WASHINGTON (Reuters) - The Obama administration will likely use a recess appointment to name a director for its new financial consumer watchdog agency, Democratic Representative Barney Frank said on Wednesday.
Such a move to sidestep the Senate’s confirmation process for agency head nominees would underscore deep partisan divisions that remain over financial regulation nine months since passage of 2010’s landmark Dodd-Frank reforms.
As implementation of the sprawling legislation proceeds, Democrats are defending it against a range of attacks by Republicans and banking lobbyists on specific provisions and on funding for agencies implementing the reforms.
This dynamic will continue up to the 2012 elections, analysts said, with Republicans hoping to win control of the Senate and the White House, enabling them to dismantle the parts of Dodd-Frank that banks find most objectionable.
For investors, the struggle means continued uncertainty over financial regulation, “which will further cloud the profitability picture for the biggest banks,” said MF Global financial services policy analyst Jaret Seiberg.
One aspect of Dodd-Frank that the banks and Republicans dislike is the new Consumer Financial Protection Bureau (CFPB). It is set to open its doors in July to protect consumers from abusive mortgages and credit cards.
The White House must nominate someone soon to head the CFPB. Elizabeth Warren, a Harvard Law School professor, has been working for the administration to help set up the bureau. Though widely reviled on Wall Street, she is seen as the front-runner to be the bureau’s first director.
Forty-four Republican senators said last week they will not vote to confirm anyone to head the bureau without changes to curb its power and independence.
Frank, speaking to reporters, said the announcement by the Republicans has freed President Barack Obama to ignore them and name a CFPB director during a Senate recess, which would avoid the difficult confirmation process. “I assume they will now make a recess appointment,” he said.
A panel in the Republican-controlled House of Representatives last week approved a bill that would weaken the CFPB. Like much of the GOP’s anti-Dodd-Frank agenda, the measure was expected to stall in the Democratic-controlled Senate, with Obama’s veto pen looming in the background.
The CFPB, like Dodd-Frank overall, was a response to the 2007-2009 financial crisis that devastated world markets and the U.S. economy, dragging the nation into a deep recession and leading to massive taxpayer bailouts of banks.
The same banks that took the bailouts, many of them again profitable, are now lobbying hard on Capitol Hill to reduce the impact of Dodd-Frank on their business models, which include mortgage and credit card lending and derivatives.
Another part of Dodd-Frank that Wall Street fiercely opposes is the first-ever attempt to comprehensively regulate the $600 trillion off-exchange derivatives market.
A Republican-controlled House panel last week approved a measure that would block these regulations for 18 months.
Democratic Representative Collin Peterson said the delay was meant to push back derivatives regulation until after the 2012 elections. “We’re going to work hard against this. I don’t think it’s going anywhere in the Senate,” he said.
The Republican measure on Thursday will go before the House Financial Services Committee, chaired by Republican Representative Spencer Bachus.
“There is nothing in the bill that would stop regulators from clamping down on oil speculation and the Democrats know that,” Bachus said in a statement.
“They are just playing politics and want to divert attention away from the fact that Dodd-Frank imposes deadlines that could ‘actually be systemic-risk raising.'”
Peterson is the top Democrat on the House Agriculture Committee. Frank is the top Democrat on the House Financial Services Committee. Both were among Dodd-Frank’s authors.
Editing by Steve Orlofsky