Obama's consumer watchdog is dead in the water

President Obama is unlikely to get a confirmed consumer director.

WASHINGTON (CNNMoney) -- President Obama is pretty much doomed to a director-less Consumer Financial Protection Bureau through next year.

It's not about Elizabeth Warren, who came up with the idea. It's not about Richard Cordray, the president's nominee to be the consumer bureau's first director. The problem is that Obama and key players in the Senate are at an impasse about whether the agency should exist at all in its current form.

"Republicans have threatened not to confirm [Cordray] not because of anything he's done, but because they want to roll back the whole notion of having a consumer watchdog," Obama said Thursday during a press conference. "That does not make sense to the American people."

The Consumer Financial Protection Bureau is independent watchdog agency tasked with regulating financial products such as mortgages and credit cards. But without a director, the bureau can't wield some of its most important powers, like regulating financial industries that now operate in the shadows such as payday lenders and mortgage servicers.

The consumer bureau also won't be able to declare specific banking or credit card fees deceptive or abusive and ban them.

Senate Republicans sent a letter to the White House in May threatening to block confirmation of a consumer bureau director if they don't get three big changes to the new bureau. Republicans want to replace the director with a board, make the bureau ask Congress for money each year, and prevent the bureau from making rules that could threaten the health of financial institutions.

Republicans have complained for months that they've heard no answer from the White House. In a committee hearing on Thursday, they pressed Treasury Secretary Tim Geithner on their trio of requests.

"We're waiting for that dialogue, and hope we hear from you," Republican Richard Shelby, the ranking Republican on the Senate's banking committee, told Geithner. "Short of that, I think the nominee is not going anywhere."

Secretary Geithner asked Republicans to "reconsider" their offer.

Shelby answered: "Well, we'd hope you'd reconsider."

Geithner said he remains "always optimistic."

Shelby's answer: "Don't get optimistic on that."

Geithner then called the Republican changes to the bureau a "significant weakening of the bureau." Shelby disagreed and Republicans think their changes will strengthen the bureau.

The snippy exchange illustrates the ideological chasm between the two sides -- a gap that threatens to leave the position vacant indefinitely.

The banking committee did approve Cordray's nomination and sent it to the floor with a 12-10 vote along party lines. The nomination needs a simple majority to approve it, but Republicans plan to block a full vote on Cordray's appointment, and Democrats don't have the numbers to break a Republican filibuster.

Cordray currently works as the enforcement officer for the Consumer Financial Protection Bureau (CFPB) in Washington. He was the Ohio Attorney General and also served in the Ohio state house. He teaches at Ohio State University as an adjunct professor.

Behind the Bureau: In July, the CFPB launched as an independent agency, and it got the power to start examining the books of the nation's largest banks to make sure they're abiding by existing laws that protect consumers.

The bureau can also monitor the banks' compliance with credit card laws that crack down on fees and require certain disclosures to customers.

However, until Cordray steps up as the official director, the bureau continues to lack new powers critical to preventing the next financial crisis --- such as regulating the non-banking firms that originated hundreds of millions of dollars in subprime mortgages to families who couldn't afford them.

The CFPB was the brainchild of Elizabeth Warren, a Harvard University law professor. Warren had been a leading candidate to run the bureau and spent the past year working as a White House and Treasury adviser setting up the bureau, but Republican opposition torpedoed her chances of becoming its permanent director.

She returned to Harvard University and is now running as a Democrat against Massachusetts Republican Scott Brown for the U.S. Senate.