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House Republican blocks consumer watchdog from testifying

Super committee co-chair Rep. Jeb Hensarling (R-TX) talks to reporters as he arrives for a meeting with Republican committee members on Capi
Super committee co-chair Rep. Jeb Hensarling (R-TX) talks to reporters as he arrives for a meeting with Republican committee members on Capi

WASHINGTON (Reuters) - A Republican lawmaker escalated a partisan fight over the new consumer protection watchdog on Monday, saying the bureau's leader was not welcome to appear before a congressional panel that oversees financial regulators.

Representative Jeb Hensarling of Texas, a Republican who leads the House of Representatives Financial Services Committee, said Consumer Financial Protection Bureau Director Richard Cordray could not appear before the panel because he has not been confirmed to his position by the U.S. Senate.

Lawmakers have battled over the bureau since it was created in 2010. President Barack Obama appointed Cordray in January 2012 to lead the consumer watchdog on a temporary basis, but Senate Republicans have refused to confirm him for a full term until Democrats agree to change the bureau's structure.

The bureau's critics argue a recent court ruling proves that Cordray's position is invalid, though Democrats and the consumer watchdog dispute that conclusion because the case did not deal directly with him.

Cordray is scheduled to appear before a Senate committee on Tuesday to present a semi-annual report on the bureau's activities, but Hensarling said he would not be asked to deliver the report to the House panel.

"The Committee on Financial Services stands ready to accept the testimony of the director of the CFPB on the semi-annual report as soon as an individual validly holds this position," Hensarling said in letters to Cordray and to bureau general counsel Meredith Fuchs.

The CFPB, formed after the 2007-2009 crisis to protect Americans from financial scams, oversees mortgages, credit cards and student loans.

Obama used a controversial maneuver known as a "recess appointment" to install Cordray temporarily while most lawmakers were out of Washington, after Senate Republicans refused to confirm him to a full term. They say the bureau should be run by a bipartisan board and not a single director.

Republicans said Cordray's appointment, as well as three additional appointments to the National Labor Relations Board, was invalid because lawmakers were not technically on recess at the time.

A court earlier this year threw out the three labor board appointees for that reason.

The ruling did not directly involve Cordray, and a separate challenge to his appointment has not been decided in court, but lawmakers and financial industry groups have said the same reasoning could be applied to invalidate his appointment.

The Obama administration wants the U.S. Supreme Court to weigh in on the appointments issue.

Consumer bureau spokesman Moira Vahey confirmed that the CFPB had received Hensarling's letter. She said the court ruling does not apply to the bureau and that it would continue to work on behalf of consumers.

"Mr. Hensarling's own letter concedes that no court has addressed the legitimacy of the president's appointment of Richard Cordray to be the director of the CFPB," Representative Maxine Waters of California, the top Democrat on the financial services committee, said in a statement.

"I suggest that Chairman Hensarling allow Director Cordray to appear before the committee to deliver his report as required by law," she said.

Hensarling said that his committee would only hear testimony from a confirmed director but that his panel would continue to oversee the consumer bureau, and CFPB staff still could be asked to appear before the committee.

(Reporting by Emily Stephenson; Editing by Lisa Shumaker)

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