I'm often baffled at how deeply ideology has been allowed to intrude on something that was once relatively uncontroversial: basic consumer protection. Yet that's just where we are today, when a seemingly unbreakable phalanx of 44 Senate Republicans have vowed to block the nomination of anyone - yes, anyone - to be the director of the fledgling Consumer Financial Protection Bureau.
Led by Sen. Richard Shelby, an Alabama Republican who fought the bureau's creation, the over-our-dead-bodies response was initially aimed at the worry that President Obama would name Elizabeth Warren to head the agency she initially proposed. As I explained in a column last spring, Shelby broadened the attack by demanding that the new bureau be weakened before it even got off the ground. Even the American Banker has debunked Shelby's key lines of attack.
Still, Shelby and his allies have refused to give ground, and have so far blocked a confirmation vote on Obama's actual nominee, former Ohio attorney general Richard Cordray - a tactic that, perhaps not coincidentally, is also preventing the new bureau from writing rules to fulfill some of its duties.
Today, the White House is heralding an impressive break in ranks. It's a break not within Congress, but by a group of 32 states' attorneys general - including six Republicans - who are pushing for Cordray's confirmation. In a letter to Senate leaders, the AGs praise Cordray as "both brilliant and balanced," and continue:
Mr. Cordray is particularly well qualified to serve in this position. For the past several months he has served as the CFPB’s director of enforcement. Immediately before taking that position, Mr. Cordray served two years as Ohio Attorney General. In both roles, he earned a reputation as a strong advocate for the interests of consumers. As Attorney General of Ohio, he took a national leadership role in dealing with the Wall Street crisis. Mr. Cordray dealt with all the leading players, including Wall Street firms, banks, credit rating agencies and subprime mortgage lenders. In these actions he not only defended consumers but also worked to find fair and reasonable solutions for the financial industry. Using his good judgment and inherent sense of fairness, Mr. Cordray worked to create a better and more vibrant marketplace going forward.
The CFPB is intended to make basic financial practices such as taking out a mortgage or a loan more clear and transparent. It is also charged with ferreting out unfair lending practices. Mr. Cordray knows that such actions will not only protect consumers but will also assist community bankers and other financial companies that are committed to honest dealing and quality customer service. He is determined to use a balanced approach to the financial services industry. As head of the CFPB, Mr. Cordray will be an honest broker and strong advocate for both businesses and consumers that are committed to following the rules.
The CFPB may be the best thing to have come out of last year's debate over the Dodd-Frank financial reforms. Much of the rest of the legislation was watered down during debate by lobbying from the same too-big-to-fail financial institutions that delivered the financial collapse, wrapped with a bow of mortgage-backed securities and collateralized debt obligations.
But somehow, 60 votes in the Senate - albeit a Senate still dominated by Democrats - held firm for a fairly strong version of the new agency, which was born from the realization that dangerous financial products not only harm consumers but can manage to threaten the whole economy. That's what happened when banks and mortgage brokers lent money to home buyers who shouldn't have qualified for loans. While those buyers bid up prices for homes and fueled the housing bubble, the lenders turned around and dumped the paper on unwitting investors.
Ideologues on the right are trying to make the bizarre case that too much regulation, not too little and too weak regulation, was somehow to blame for our financial mess. They are counting on voters' ignorance and short memories. Thankfully, at least some Republican attorneys general - including Utah's Mark Shurtleff, Arizona's Tom Horne, and Colorado's John Suthers - recognize that consumer protection is a basic duty of a responsible government.