democrats to challenge Sen. Scott Brown (R-Mass.) next year were she not to get the consumer agency job. “He was one of the first senior leaders I recruited for the agency, and his work and commitment have made it clear that he will make a stellar director.”
Liberal organizations had pushed hard for Warren to head the agency. Stephanie Taylor, co-founder of the Progressive Change Campaign Committee, which collected more than 350,000 signatures for an online petition supporting Warren’s nomination, said her group would support Cordray.
“With her track record of standing up to Wall Street and fighting for consumers, Elizabeth Warren was the best qualified to lead this bureau that she conceived — and we imagine Richard Cordray would agree, Taylor said. “That said, Rich Cordray has been a strong ally of Elizabeth Warren’s and we hope he will continue her legacy of holding Wall Street accountable.”
Administration officials said Warren would return to Harvard in time to teach in the fall semester.