Republicans relented and agreed to allow Cordray to be confirmed as the bureau’s leader. Cordray vote leaves GOP at a loss

For almost two years, Senate Republicans have insisted they would block anyone from being confirmed as head of the new Consumer Financial Protection Bureau without major changes in how the agency conducts its business.

On Tuesday, Republicans relented and agreed to allow Richard Cordray to be confirmed as the bureau’s leader. The vote was 66-34.


And in the end, what do Republicans have to show for their two-year fight? Pretty close to nothing — which raises questions about why it took so long to strike a deal and highlighting how poisonous the debates over presidential nominations had become in the Senate leading up to this week.

( Also on POLITICO: Richard Cordray confirmed to lead CFPB)

“This shows the danger of overplaying your hand,” said Jaret Seiberg, an analyst with Guggenheim Partners who has followed the debate closely. “By not dealing when they had a hand to play, the Republicans get nothing out of this.”

Republicans defended their strategy, insisting their effort was not futile because they were able to raise important questions about whether the CFPB, a pillar of the 2010 Dodd-Frank law, has too much power.

Sen. Chuck Grassley (R-Iowa) said the decision to block Cordray ultimately helped lead to a deal that forced two previous nominees for the National Labor Relations Board to be replaced with new candidates as part of a broader Senate deal struck this week over how executive branch nominees will be handled going forward.

“We got two illegally appointed NLRB people off the agenda,” he said. “It was pretty important when the court says somebody’s been illegally appointed that they don’t get Senate confirmation.”

Asked whether the years of bickering had been worth it, the lawmaker answered, “Very definitely.”

With no changes to the CFPB included as a part of the final agreement, GOP lawmakers say their grievances about the agency had not abated and that they would continue to highlight their problems with the new regulator.

The end of the Cordray confirmation fight “does not eliminate the need to reform the agency,” Mike Crapo, the top Republican on the Senate Banking Committee, told POLITICO. “We will actually need to find additional avenues or ways to continue to negotiate over that.”

But Republicans have little leverage now to force those changes, at least while President Barack Obama remains in the White House, after giving up their biggest bargaining chip with Cordray.

Hours after Senate Majority Leader Harry Reid announced the broader deal over nominees that avoided a threatened change to Senate rules, called the nuclear option, Sen. Rob Portman (R-Ohio) and others highlighted that Cordray had agreed to meet with the Senate Appropriations Committee to discuss budget issues, but it wasn’t clear whether that would be in a hearing or a private briefing.

Regardless, that’s a far cry from the concessions Republicans had sought, including having the agency’s budget approved each year by Congress and changing its leadership from a single director to a board.

Democrats — who have opposed negotiating provisions of Dodd-Frank, insisting that the Wall Street reform act is the law of the land — were relieved to have the Cordray fight behind them and couldn’t resist taking shots at Republicans for blocking his nomination in the first place.

“There was never a case ever in Senate history where someone was blocked because they didn’t like the agency — not because of the nominee or his or her qualifications,” said Sen. Sherrod Brown (D-Ohio), noting Republicans have always said their problem is with the bureau not with Cordray. He charged that Republicans had been swayed by Wall Street’s opposition to the CFPB. “Government can’t operate that way.”

Sen. Elizabeth Warren (D-Mass.), who conceived of the idea for the bureau as a Harvard law professor and presided over Tuesday’s vote in the Senate, reveled in Cordray’s confirmation as evidence that such an agency can survive attacks if supporters don’t back down.

“Here in Washington, sometimes Goliath loses to David, and that’s what’s happened this time,” she told reporters.

The CFPB was created to police products such as credit cards and mortgages in response to complaints that consumers were being fleeced by lenders in the run-up to the 2008 financial crisis.

Cordray has been running the bureau since he was tapped for the director’s job in January 2012 through a controversial recess appointment, which expires at the end of this year. He can serve five more years now that he has been confirmed by the Senate.

The debate over his leadership took on a new wrinkle earlier this year after a court ruled that recess appointments to the National Labor Relations Board were unconstitutional, throwing a legal cloud over Cordray’s own appointment because it was done on the same day and in a similar manner.

Since then, the bureau has been operating amid legal questions about whether rules written to oversee mortgages and other products during Cordray’s tenure could be thrown out if a court decides his recess appointment was unconstitutional as well.

But banking lawyers said those issues are largely moot now that the Senate has confirmed Cordray.

“I think it will largely, if not entirely, remove the cloud that overhangs the bureau right now,” said Alan Kaplinsky, the head of the consumer financial services group at the Ballard Spahr law firm.

Bank lawyers expect Cordray to move quickly to ratify the rules he has issued and decisions he has made during his recess appointment, including a slew of important mortgage rules under Dodd-Frank.

The banking industry has publicly backed the changes sought by Republicans but privately officials said they had grown tired of the debate. Many industry officials have said the bureau has been a reasonable regulator under Cordray’s leadership.

One source that works in the banking industry told POLITICO that many of their clients were eager to put the nomination drama to rest.

“They just want to know what they’re dealing with and not have lingering doubt out there about the basic authority of the CFPB to do anything,” the person said.

Part of the legal cloud that had been hanging over the agency stems from a quirk in the 2010 Dodd-Frank law that limits some of the bureau’s powers until it has a director.

According to a July 2011 report from the Treasury Department inspector general, CFPB can only enforce consumer laws that existed before the bureau was created. But it could not exercise any new authority, including the ability to supervise nonbanks like payday lenders or debt-collection firms, until a director is in place.

The bureau has been exercising all of its powers since Cordray’s recess appointment, and officials have consistently said the threat of a legal challenge has not slowed them down.

But some in the industry, including former CFPB lawyers, have said the bureau by necessity has prioritized issues that would not be affected if Cordray’s appointment was overturned. There is some debate about whether Cordray’s confirmation will lead to a more aggressive CFPB.

Kaplinsky said he does not expect much of a change, noting he hasn’t seen any reluctance by the bureau to exercise its authority. “I’m not sure how much more aggressive they can get,” he said.

Compass Point Research & Trading analyst Isaac Boltansky predicted that the pace could begin to pick up at the bureau after Cordray’s confirmation — but only because the CFPB is still a new agency going through growing pains.

“I expect the CFPB to be more active in the near future, not because they’ve been slowed by this uncertainty regarding Richard Cordray but because we’re rounding a corner on two years of them having their door open,” he said.

Ed Mierzwinski of the consumer group U.S. PIRG pushed back on the suggestion that Cordray’s confirmation could prompt the agency to become more aggressive once the uncertainty surrounding the directorship is put to rest.

“Everybody thinks the bureau is going to become some kind of ogre — somehow launch the missiles,” he said. “The bureau has been very careful to do its work in a fair and transparent manner, and I think it will continue to do so.”