President Barack Obama today celebrated his win over the GOP in a two-year struggle to expand his power over the financial sector, saying the sector now has “certainty” about the government’s regulatory authority.
The new powers were activated with the Senate’s agreement — over GOP opposition — to confirm Richard Cordray as the first director of the Consumer FInancial Protection Board.
“Without a director in place, the Consumer Financial Protection Board would have been severely hampered… [and] didn’t have all the tools it needed,” Obama told a roomful of clapping government officials at the White House.
Cordray’s confirmation allows the agency to begin using its extensive new powers over the wealthy financial sector, which normally splits its huge donations between the Democratic Party and the GOP.
The new powers were created by the Dodd–Frank Wall Street Reform and Consumer Protection Act, which was signed by Obama on July 21, 2010, but were unusable until the first director was confirmed.
Since 2011, GOP Senators have opposed Cordray’s appointment.
But their resistance was broken this week when the Democratic leaders of the Senate threatened to change the Senate’s voting procedures that now require a bloc of 60 Senators to overcome opposition to nominations.
Democrats said they would change the rules so that a bare majority, only 51 Senators, could confirm nominations. This threat was dubbed “the nuclear option” when a GOP majority threatened to change the rules during a similar controversy while George. W. Bush was president.
“Cordray’s confirmation yesterday now allows for full implementation of the disastrous Dodd-Frank law that now gives the Federal Government power over every consumer financial transaction in America,” said Steve Lonegan, the GOP candidate for the open Senate seat in New Jersey.
“Cordray has now been confirmed for a five-year term… He is subject to no Congressional accountability and Congress has no control over his budget, which comes directly from the Federal Reserve,” said Lonegan, whose state include many companies and employees in the financial-sector.
The financial-sector law was drafted and passed following the bursting of the real-estate bubble, which was inflated by federal policies from 1996 to 2008, under both President Bill Clinton and President Bush.
Obama, as a lawyer and a state senator in Illinois, also helped inflate the bubble, which imposed huge economic costs on the nation, but especially among lower-income African-Americans and Hispanics.
The resulting recession has pushed the nation’s unemployment to high levels, and has kept may younger Americans from getting good jobs, marrying and buying houses. But it also helped Obama win election in 2008.
The federal housing policies were intended to help low-skilled Americans — especially African-Americans — and Hispanic immigrants gain housing wealth by pushing down mortgage requirements, such as down-payments. But the government policy had the reverse effect, and the housing collapse after 2007 eliminated much of the wealth held by African-American and Hispanic families.
After the crash, Obama and his Democrats allies justified the Dodd-Frank bill by arguing the crash was caused by greedy bankers’ unfair and illegal treatment of African-American and Hispanic borrowers.
“For decades, the middle class was the engine that powered the economy and that allowed us all to grow together… [but] over time, a winner-take-all philosophy began to take hold,” Obama said at the White House event today.
“It left everyone working hard and harder to stay afloat… mortgages were sold that people didn’t really understand and couldn’t really afford, the financial sector was able to make huge bets with other people’s money, and that strain of irresponsibility eventually came crashing down on all of us,” Obama said today.
Since his inauguration, the nation’s debt has risen by $7 trillion, the number of unemployed and underemployed people has remained around 20 million, and after-inflation wages have declined.