Mark Calabria
Recommend this article

President Obama is announcing today that despite the fact that the Senate is not in recess, he’s going to recess appoint Richard Cordray to be the head of the Consumer Financial Protection Bureau (CFPB), created under the Dodd-Frank Act.

Of course the President is actually claiming that the Senate isn’t in session and that its “pro forma” sessions are just a “gimmick”.  Funny I don’t remember then Senator Obama complaining about gimmicks when the Senate used the sames tactics to block Bush recess appointments. 

But then again this is the guy who signs a bill allowing indefinite detention of American citizens after having campaigned on shutting down Guantanamo.  Only a former constitutional law professor could be so creative with the Constitution.

More importantly the “recess” appointment of Cordray doesn’t solve the President’s problem.  The Dodd-Frank Act is very clear, even a law professor can probably understand this section, that authorities under the Act remain with the Treasury Secretary until the Director is “confirmed by the Senate”. 

A recess appointment is not a Senate confirmation.  Now don’t ask me why Dodd and Frank included such unusual language, they could have just given the Bureau the new authorities, but they didn’t.  So even with this appointment, the CFPB won’t be able to go after all those non-banks, like the pay-day lenders and check-cashiers that caused the financial crisis (oh wait, those industries didn’t have anything to do with the crisis).

This appointment also guarantees that Obama, even if he gets a second term, is unlikely to ever get a CFPB Director past the Senate.  Maybe not such a big deal for Cordray since the rumor has always been this is just a political stepping stone so he can go back to Ohio and run for office. 

The real harm is that Obama has decided to take a gamble with the Constitution, risk the further erosion of the Senate’s advise and consent powers, solely to have another campaign issue.  So he can try to paint Republicans as captive to Wall Street, all despite the fact the new agency exempts Wall Street (who will continue under the ever effective oversight of the SEC). 

Maybe he can have Geithner and the various Goldman alum in the Administration stand next to him to help remind us how hard he is fighting for the middle class.

Mark A. Calabria, Cato Institute

Recommend this article

Mark Calabria

Mark A. Calabria, is director of financial regulation studies at the Cato Institute.