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Republicans and Democrats fight, Cordray waits

Sep 5, 2011, 9:10 p.m.
President Barack Obama (L) announces that Richard Cordray is his choice to serve as the first Director of the Consumer Financial Protection Bureau, in the Rose Garden of the White House in Washington, July 18, 2011. REUTERS/Larry Downing

By Dave Clarke

WASHINGTON (Reuters) - On Tuesday, Richard Cordray will sit down with the Senate Banking Committee to interview for a job he is unlikely to get.

Cordray, a former attorney general in Ohio, has been nominated to be the first director of the new Consumer Financial Protection Bureau (CFPB). Republicans have opposed the agency as a regulatory overreach since it was created as part of the 2010 Dodd-Frank financial oversight law.

Cordray's best chance of being confirmed by the Senate is if the administration and Republicans do something they have been unable to do in recent months: compromise.

Republicans have promised to block any nominee until the administration agrees to make three changes to the bureau's structure: Have it run by a board rather than a director; subject its budget to annual congressional approval; and give other regulators more authority over bureau regulations.

Democrats have balked at the demands, charging Republicans with using the nomination process as blackmail to weaken the agency.

Senators from both parties are expected to trade jabs over the agency at Tuesday's hearing.

The bureau, which opened its doors on July 21, is responsible for policing markets for products like credit cards and mortgages. Cordray is currently the agency's chief of enforcement.

Whether Cordray is the right man for the job has barely entered the discussion in the larger showdown between Republicans and Democrats. That fight is over whether the bureau is the answer to ending past lending abuses and will it be the regulatory straw that breaks the lending industry's back.

In Ohio, Cordray was a vocal critic of Wall Street and lending practices leading up to the 2007-2009 financial crisis, but Republicans have not made him or his record the focus of their opposition to his nomination as director.

On Tuesday he will at least get a chance to make his pitch for the job.

As attorney general, Cordray was not afraid to file legal challenges against banks, including Bank of America Corp. In testimony prepared for Tuesday's hearing, Cordray said he chose the litigation route in Ohio because it was among the only powers he had over banks and that as head of CFPB he could avoid such showdowns.

"The supervisory tool, in particular, offers the prospect of resolving compliance issues more quickly and effectively without resorting to litigation," he said.

With Republicans refusing to budge, the Obama administration will have to decide if the benefits of a political fight over the merits of the agency outweigh what it may have to give up to get Cordray confirmed.

There is no evidence such a deal is on the horizon, and consumer groups and liberal activists are urging the White House to stand firm.

"We're not going to settle for weakening the consumer bureau for establishing its full authority with a director," said Ed Mierzwinski, consumer program director of the U.S. Public Interest Research Group.

The bureau cannot exercise certain powers until it has a confirmed director in place. Chief among them is the ability to oversee nonbanks that engage in lending and other consumer financial products.

What has been lost in the debate over what the bureau cannot do without a director, said Travis Plunkett, legislative director of the Consumer Federation of America, are the significant powers the agency does have.

The bureau can now police financial products being offered by banks and write new rules to govern those markets.

"The consumer bureau has a lot of power to do a lot of good for consumers, and they need to use it," he said.

(Reporting by Dave Clarke; editing by Jeffrey Benkoe)

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