President Barack Obama will install Richard Cordray as head of the new Consumer Financial Protection Bureau on Wednesday, administration officials said, bypassing Senate Republicans who had blocked his nomination from coming to a vote.
Obama will discuss the decision during a visit to Ohio, where Cordray served as attorney general and won a reputation for taking an aggressive stance against banks. Obama is speaking at Shaker Heights High School in a suburb of Cleveland. Cordray traveled to Ohio with Obama aboard Air Force One.
The president's move makes way for the new bureau to start supervising payday lenders, debt collectors and nonbank firms that offer student loans and other financial products. Many of these thousands of nonbank lenders have escaped federal scrutiny, and the Obama administration has argued that new oversight will help prevent future financial crises.
Under the Dodd-Frank law, which created the consumer-protection bureau, the agency couldn't supervise those firms until a director was in place. Cordray will serve as the first director.
The decision came after White House attorneys concluded the president has the legal authority to make a recess appointment even if the Senate is technically in session, Democrats said.
Republicans have said they wouldn't confirm anyone to the post until changes are made to the bureau's structure. In December the Senate failed to get enough votes to advance the Cordray nomination.
Senate Republicans have tried to prevent the appointment by keeping the Senate technically in session with perfunctory proceedings until senators return to Washington later this month.
Senate Minority Leader Mitch McConnell questioned whether the appointment was legal given that the Senate isn't technically in recess now.
"President Obama, in an unprecedented move, has arrogantly circumvented the American people by 'recess' appointing Richard Cordray as director of the new CFPB," McConnell said. "This recess appointment represents a sharp departure from a long-standing precedent that has limited the president to recess appointments only when the Senate is in a recess of 10 days or longer. Breaking from this precedent lands this appointee in uncertain legal territory."
Obama has made 28 recess appointments but none over the past year.
A recess appointment expires at the end of the Senate's next session or when someone else is confirmed and permanently installed to the position, whichever comes first. So Cordray's appointment could be in effect until the end of 2013.
Democrats on Capitol Hill cheered the pending move. "With Richard Cordray leading the Consumer Financial Protection Bureau, Americans will finally get the consumer protections they deserve. Cordray is eminently qualified for the job, as even my Senate Republican colleagues have acknowledged," said Senate Banking Chairman Tim Johnson (D., S.D.).
According to the Senate's associate historian Betty Koed, no president has made recess appointments while the Senate is holding "pro forma" sessions, which have been used as a means to try to block recess appointments. She said the use of perfunctory sessions to block recess appointments hasn't been challenged, noting, "No, it hasn't been put to the test."
The Senate sessions are held to keep Congress open, even while lawmakers are away from the Capitol and no real business is being conducted. Republicans forced congressional leaders to schedule a series of these sessions over a holiday break as a way to try to thwart the president's ability to make recess appointments.
The White House said the president is within his legal right to make the nomination because the Senate has "effectively been in recess for weeks." The sessions held to prevent these appointments are essentially gimmicks, said White House Communications Director Dan Pfeiffer.
"Gimmicks do not override the president's constitutional authority to make appointments to keep the government running. Legal experts agree. In fact, the lawyers who advised President Bush on recess appointments wrote that the Senate cannot use sham `pro forma' sessions to prevent the President from exercising a constitutional power," Pfeiffer wrote on the White House blog.
This story first appeared on WSJ.com.Maya Jackson-Randall
and Victoria McGrane
contributed to this article.