By Jim Kuhnhenn
WASHINGTON — Reigniting a partisan fight over banking regulations, President Barack Obama intends to nominate former Ohio Attorney General Richard Cordray to lead a consumer protection bureau that was a central feature of a law overhauling the rules that govern the financial sector.
Obama plans to announce the nomination formally today, the White House said Sunday. Republicans immediately threatened to block Cordray’s confirmation.
In choosing Cordray, Obama bypassed Elizabeth Warren, a favorite of consumer groups, who has been assembling the agency as a special adviser to the White House and to Treasury Secretary Timothy Geithner.
The agency will officially begin its oversight and regulatory work on Thursday. Its role is to be a government watchdog over mortgages, credit cards and other forms of lending.
“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 in a statement.
Warren, who is considered the architect of the consumer bureau, faced stiff Republican opposition in the Senate and would have had a difficult time wining confirmation.
The financial industry lined up against Warren. Bankers said a Warren-run agency would restrict new products just when companies are seeking to replace profits squeezed by the new financial rules.
But Sen. Richard Shelby of Alabama, the top Republican on the Senate Committee on Banking, Housing and Urban Affairs, said Republicans would block Cordray as well unless Obama seeks changes in the agency.
“Until President Obama addresses our concerns by supporting a few reasonable structural changes, we will not confirm anyone to lead it,” Shelby said. “No accountability, no confirmation.”
Cordray’s elevation from enforcement chief to director raises a separate concern for the industry: Some fear the agency will launch early enforcement actions designed to raise its public profile.
Treasury officials said that’s unlikely, because the agency’s enforcement division still is making key decisions about policy and procedure.
Cordray, 52, is considered a Warren ally and has been working with her as director of enforcement for the agency.
“He will make a stellar director,” Warren said of Cordray.
Republicans fought fiercely against the creation of the bureau last year and have been trying to place restrictions on the agency. In May, all Senate Republicans joined in a letter to Obama threatening to withhold their support for any nominee to the position if the White House didn’t seek significant changes to the agency.
Among the changes would be to replace a single director with a board and to make the bureau’s finances subject to congressional approval.
Though Democrats control the Senate, Republicans could block Cordray’s appointment through a filibuster.
“I remain hopeful that those who want to cripple this consumer bureau will think again and remember that the financial crisis — and the recession and job losses that it sparked — began one lousy mortgage at a time,” Warren said in a statement Sunday.
Rep. Barney Frank, D-Mass., who shepherded the financial regulation bill through the House last year as the chairman of the House Financial Services Committee, said he regretted that Warren had “fallen victim to such wholly unjustified political attacks.”
But Frank praised Cordray and said, “There is no excuse for Senate Republicans to refuse to confirm Richard Cordray given his clear qualifications for this job.”
The Progressive Change Campaign Committee, which had backed Warren, issued a statement supporting 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,” said the committee’s co-founder, Stephanie Taylor. “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.”
But consumer advocate and one-time presidential candidate Ralph Nader called bypassing Warren “an act of political cowardliness by President Obama.”
“Elizabeth Warren apparently is just too good, too smart, too able to arouse the just concerns of millions of American families over the need to put the law-and-order wood to the corporate criminals, defrauders and reckless speculators,” Nader said.
Treasury Secretary Timothy Geithner credited Warren for recruiting staff for the consumer bureau and for her efforts to simplify mortgage disclosure, improve credit card transparency and protect military families from lending abuses.
Warren wants to remain a public advocate on consumer issues including abuses by mortgage servicing companies that have foreclosed illegally on military families and others, according to people familiar with her thinking.
She has felt constrained from speaking out as a White House appointee and looks forward to the freedom she will enjoy when she returns to being a Harvard Law School professor, said those familiar with her plans. They spoke on condition of anonymity to describe private conversations.
In pushing for changes in financial regulations last year, Obama focused on the popular appeal of a consumer bureau, which he had proposed as an independent agency. It was during that debate that Obama referred to bankers as “fat cats,” a characterization he has since abandoned.
The regulatory overhaul was a response to the financial crisis of 2008 that helped plunge the country into a recession.
In a compromise, the consumer agency was placed within the Federal Reserve, but will act autonomously from the central bank.
In his statement, Obama thanked Warren “for her many years of impassioned leadership, and her fierce defense of a simple idea: ordinary people deserve to be treated fairly and honestly in their financial dealings.”
Obama also said, “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.”