President Obama surprised quite a few last week when he nominated former Ohio Attorney General Richard Cordray to head the Consumer Financial Protection Bureau. Elizabeth Warren, a former Harvard law professor whom the president tapped to get the agency on its feet, was expected to get the nod. The CFPB was Warren's idea, after all.
But the move didn't surprise everyone. White & Case partner Ernie Patrikis has indicated "Warren was a lightning rod" and that she would have had a very hard time being confirmed by Congress. Many thought Warren was too rigid and would not subject the agencies' efforts to "reasonable cost-benefit analysis." But does the nomination of Cordray assuage those concerns? Not for everyone.
According to an opinion piece published in The Wall Street Journal, Sen. Richard Shelby, R.-Ala., and 43 of his colleagues won't be happy unless the single-person agency leadership is replaced by a board. Moreover, he says the CFPB should be subject to appropriations rather than receiving funds directly from the Federal Reserve, of which it is a part.
Shelby argues that allowing one person to have that much power over the economy is asking for trouble. Sooner or later, he says, that power will be abused. He explains: While the bureau receives hundreds of millions of dollars of public money annually, the elected representatives of the American people have no say in how it spends this money. Moreover, other regulators have no meaningful ability to prevent bureau mandates that may threaten the financial health of banks.
He also insists that Cordray's nomination is "dead on arrival" without three changes to the CFPB and how it functions. Shelby and his colleagues want an oversight board, to subject the agency to the appropriations process and to give banking regulators the power to prevent the bureau from taking action that would "endanger the safety ... of financial institutions."