U.S. Treasury Secretary Tim Geithner warned Republicans on the Senate Banking Committee about opposing the nomination of a Consumer Financial Protection Bureau director, arguing that a failure to do so would leave a swath of the financial sector unregulated.
The confirmation of the nominee, former Ohio Attorney General Richard Cordray, cleared the Banking Committee on a party-line vote, 12 to 10, but there were no signs that the full Senate will confirm him. Elizabeth Warren, Harvard Law professor and architect of the CFPB, was an early favorite to score the nomination that eventually went to Cordray.
Republicans led by Sen. Richard Shelby of Alabama, the committee's ranking member, have opposed nominating any director to the bureau unless major changes are made, such as having a board lead the agency instead of one person.
But Geithner warned the senators that confirming a director to the newly-created consumer finance watchdog will fill a blind spot that exacerbated the financial crisis.
If the Senate fails to confirm a director for the CFPB... we will leave a vast array of non-bank financial institutions, consumer finance companies, outside the scope of consumer protection, Geithner said Thursday at a committee hearing, which is exactly the same mistake that left us so vulnerable to the financial crisis we went through.
Geithner suggested that Republican senators spend time with Cordray, who was the CFPB's chief of enforcement after losing reelection in 2010 as Ohio's top attorney, calling him an exceptionally talented, thoughtful leader who will leave them reassured about the agency formed under the financial reform law known as Dodd-Frank.
President Barack Obama on Thursday jumped into the fray over Cordray's nomination to lead the CFPB, saying at a morning press conference that Republicans want to roll back the entire notion of a consumer finance watchdog.
In May, Shelby and 43 Republican senators sent a letter to Obama about the changes they would like to see to the CFPB before confirming a director. In addition to replacing a director with a board, Republicans want Congress to fund the agency and to allow federal bank regulators to block CFPB rules.
The Republican proposal does not dismantle, defang or gut the consumer bureau, Julie Eckert, a spokeswoman for Shelby, said according to Politico. Republicans are simply seeking common-sense structural changes in order to make this massive bureaucracy accountable to American taxpayers.
Geithner had said that he hopes Republicans drop their push for changes to the bureau, but Shelby said don't get optimistic on that, according to Reuters.
The Senate Banking Committee chair, Sen. Tim Johnson, D-S.D., criticized Republicans for holding up Cordray's confirmation.
In doing so they are blocking vital new protections for consumers, and putting community banks and credit unions at a disadvantage to their less-regulated competitors, Johnson said in a statement.