Obama’s Recess Appointment of Cordray Eschews Constitutional Process

Washington, D.C., January 4, 2012 — Today, the White House confirmed that President Obama is using a recess appointment to name Richard Cordray the new Director of the Consumer Financial Protection Bureau (CFPB). The CFPB is a powerful bureaucracy created by the 2010 Dodd-Frank financial overhaul legislation.

John Berlau, Director of CEI’s Center for Investors and Entrepreneurs, called the nomination of former Ohio Attorney General Richard Cordray “very troubling.” Berlau criticized both Obama’s controversial use of a recess appointment—which, according to Berlau, relies on a “broad” definition of recess—and the selection of Cordray itself.

Below is a statement by John Berlau.

The Cordray appointment is a disturbing body blow to our constitutional system of check and balances in three ways:

1. President Obama broadly defined “recess” as any adjournment of Congress. What’s next, appointing nominees when the Senate takes a bathroom break?

2. Dodd-Frank puts severe limits on both Congressional and judicial oversight over the CFPB’s actions.

3. As Ohio Attorney General, Cordray directed state money toward a confrontational community organizing group and to trial lawyers who contributed to his campaigns

 Let’s take these one at a time. The Senate is now in “pro forma” session, in which a handful of senators meet in the Senate every three days, as part of the agreement with the Republican-controlled House to adjourn Congress. The Democrat-controlled House and Senate did the same thing during the last year of the George W. Bush administration. During the 2007-08 pro forma session, as noted by the nonpartisan Congressional Research Service and reported by Politico, President Bush “made no recess appointments between [Democrats’] initial pro forma sessions in November 2007 and the end of his presidency.” President Obama arguably had a window yesterday in the few seconds between the first and second session of Congress, but didn’t exercise this opportunity. If he appoints Cordray now, he sets a precedent that Democrats and critics of the “Imperial Presidency” will likely regret the next time there is a Republican president and Democrats control one or both houses of Congress.

This appointment is particularly troubling because of the nature of the agency that Cordray will now head. The Consumer Financial Protection Agency shatters precedents, as well as specific Constitutional provisions, on checks and balances in regulatory agencies. Once a director is appointed, Congress has no effective oversight of the bureau through the appropriations process, as it does with other agencies.

Then, of course, there is Richard Cordray’s troubled history as an Ohio politico, a history that Buckeye state voters took into account when they removed him from office in favor of Republican Mike Dewine in 2010. Senate Republicans have focused more on the structural defects of the CFPB, but Cordray’s nomination would be troubling even if those weren’t at issue.

Last month in The American Spectator, I wrote about Cordray’s longtime support of the East Side Orgizing Project or ESOP, an Ohio “housing” group that has distinguished itself storming banks and throwing plastic sharks on the lawns of private homes. ESOP’s executive director is on record telling Bloomberg that Cordray specifically approved of these tactics when he met with the group. In addition, BigGovernment.com and others exposed a pattern of trial lawyer contributors to Cordray suddenly getting lucrative business from his office in helping the state with lawsuits against financial firms. 

The CFPB is slated to have broad regulatory influence over Main Street businesses that have nothing to do with the financial crisis. As was warned before Dodd-Frank passed, its power to ban “financial products” of “nonbanks” could extend to any form of credit extended to consumes, including a layaway plan by a small store. President Obama’s decision to appoint Richard Cordray to head this powerful bureaucratic agency only compounds previous concerns about the future of the CFPB. There can be no transparency and accountability in the financial system without transparency and accountability in the bureaucracies that control it.

See John Berlau’s extended statement on the Cordray appointment on OpenMarket.org.