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Obama names watchdog agency head via recess appointment

Republicans howl at president's 'unprecedented' use of power


President Obama appoints former Ohio Attorney General Richard Cordray to head the Consumer Financial Protection Bureau. The recess appointment thwarts — for now — efforts by Republican senators to block the nomination

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Bypassing the U.S. Senate and prompting howls of rage from Republicans, President Obama used a recess appointment Wednesday to name former Ohio Attorney General Richard Cordray to head the federal consumer financial protection watchdog agency.

The president named Cordray to head the Consumer Financial Protection Bureau (CFPB) in Cordray’s home state of Ohio, where he spent more than two decades as an attorney, lawmaker, state treasurer and top law enforcement official. Cordray, 52, is currently the chief of enforcement for the agency that he will now head.

“I refuse to take ‘no’ for an answer,” Obama told a crowd at Shaker Heights High School in Shaker Heights, Ohio. “The financial firms have armies of lobbyists looking out for their interests. You should have somebody looking out for your interests and that’s Richard Cordray …

“Now’s not the time to play politics while people’s liveihoods are at stake,” Obama said. “Now’s the time to do everything we can do to protect consumers and prevent financial crises like the one we’ve been through from ever happening again. That starts with letting Richard do his job.”

The move appears to thwart — for now — efforts by Republican senators to block Cordray from taking the post. Forty-four senators had signed a letter vowing to oppose any nominee unless the CFPB’s powers are diluted. Nominees need at least 60 of the Senate’s 100 votes for approval, so their opposition left the president a few votes shy of what he’d need for a filibuster-proof vote. Opponents of the nomination favor installing a commission rather than a single director to head the agency. They have said their opposition to the appointment will bring about accountability to the agency and has nothing to do with Cordray’s qualifications to lead the bureau.

Senate Banking Committee Chairman Timothy Johnson, a South Dakota Democrat, lauded Obama’s move. “Mr. Cordray is eminently qualified for the job, as even my Senate Republican colleagues have acknowledged. As banking committee chairman, I look forward to working with Mr. Cordray and the CFPB as he moves forward on implementing long overdue consumer financial protections for all Americans.”

He added: “It’s disappointing that Senate Republicans denied him an up-or-down vote, especially when it’s clear he had the support of a majority of the Senate.”

Obama’s recess appointment drew immediate fire from Republicans and is likely to be challenged. According to a Congressional Research Service brief, there is precedence to challenge recess appointments based on the duration of the recess. If the recess is less than three days in length, the U.S. Justice Department has said it may not be valid.

To prevent the president from making any recess appointments, the Senate had been staying in session by holding brief pro-forma meetings with a skeleton crew in the Senate chamber, quickly gaveling themselves in session and gaveling out.

White House spokesman Dan Pfeiffer dismissed the sessions while not in session as a “gimmick.”

“The Senate has effectively been in recess for weeks, and is expected to remain in recess for weeks,” he said in a post on the White House blog. “In an overt attempt to prevent the president from exercising his authority during this period, Republican senators insisted on using a gimmick called ‘pro forma’ sessions, which are sessions during which no Senate business is conducted and instead one or two senators simply gavel in and out of session in a matter of seconds. But gimmicks do not override the president’s constitutional authority to make appointments to keep the government running. Legal experts agree.”

Republicans, bankers cry foul

Republicans didn’t. “Although the Senate is not in recess, President Obama, in an unprecedented move, has arrogantly circumvented the American people by ‘recess’ appointing Richard Cordray as director of the new CFPB,” said Senate Republican leader Mitch McConnell. “This recess appointment represents a sharp departure from a long-standing precedent that has limited the president to recess appointments only when the Senate is in a recess of 10 days or longer. Breaking from this precedent lands this appointee in uncertain legal territory, threatens the confirmation process and fundamentally endangers the Congress’s role in providing a check on the excesses of the executive branch.”

House Speaker John Boehner called the appointment “an extraordinary and entirely unprecedented power grab by President Obama that defies centuries of practice and the legal advice of his own Justice Department. The precedent that would be set by this cavalier action would have a devastating effect on the checks and balances that are enshrined in our constitution … This action goes beyond the president’s authority, and I expect the courts will find the appointment to be illegitimate.”

Frank Keating, president and CEO of the American Bankers Association, the bankers’ trade group, said the appointment “puts the bureau’s future actions in constitutional jeopardy … By abandoning the opportunity to compromise on the governance structure of the CFPB, the potential to create regulatory clarity for our industry, allow for the regulation of nonbanks, and ultimately benefit consumers is damaged.”

Consumer groups applaud

Just as quickly, consumer groups applauded.

“Until now, the CFPB has been fighting mounting consumer financial abuses with one arm tied behind its back,” Travis Plunkett, legislative director of the Consumer Federation of America, said in a statement.

He noted that 16 months have passed since Congress created the CFPB as part of the massive Wall Street reform law. “As Cordray takes over the CFPB, the list of questionable and predatory practices that consumers are coping [with] is growing, and includes: predatory practices targeted at military service members; mortgage foreclosure and servicing abuses; unfair and high-cost bank overdraft loans; plentiful fees and few protections for prepaid cards: internet payday lending and bank payday lending.”

“With a director in place, the Consumer Financial Protection Bureau can finally provide fair and equal oversight to the marketplace,” said Linda Sherry, director of national priorities for Consumer Action. “The CFPB can now fully fight for and protect consumers on the financial front. Consumers have been waiting far too long for this financial watchdog to have the authority to really sink its teeth into creating a better financial marketplace for all people — not just the 1 percent.”

What the agency does

The agency, a powerful federal watchdog over an array of financial products — from credit cards and mortgages to payday loans and wire transfers — officially opened for business July 21, 2011. However, because it has been without an official director approved by the U.S. Senate, the bureau has been hamstrung in its ability to fully exercise all of its powers. The agency has been able to enforce existing federal laws governing unfair and deceptive practices, debt collection and lending. However, it has been unable to draft new legislation or police credit bureaus, payday lenders and other nonbank lenders that fall under the federal agency’s jurisdiction.

“President Obama stood with consumers and families in making this crucial decision,” Lisa Donner, executive director of Americans for Financial Reform, said in a statement. “Now that the CFPB has a director, it finally has its full authority to protect consumers everywhere in the financial marketplace, from a Wall Street bank to a payday lender or from a mortgage company to a credit bureau or anywhere else.”

In his remarks at his campaign event in Shaker Heights, the president tied Cordray’s appointment to a larger populist theme sure to be repeated until election day.

“I know that you’re hearing a lot of promises from a lot of politicians lately,” Obama said. “You’re only going to hear one from me: As long as I have the privilege of serving as your president, I promise to do everything I can, every day, every minute, every second to make sure that this is a country where hard work and responsibility mean something, and everyone can get ahead — not just those at the very top, not those who know how to work the system, but everybody. That’s what America’s always been about. That’s what America’s going to be about, today and tomorrow and 10 years from now and 20 years from now, and with the help of people like Richard Cordray, that’s the country we will always be.”

See related: Obama nominates new consumer financial watchdog director, U.S. Senate fails to approve Cordray as financial watchdog head, New agency arrives with broad powers to police financial products

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