Forty-four Republican Senators sent a letter to President Obama on Thursday pledging to block any nominee, no matter merits or ideology, to head the newfangled Consumer Financial Protection Bureau created by the Democrats’ 2010 financial regulation overhaul of and set to open shop in July. Their demands? They want a check on the “unfettered authority” of the yet-to-exist agency, which will police consumer issues like mortgages, credit card contracts and payday lenders, in the form of a board of directors (rather than one bureau head) and congressional appropriation power over the CFPB’s budget.
The bureau has been opposed by the GOP since its inception and party leaders have a special aversion to Elizabeth Warren, the Harvard prof who schemed up the idea of a consumer agency in the first place, and is now at the Treasury Department helping to set it up. Liberals have been clamoring for Warren to get the director’s nod from the outset, but the Senate math never looked good. Republicans would simply block her nomination until Obama presented another option, and the President has reportedly been sending out feelers to other potential nominees in recent months. If he eventually found the right (and willing) person for the job, he could nominate whomever and tell liberals that a Warren directorate just wasn’t in the cards. But if the GOP follows through on its threat to block any candidate, they’re just ensuring that Warren ends up in the job. Why?
There is no way Obama and Democrats accede to the GOP’s demands. A directors board isn’t so far-fetched, but Republicans’ main goal is to subject the CFPB to appropriations. The framers of the financial reform bill designed the CFPB not to rely on Congress for funding, instead placing it under the umbrella of the Federal Reserve. If Republicans can disentangle it from that framework, they’ll be able to deny requested funding levels for the bureau as they have with the Securities and Exchange Commission and the Commodity Futures Trading Commission, and gain some control over the scope of its mandate. Democrats aren’t going to accept that.
So, the only way for Obama to get the CFPB a director by July, when the bureau is supposed to open its doors, is to use a recess appointment. (The Senate will be out May 30-June 5 for Memorial Day and July 4-10 for Independence Day.) There’s a precedent for this. A qualified candidate facing unyielding conservative opposition to head an important agency in the wake of a landmark regulatory bill? Sounds like Donald Berwick. He was even appointed in early July.
There are other qualified candidates beside Warren, but by forcing a recess appointment, it’s hard to imagine anyone else gets the nod. For one, potential directors have reportedly been turning away Obama’s overtures in what some speculate is deference to Warren. Obama might have been able to convince them that the Senate just wasn’t going to let her through, but if they’re not going to let anyone through, that point is moot. Similarly, liberals might have been able to come to terms with some other capable director if they felt satisfied that person could win Senate confirmation where Warren could not. No longer.
Granted, all of this is pretty speculative. Republicans might not follow through on the threat or Obama could simply elect to do nothing until the political winds shift. (No word yet on the fate of Peter Diamond.) But the latter would do a disservice to the bureau he holds up as a key accomplishment, and the most soundbite-friendly element of financial regulatory reform he can tout during his reelection campaign.