Obama, GOP May be Ready to Deal on CFPB

NEW YORK ( TheStreet) -- This time around President Obama and Senate Republicans may play a little nicer when it comes to the Consumer Financial Protection Bureau (CFPB).

Richard Cordray's renomination might provide an opportunity for both parties in Congress to address GOP concerns about the CFPB's governance, according to Kevin Petrasic, a partner in the Global Banking and Payments Systems practice of Paul Hastings in Washington. "There has been suggestion that there may be some sort of deal where Cordray would get confirmed, and a bill might take under consideration a three-to-five member commission to replace the director and have him become the first chairman," Petrasic says.

President Obama on Thursday nominated Cordray to serve a full term as the director of the CFPB, a year after the president made a controversial recess appointment of Cordray to get the new agency up and running.

The CFPB was created as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law by the president in July 2010.

After Senate Republicans blocked the nomination of Cordray -- formerly the state attorney general for Ohio - for six months, with Senator minority leader Senate Minority Leader Mitch McConnell (R-Ky.) saying in November 2011 that the president hadn't "done a thing" to address his party's concerns over the new agency's "lack of transparency of accountability," President Obama in January made a recess appointment of Cordray as the new CFPB director.

The recess appointment was controversial, because the Senate was technically in session, on a pro forma basis, because the House of Representatives -- controlled then, as now, by Republicans -- was having someone bang the gavel every three days to keep the entire U.S. Congress in session.

The president on Thursday said that there was "absolutely no excuse" for the Senate not to confirm Cordray quickly to serve a full term.

Cordray on Thursday said that said that "For more than a year, we have been focused on making consumer finance markets work better for the American people," and that the CFPB was approaching "this work with open minds, open ears, and great determination."

While House Financial Services Committee Chairman Jeb Hensarling (R-Texas) was quite gracious on Thursday in congratulating Mary Jo White on her nomination to be the new chairman of the Securities and Exchange Commission, his comments on Cordray's renomination of Cordray took a darker tone:

"President Obama's alleged recess appointment of Mr. Cordray last year was, at best, a highly controversial and legally questionable maneuver. The Dodd-Frank Act places vast, unprecedented and unchecked power completely in the hands of a single person. The CFPB director has the power to decide whether American families can obtain a mortgage, get a car loan or even get a credit card."

Hensarling went on to say that he was hoping "that the decision to renominate Mr. Cordray will open the debate about whether some common sense checks and balances will be placed on a massive bureaucracy that is now totally unaccountable to the American people."

While Republicans in Congress were clearly annoyed at the president's hardball recess appointment tactic, they didn't see fit to press the issue. Cordray's recess appointment lasts until the end of 2013.

Petrasic argues that there is still a chance that President Obama may just get what he wants, with a quick Senate confirmation of Cordray: "This time around, Cordray has a track record as the director. Interestingly, I would suggest that the industry is OK with him generally, as the Bureau was responsive to a number of comments the industry put forth" on new mortgage lending rules banning certain sales practices that were finalized last week.

But it may serve Democrats and Republicans to ink some sort of deal and put the CFPB behind them.

"It is probably in the best interest of both parties to depoliticize the nomination process," Petrasic says, adding that "over the long term, for this agency to survive and become a moderating influence, you have to allow for some sort of process that takes it beyond the political process."

-- Written by Philip van Doorn in Jupiter, Fla.

>Contact by Email.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.