WASHINGTON (Reuters) - Senate Republicans on Thursday beat back Democratic President Barack Obama’s pick to head the new Consumer Financial Protection Bureau, and each party accused the other of holding consumers hostage to politics.
Democrats were able to muster only 53 of the 60 votes needed to advance to an up-or-down vote on the nomination of former Ohio Attorney General Richard Cordray. One Republican, Scott Brown of Massachusetts, sided with the Democrats in the 53-45 vote.
Republicans are promising to block Cordray until changes are made to how the new agency operates.
Following Thursday’s vote Democrats said they have no intention of compromising, even if it means the new bureau will be leaderless until at least after the 2012 elections.
“I just want to send a message to the Senate: We are not giving up on this,” President Obama said after the vote. “We’re going to keep on going at it. We are not going to allow politics as usual on Capitol Hill to stand in the way of American consumers being protected by unscrupulous financial operators.”
The Consumer Financial Protection Bureau was created by the 2010 Dodd-Frank financial oversight law to police the market for consumer financial products such as credit cards and mortgages.
Congress, when both chambers were led by Democrats, created the CFPB to protect consumers against Wall Street banks and lenders who critics say took advantage of borrowers in the lead up to the 2007-2009 financial crisis.
Republicans argue a new federal agency is not the answer. They say without tighter congressional oversight, the bureau could weigh down the economy with new regulations.
“Unelected bureaucrats must be held accountable to the American people,” Senate Republican Leader Mitch McConnell said. “And that’s exactly what our proposal would do.”
Under a quirk of the law, the bureau cannot take on its responsibilities for cracking down on lenders outside the banking industry until a director is in place.
This means payday lenders and mortgage brokers cannot yet be policed by CFPB.
Democrats contend this alone is reason to put Cordray into his job now, and have tried unsuccessfully this week to use it as a pressure point with Senate Republicans up for election in 2012, in part by appealing to news outlets in their states.
Republicans say agreeing to the bureau changes they have outlined is the best way to make sure the new agency can start exercising its powers over all lenders.
In May Republicans promised to block the confirmation of any nominee to lead CFPB unless changes are made that they contend will make CFPB more accountable to Congress.
Republicans are now accusing Democrats of making no effort to negotiate with them, choosing instead to ramp up the political rhetoric in hopes it will buckle their will.
“The president knew about these concerns months ago and he chose to dismiss them,” McConnell said. “And now he’s suddenly making a push to confirm his nominee - because it fits into some picture he wants to paint about who the good guys and the bad guys are in Washington.”
Some Democrats are calling on Obama to use his authority to bypass the Senate and make Cordray the director when the chamber goes on a recess.
Republicans have so far been able to take away this option by technically never allowing the Senate to go on a break, even when members leave town for more than a few days.
‘NOT ABOUT CORDRAY’
Obama in July nominated Cordray to be the first director of the Consumer Financial Protection Bureau.
Democrats have cast him as a man who can stand up for the little guy, as demonstrated by his moves against big banks over their mortgage practices when he was Ohio attorney general.
Republicans maintain their problem is not with Cordray but with the structure of the bureau.
They want the CFPB run by a board, rather than a director, and believe its budget should be approved by Congress. They also advocate giving other regulators more authority to veto its regulations.
Democrats have brushed aside these requests, arguing Republicans are leveraging the nomination process to weaken the bureau.
Meanwhile, the bureau is not simply sitting on its hands.
It began operating in July and since that time has put examiners inside the biggest banks to keep an eye on whether they are following consumer laws.
The agency has also been working on forms for credit cards and mortgages it says will make it easier for consumers to understand the terms of their loans.
In at least one state, the bureau is expected to very much be an issue in the 2012 election.
Elizabeth Warren, the Harvard law professor who conceived the idea for the agency, is challenging Brown in the Massachusetts Senate race.
Warren was heading up the administration’s effort to set up the bureau until she left this summer after Obama chose Cordray instead of her to be CFPB’s first director.
On Thursday Brown was the only Republican to vote with Democrats in support of Cordray. A recent poll shows Warren with a seven-point lead over Brown.
“I have a word for some of my Republican friends: if they think they can keep silencing these strong consumer advocates they just might find one joining us on the Senate floor a year from now,” Senator Charles Schumer, a member of the Democratic leadership, said with a smile after the vote.
Reporting by Dave Clarke; Editing by Derek Caney, Gary Hill