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Obama defies GOP by naming new consumer watchdog

The long-delayed start of a new consumer protection bureau took a major step forward Wednesday when the White House defied Congressional Republicans who had been holding out for changes that consumer advocates say would have substantially weakened the agency.

President Barack Obama  announced a recess appointment to name Richard Cordray as the nation's chief consumer watchdog despite strong Republican opposition, bypassing Senate approval. 

"I refuse to take `no' for an answer," the president said told a cheering crowd in Ohio.

The announcement drew immediate fire from Republicans who have blocked Cordray's appointment since it was announced in July.

"This is a very grave decision by this heavy-handed, autocratic White House," said Sen. Orrin Hatch, R-Utah. "Circumventing the Senate and tossing out decades of precedent to appoint an unaccountable czar to appease its liberal base is beneath the Office of the President."

The Senate's top Republican, Mitch McConnell of Kentucky, accused Obama of an unprecedented power grab that "arrogantly circumvented the American people."

Following Cordray's nomination in July, Senate opponents vowed to block the appointment of any director until they won substantial changes in the make-up and funding of the new bureau. Sen. Richard Shelby, R-Ala., the ranking Republican on the Committee on Banking, Housing and Urban Affairs, strongly opposed allowing the agency to begin operating in its current form, arguing that it was too independent and should be subject to increased oversight.

On Wednesday, Shelby called Cordray “an unaccountable bureaucrat who will have immense power over the economy.

“President Obama's philosophy is clear: government knows best, and the bigger, the better,” Shelby said in a statement. “ In light of his record, it's not surprising that he end ran the elected representatives of the American people to avoid accountability to them.”

The consumer agency was created after the 2008 financial industry meltdown and championed by consumer advocates lead by Harvard law professor Elizabeth Warren, who lobbied heavily for an new, independent financial regulator devoted solely to protecting the interests of consumers. But Warren's forceful attacks on the financial services industry made her appointment to head the new agency politically untenable.  

In an effort to remove that political obstacle, Obama in July nominated Cordray, a former Ohio Attorney General, to head the agency. But the nomination has been stalled by Senate Republicans intent subjecting the new Consumer Financial Protection Bureau to greater oversight by existing regulatory agencies. On Wednesday, the president said the standoff had gone on long enough.

 "I'm not going to stand by while a minority in the Senate puts party ideology ahead of the people we were elected to serve," he said. "The only reason Republicans in the Senate have blocked (the nomination) is because they don’t agree with the law setting up the consumer watchdog.  They want to weaken it. "

The legislation that created the agency put the CFPB’s rule-making on hold until a director was named. Since Obama signed the Dodd–Frank Wall Street Reform and Consumer Protection Act into law in July, 2010, the CFPB has been staffing up and preparing for the long-delayed appointment of a director. Some 18 months after Congress created the agency to protect consumers from predatory lending, it has yet to begin implementing new regulations and moving to enforce them. 

Following news that the White had decided to move ahead, Warren, now a Massachusetts Democratic candidate for the Senate, said opposition to Cordray's appointment was designed to "undermine the agency’s effectiveness and to frustrate efforts to hold the big banks accountable for bringing our economy to its knees. 

It’s time the big banks and their allies acknowledge the urgent need for change," she said in a statement.

Obama's end run around the Senate is likely to cause an uproar among Republicans in Congress. As msnbc.com's Tom Curry reported last month, the Constitution allows for recess appointments when Congress is not in session. Before leaving for its holiday break, the Senate imposed a schedule of "pro forma" legislative sessions designed to block the move. 

But the White House apparently concluded that the schedule is a legal gimmick that doesn't interfere with Obama’s power to make the short-term appointment, which runs for a years. If Obama wins re-election, he could nominate Cordray and ask the new Senate to confirm the appointment. Either way, the new agency will have had a year to implement new regulations. 

Consumer groups hailed the move by the White House.

“American consumers can not wait any longer while Senate Republicans and industry lobbyists play games with the nomination process,” said Lauren Saunders, managing attorney at the National Consumer Law Center. “With a director finally in place and no question about its powers, the Consumer Financial Protection Bureau can start scrutinizing unfair practices by debt collectors, mortgage brokers, credit reporting agencies, and predatory payday lenders.”