By Daniel Indiviglio
WASHINGTON, July 16 (Reuters Breakingviews) - For Wall Street, the U.S. Senate's filibuster deal is a double-edged sword. A compromise reached Tuesday by legislators avoids a nasty showdown that could have led to even greater political dysfunction in Washington and roiled financial markets. The price, however, was the confirmation of a watchdog the money industry loves to hate.
Republicans have opposed the Consumer Financial Protection Bureau (CFPB) from its inception. When the Dodd-Frank Act outlined its structure, they complained about Congress lacking authority over its budget and the regulator having too powerful a director, arguing instead for a board to decide new regulations like many other regulators.
That led the party to block its potential heads - Elizabeth Warren in the first instance. This was possible because its 46-vote minority out of 100 in the Senate provided more than the 41 votes needed to filibuster nominees. But in early 2012, President Barack Obama pulled a trick of his own by sidestepping lawmakers and appointing Richard Cordray during the winter recess of Congress.
That move came under fire after a federal appeals court invalidated a few other nominees the president made at the same time. Calling for a vote on confirmation to finally put the issue to rest, the Democratic Senate majority was on the verge of invoking its so-called 'nuclear option,' which would have killed the filibuster and resulted in a simple majority being sufficient for both new laws and appointments. Calculating that losing the filibuster would be a worse fate than approving Cordray, Republicans finally consented to a vote.
A CFPB with a properly appointed director whose powers are left intact won't thrill the financial industry, which would have preferred a weaker supervisor and potential to gut the agency at a later date. Non-bank financial firms may lament that new rules could have disappeared if the recess appointment court challenge had gone their way.
Leaving the filibuster threat in place provides some consolation. Although it makes legislating tough, occasionally wreaking havoc on markets, a simple majority would enable changes to laws under even weak shifts in the congressional power balance. Wall Street adjusts its game with occasional new rules, so it will get used to the CFPB. Facing a constantly changing playfield, however, would have been a knottier outcome.
- The U.S. Senate struck a deal on July 16 to allow a vote on the appointment of Consumer Financial Protection Bureau Director Richard Cordray. He is expected to be confirmed. President Barack Obama utilized a controversial recess appointment to install the regulator as head of the new agency in 2012. With a director in place, the watchdog could exercise additional powers, like supervising non-bank financial companies.
- Republicans had refused to allow a vote on Cordray's nomination because they opposed the structure of the bureau, which was created by the Dodd-Frank Act. In particular, they wanted its funding subject to congressional oversight instead of being provided by the Federal Reserve; and for the agency to adopt a board structure.
- Republicans had been able to block Cordray because congressional rules require 60 out of 100 senators to agree on closing debate and bringing a vote. That enables the 46-member Republican minority to block nominees and legislation. Democratic Senate Majority Leader Harry Reid threatened to invoke the so-called 'nuclear option,' which would change Senate rules if Republicans continued to block Cordray.
- They consented to a vote, as long as Reid agreed not to eliminate their filibuster power. President Barack Obama would also nominate two new nominees to replace his National Labor Relations Board picks who were recess-appointed at the same time as Cordray. A U.S. federal appeals court ruled in January that those NLRB recess appointments were invalid. A similar challenge had been pending against Cordray.
- Reuters: US consumer agency chief Cordray heads toward confirmation
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(Editing by Rob Cox and Martin Langfield) Keywords: BREAKINGVIEWS SENATE/CORDRAY
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