Second CFPB Fight May Be Just as Contentious as First

Insurance Networking News, January 25, 2013

Joe Adler

Gil Schwartz, a partner at the law firm Schwartz & Ballen, said Obama's reelection leaves Republicans with less political room to fight the nomination.

"It's hard to deny the president a nomination under the circumstance," he said. "I don't think it's business as usual for Republicans. I think they do recognize that sentiment has swung toward his side and the CFPB isn't going anywhere."

Others said while the bureau has accelerated the flurry of rulemakings affecting mortgages and other areas of the consumer financial markets, the CFPB has won credit from many in the industry for taking a more measured approached than was expected. Cordray is seen as wanting to listen to bankers' concerns.

"The CFPB has been very deliberative," said Ronald Glancz, a partner at Venable. "They've listened to a lot of voices. They're very open and transparent in terms of the way they've gone about their rulemaking. I think Cordray will certainly get credit for that and they've taken the middle of the road in many cases."

But the apparent position of GOP leaders not to budge from their earlier position poses significant obstacles, prompting some to question why exactly Cordray was renominated without any discussion about potential changes to the CFPB's structure.

"I have a hard time thinking the way the process was done that somehow Republicans are going to be a lot more amenable then they were before," said Mark Calabria, director of financial regulation studies at the Cato Institute and a former Senate Banking Committee staffer. "I think one of the reasons for [President Obama] to send this nomination up is purely politics — 'Let's have a fight to illustrate that I care about consumers and Republicans don't.'"

He added that, after Republicans aired their initial concerns about the bureau's single-director leadership, Cordray's recess appointment only stirred the pot further.

"The process of his [first] nomination still irked a lot of people in the way it was done," Calabria said. "Before, he could come in almost on a clean state, but any sort of nomination hearing is going to be about not only what CFPB has done but about the nature in which he was appointed."

Meanwhile, there are still signs many in the industry have concerns.

Richard Hunt, the head of the Consumer Bankers Association, told reporters that, while he has found Cordray to be "very accessible [and] mostly fair", the CBA still believes the bureau should be led by a commission instead of a single director.

"We are one rule from bringing the financial markets into chaos, which is much more likely to happen when you have a sole director versus a commission," Hunt said. "This is time that the Senate takes a pause, reflects and tries to save itself from itself, and have a commission, not a sole director."

Hunt said he expects the renomination to spur talks of a compromise involving the administration removing its opposition to a CFPB commission in exchange for a confirmation vote on Cordray. "You will start seeing some discussion of a possible confirmation in return for a restructuring," he said.

But Taft said that was unlikely. "Both Obama and the Democrats have seemed to communicate that that is not on the table," he said.

Fine said the environment has significantly changed since the first time Cordray was nominated.

"It's a different time now than when he was first nominated. The CFPB has a track record. By any objective standard, the bureau has been more measured in its approach than a lot of people thought it would be," he said.

"There are still some rules that ICBA still has concerns about. That said, it could have been a lot worse. From the standpoint that the bureau does at least seem to be listening, particularly to community bank concerns, that is very encouraging to us."

This story originally appeared at American Banker.

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