Obama recess appoints consumer bureau chief

Obama to sidestep Congress, appoint consumer bureau chief.

WASHINGTON (CNNMoney) -- In a move that has angered Republicans, President Obama on Wednesday announced he's making a recess appointment of Richard Cordray to be the first director of the Consumer Financial Protection Bureau, sidestepping the Senate confirmation process.

"Today, I'm appointing Richard as America's consumer watchdog," Obama said in a speech in Ohio, where Cordray served as attorney general. "That means he'll be in charge of one thing: Looking out for the best interests of American consumers."

Last month, the Senate failed to muster enough votes to take up confirmation of Cordray to run the consumer bureau, with all but one Republican voting against the move. At the time, President Obama hinted that was considering such a recess appointment.

"When Congress refuses to act and as a result hurts our economy and puts people at risk, I have an obligation as president to do what I can without them," Obama said. "I will not stand by while a minority in the Senate puts party ideology ahead of the people they were elected to serve."

With a recess appointment, Cordray can serve through the end of 2013.

News of the impending recess appointment spurred a flurry of angry statements from GOP leaders who have been trying to block a recess appointment for more than seven months.

"President Obama, in an unprecedented move, has arrogantly circumvented the American people by 'recess' appointing Richard Cordray as director of the new CFPB," said Senate Minority Leader Mitch McConnell in a statement.

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But White House Communications Director Dan Pfeiffer defended the move in a White House blog post, insisting the Constitution gives the president powers to make temporary recess appointments despite congressional moves.

"Gimmicks do not override the President's constitutional authority to make appointments to keep the government running," Pfeiffer said.

At stake are vast new powers the Consumer Financial Protection Bureau can't wield without a director. For example, the bureau can't regulate financial products from non-banks, including student loan providers, debt collectors, payday lenders and check cashers.

Without a chief, the bureau also can't regulate mortgage originators and servicers, which played a big role in the financial crisis by providing subprime mortgages to families who couldn't afford them.

Cordray, who was traveling with the president on Wednesday, told reporters that the first thing on his list was to "begin working to expand our program to non-banks, which is an area we haven't been able to touch up until now," he said.

The recess appointment has sharpened tension between the White House and Republicans, who have vowed since May to block confirmation of any director unless they get structural changes to the bureau, which was formed as part of the Wall Street reform law passed last year.

The nation's founders stuck the power to make recess appointments in the Constitution to ensure government could continue to operate, back when Congress didn't meet year-round. Over the years, presidents of both parties have used recess appointments for political purposes.

Since May, Republicans had been using a little-known procedure to keep the Senate in session -- even as it wasn't really conducting any business -- in order to stop the president from making recess appointments. Their basis for the move comes from a non-binding Department of Justice brief from 1993 that states Congress should be in recess for more than three days before the president makes an official recess appointment.

Until now, Obama has not tried to challenge the GOP's effort to block his recess appointments. However, legal experts have said they believed Obama had the authority to make such a recess appointment despite Congressional attempts to block him.

And Senate Majority Leader Harry Reid said he supported the move in a statement.

But GOP leaders say they don't think Obama has the power to make a recess appointment, given their moves. McConnell, a Kentucky Republican, said in a statement that Cordray's appointment is in "uncertain legal territory."

And House Speaker John Boehner went a step further, saying in a statement thathe expects "courts will find the appointment to be illegitimate."

Republicans say their objection to Cordray's nomination has nothing to do with the nominee.

Instead, they want three big changes to how the bureau is overseen. They want to replace the director with a board; make the bureau ask Congress for money each year; and gain more power to overrule the bureau. Republicans vowed to block confirmation of any nominee to run the bureau until the president agreed to approve those structural changes to the bureau.

U.S. Chamber of Commerce CEO Thomas J. Donohue denounced the president's move in a statement.

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"To say we are disappointed in the move by the President today would be a gross understatement," Donohue said. "This controversial appointment is unprecedented, constitutionally questionable, and puts the authority of the director and the validity of the bureau's work in legal jeopardy."

Consumer advocacy groups ranging from Public Citizen to the Consumer Federation of America praised Obama's move. So did Elizabeth Warren, the Harvard University professor and Democrat running for the Senate in Massachusetts. Warren came up with the original idea for the consumer bureau and was once a leading candidate to run it.

"President Obama's decision to overrule the big banks and the Senate Republicans who are protecting them gives consumers a strong ally and advocate in Washington," Warren said in a statement.

--CNN's Adam Aigner-Treworgy contributed to this report.