U.S. consumer nominee clears hurdle but faces wall

WASHINGTON (Reuters) - The U.S. Senate Banking Committee voted on Thursday in favor of President Barack Obama's nominee to head the new Consumer Financial Protection Bureau.

The vote, which sends Richard Cordray's nomination to the full Senate for a vote, sets up a showdown between Democrats and Republicans over an important part of the 2010 Dodd-Frank financial oversight law.

Republicans opposed the creation of the agency and have promised to block the Senate from voting on Cordray or any nominee to lead the bureau until its structure is changed.

Democrats argue that the changes would weaken the new regulator, which opened its doors on July 21.

On Thursday Treasury Secretary Timothy Geithner said he remains optimistic Republicans will change their stance.

"Don't get optimistic on that," Senator Richard Shelby, the lead Republican on the banking panel, shot back at a hearing with Geithner on risks to the financial system.

The hearing followed the committee's vote on Cordray, a former Ohio attorney general who currently works at the bureau on enforcement issues.

Shelby complained the administration has not engaged Republicans on their request for changes. They want the bureau run by a board, not a director, and want its budget to be subject to annual congressional approval.

They also want to give other regulators more authority to override the consumer agency's rules.

Senate Democrats have not said when they will try to hold a full Senate vote on Cordray. The committee voted along party lines, 12 to 10, to approve his nomination.

The Obama administration is trying to ratchet up pressure on Republicans, accusing them of trying to cripple an agency set up to police abuses in areas such as credit cards and mortgages.

"Republicans have threatened not to confirm him, not because of anything he's done, but because they want to roll back the whole notion of having a consumer watchdog," President Barack Obama said at a news conference on Thursday.

Republicans and banks accuse the agency of being an example of an unchecked regulatory overreach.

Democrats say the bureau is a much-needed check on lending abuses and will give people clearer choices and more information about the financial products they use.

(Editing by Gerald E. McCormick, Robert MacMillan and Steve Orlofsky)