Once upon a time, we could have expected the following sequence: After considerable debate, Congress would have passed a bill creating an agency. The president would then nominate someone to head that agency. That nomination would be considered on its merits by the Senate.
But this is now. The president has nominated Richard Cordray, an able, experienced and thoughtful former state attorney general who has a record of achievement in protecting individuals against financial abuse, to head the Consumer Financial Protection Bureau. And the Republican minority in the Senate has announced that it intends to deny any consideration of the individual whom the president has nominated pursuant to his constitutional prerogative. They will do that by blatantly distorting the Constitution, substituting a refusal to allow the constitutionally mandated nomination process for the legislative process in which they simply do not have the votes to accomplish what they want.
Cordray is just the latest capable, dedicated public servant to fall victim to a Republican mugging. He joins Joseph Smith, the banking commissioner of North Carolina who recently drew unanimous bipartisan support from the North Carolina General Assembly for his renomination; Peter Diamond, a Nobel laureate in economics who was nominated to serve on the Federal Reserve System’s Board of Governors; and others as collateral damage of the Senate Republicans’ war on financial regulation in particular and the Obama presidency in general. Cordray’s record as attorney general of Ohio puts him in a small group of people able to act effectively to deal with the mortgage crisis. No one has raised any questions about his intelligence, integrity or dedication.
Yet his nomination will not even be fairly considered by the full Senate. Forty-four Republicans have announced that in disregard of their constitutional duty to consider nominations on the merits. They will not confirm anyone until the Senate majority reverses itself to once again put bank regulators in a position to overrule virtually all of the policies that would be set by the consumer agency. The president is being told that the price of having a nominee confirmed is reversing himself on a major policy initiative that has already been enacted.
It is, of course, entirely legitimate for Republicans to object to the independence of the consumer agency and to press for their solution, which is to allow bank regulators to overrule that agency. It should be remembered that the chairman of the House Financial Services Committee, Spencer Bachus, noted that “the regulators are there to serve the banks.” While they are entitled to that opinion, Senate Republicans are not entitled to use the confirmation power as a bludgeon to get their way when they cannot do so through the normal legislative process.
There is an interesting consequence of the Republican effort to undermine the most important consumer protection step the Congress has taken in a long time. Out of deference to the Senate confirmation power — before supporters of the bill realized how blatantly it would be misused — the legislation creating the agency specified that a number of the bureau’s powers would not take effect until the agency has a director.
This is key because the economic crisis would not have been so bad had only deposit-taking institutions, which are insured and regulated by the federal government, made mortgage loans. A large number of nonbanks continue to operate outside of federal regulation and, in many cases, without significant state regulation. A large majority of these other entities behave responsibly, but there are enough abuses among those that are under-regulated to make it important that full regulation be allowed. The Bush administration overrode consumer protection laws regarding national banks in those states where they existed. In some cases mortgage originators were allowed to have tenuous connections to national banks, which resulted in further insulation from state law. Community banks have to compete with many of these entities, and they will continue to suffer from unfair competition and pressure to do things they would rather not do if the new bureau is not able to assume its full powers.
Cordray’s hearing is scheduled for Tuesday, and we’re going to see an extraordinarily qualified administrator of an important consumer protection agency be trashed by the Senate Republican minority because their primary goal is to ensure that financial institutions are not troubled by what they may see as an excessive concern for consumer fairness. They are now refusing to confirm any recess appointment, not because of flaws of the appointee but because of an unachievable legislative objective, followed by an objection to a presidential recess appointment. It is the legislative equivalent of an arsonist having set a fire and objecting to a building’s inhabitants using the fire exit.
Rep. Barney Frank, a Democrat from Massachusetts, co-authored the 2010 financial reform legislation.