Recess appointee Richard Cordray ready to 'prove' worth of consumer bureau

No matter how Richard Cordray was appointed, he believes Americans will support him and the federal government's Consumer Financial Protection Bureau (CFPB) when they begin to see the fruits of its labor.

“The most important thing we can do as a bureau is keep our nose to the grindstone and keep doing our work,” Mr. Cordray, CFPB director and former head of its enforcement division, said Thursday during a public appearance in Washington. “As we attack this problem, as we offer a solution or an improvement for that problem, we will prove our own case both to the people who represent the public and the public at large.”

President Obama, using a recess appointment to get around Senate objections, installed Cordray atop the CFPB on Wednesday. Republican senators had blocked the appointment since Mr. Obama nominated Cordray, a former Ohio attorney general, for the post in July. Republicans have balked at confirming anyone for the CFPB’s top job, citing concerns about lack of congressional oversight of the bureau’s operations and funding.

Obama's recess appointment drew fire from many conservatives, who said the Senate was not in fact in recess on Wednesday. House Speaker John Boehner called Obama’s move an “extraordinary and entirely unprecedented power grab.”

Cordray spent part of his first day on the job speaking at the Brookings Institution, where he characterized the CFPB’s chief responsibility as clarifying financial products and services aimed at consumers, to avoid crises like the subprime mortgage debacle.

“The single event that has limited credit most substantially for Americans in my lifetime is the financial crisis of 2008 and 2009,” said Cordray. “That meltdown was caused, in turn, by some of these problems and failing to regulate parts of markets.” 

With Cordray now at the helm, the CFPB can begin addressing some of these unregulated markets.

While the CFPB has been at work for more than a year, its operations were limited to larger banking institutions until its director was in place, under stipulations in the Dodd-Frank financial regulatory reform law. Cordray's arrival allows the CFPB to begin oversight of nonbanks, including payday lenders, mortgage servicers and originators, and private purveyors of student loans, among others.

These groups are key players in the consumer finance world because of their reach – 20 million American households use payday lenders, according to Cordray – and because “they have largely escaped any meaningful federal oversight” even though they typically compete with banks.

Cordray’s plans for the CFPB come amid strident criticism of the manner of his appointment.

Republicans were almost unanimous in their disdain for the president’s maneuver. Senate minority leader Mitch McConnell (R) of Kentucky objected to the move on constitutional grounds, saying it “fundamentally endangers” Congress’s ability to check the power of the president. 

In terms of the appointment’s constitutionality, appointing the CFPB director Wednesday rather than Tuesday may matter. On Tuesday, the Senate was technically in recess. But Obama acted on Wednesday to gain an additional year of Cordray’s service atop the CFPB: Because recess appointees serve until the end of the “next session” of Congress, Cordray may be able to serve through 2013.

One GOP voice raised in support of Cordray was Sen. Scott Brown of Massachusetts. Senator Brown, who faces a tough reelection battle with putative Democratic opponent Elizabath Warren, has tacked toward the political center on several issues to woo voters in the liberal-leaning Bay State. 

"I support President Obama's appointment today of Richard Cordray to head the CFPB," Brown said in a statement Wednesday. "I believe he is the right person to lead the agency and help protect consumers from fraud and scams. While I would have strongly preferred that it go through the normal confirmation process, unfortunately the system is completely broken.”

Ms. Warren launched the CFPB and initially led it, but Obama did not nominate her to be its permanent director.