President Obama’s recess appointment Wednesday of Richard Cordray to lead the Consumer Financial Protection Bureau may not allow the agency to perform all of its functions, undermining one of Obama’s key rationales for the controversial move.
Under the law, the agency cannot regulate non-banks until a director is confirmed by the Senate.
Some Republicans, including widely respected Sen. Rob Portman of Ohio, are arguing that the law creating the agency very specifically requires that he be confirmed by the Senate – and not appointed without a Senate vote during a recess – before he can begin to regulate non-banks.
If Cordray’s appointment was not necessary to get the agency fully up and running, it supports the argument that a primary motive for the appointment was political. Cordray is said to be eying higher office in Ohio – Obama’s announcement of the appointment in Ohio sounded a lot like a Cordray campaign rally – and Obama has already begun raising money off the appointment.
The need for confirmation is made explicit in Section 1066 of the Dodd-Frank bill, which created the agency.
SEC. 1066. INTERIM AUTHORITY OF THE SECRETARY.
(a) IN GENERAL.—The Secretary is authorized to perform the functions of the Bureau under this subtitle until the Director of the Bureau is confirmed by the Senate in accordance with section 1011.
According to the Volokh Conspiracy, a conservative legal blog: “section 1011 is a defined term which provides: ‘The Director shall be appointed by the President, by and with the advice and consent of the Senate.'”
But Obama during his Ohio appearance Wednesday asserted that he needed Cordray in place in order for the agency to go after non-bank entities that he thinks are ripping off customers.
Without a director in place, the consumer watchdog agency that we’ve set up doesn’t have all the tools it needs to protect consumers against dishonest mortgage brokers or payday lenders and debt collectors who are taking advantage of consumers.
The appointment has stirred a furious reaction from Republicans, who say the Senate is not in recess and Obama’s “recess appointment” is illegal.
H/T to two of my readers, Moe and srdem65, for letting me know about this.