Consumer Financial Protection: Dead on Arrival

Illustration for article titled Consumer Financial Protection: Dead on Arrival

Doing what they do best these days, on Thursday Senate Republicans obstructed another measure — this time blocking a vote on the nomination of Richard Cordray for director of the Consumer Financial Protection Bureau. Seven votes shy of the 60 needed to bring Cordray's nomination to the floor for an up-or-down vote, the bureau (which was created under the 2010 Dodd-Frank financial-regulation law) can't get started.


"This makes absolutely no sense," Obama said on Thursday of the blockade on Cordray, a former Ohio attorney general and treasurer. We need, the president argued, a watchdog to ensure that banks, mortgage brokers, payday lenders and private student-loan companies play fair when it comes to consumers.

"Consumers across the country understand that part of the reason we got into the financial mess that we did was because regulators were not doing their jobs. People were not paying attention to what was happening in the housing market; people weren't paying attention to who was being taken advantage of. There were folks who were making a lot of money taking advantage of American consumers."

But for all his indignation, this doesn't appear to be an area on which Republicans will budge (although one, Scott Brown of Massachusetts, did vote to bring the nomination to the floor). For them, it's not even about Cordray. Most have long vowed to obstruct any nominee unless Obama agrees to a few structural changes:

* A board of directors should oversee the bureau instead of one person.

* The bureau should be subject to the congressional appropriations process.

* Other banking regulators, such as FDIC and the Federal Reserve, should be allowed to veto new regulations offered by the bureau.

"Unless Congress enacts reform, it is only a matter of time before this concentration of power is abused or misused to the detriment of American businesses and consumers," Sen. Richard Shelby (R-Ala.) wrote in a July Wall Street Journal op-ed. "Regrettably, President Obama has ignored these proposals for months. As a result, Mr. Cordray's nomination is dead on arrival in the Senate and will remain so until these reasonable changes are made."

True to Shelby's word, the nomination was, in fact, dead on arrival — a setback that Rep. Emanuel Cleaver (R-Mo.), chair of the Congressional Black Caucus and a member of the House Financial Services Committee, says has particular meaning for African Americans. In a conference call, Cleaver cited the 2005-2006 lending boom, when banks and other lenders issued subprime loans, as an example of why a consumer watchdog matters.


"The African-American and Latino communities were targeted. Getting a loan sometimes meant hidden fees that could double in interest from one day to the next," said Cleaver. "We wanted someone in place who got out of bed every morning with one objective, and that is to protect the consumers of the United States."

The bureau would oversee not only banks and mortgage lenders but also alternative services such as check cashers and payday lenders. African Americans are more likely to use these services, which often have exorbitant hidden fees but have never had federal oversight to enforce fair rules.


Despite the gridlock in the Senate, Obama vowed to "keep on going at it." Who's right? Does the Consumer Financial Protection Bureau have too much authority that needs to be re-evaluated? Or is this just politics standing in the way?

Cynthia Gordy is The Root's Washington reporter.