Cordray Appointment Roils Hill

Holes are being filled in the story of the controversial appointment of Rich Cordray as director of the new Consumer Financial Protection Bureau (CFPB)</p

The new director himself has wasted norntime getting to work after waiting nearly six months for the opportunity.  He immediately released a post on the CFPBrnwebsite in which he summarized the work the headless agency has accomplishedrnover the past six months and an explanation of why the absence of a directorrnwas handicapping it.  “In particular,” hernsaid, “we lacked the ability to supervise financial institutions other than bigrnbanks – like nonbank mortgage lenders and servicers, and payday lenders. Manyrnof these institutions had no regular federal oversight in the run up to thernfinancial crisis. They led a race to the bottom that pushed aside responsiblernbusinesses, including community banks and credit unions, and greatly harmedrnconsumers.  We can now exercise the fullrnauthorities granted to us under the law and begin to supervise these nonbanks.”  </p

This morning the Bureau, along with arnrather unassuming little video in which Cordray invites consumers to tell thernagency their stories and ask for help where needed, CFPB announced the formalrnlaunch of the non-bank supervision program Cordray alluded to on Wednesday.  Oversight has, until now, been under state andrnlocal supervision which ranges from rigorous to non-existent which means thatrnthe most egregious practitioners of consumer abuse flock to the states on thernlow end of that scale.</p

CFPB will begin this supervision inrnphases with certain markets, i.e. mortgage companies (originators, brokers,rnservicers, loan modification and foreclosure relief servicers) payday lendersrnand private education lenders falling under the regulations immediately.  For other businesses such as debt collection,rncredit reporting, auto financing and money services, CFPB may opt to supervisernonly “larger participants” once that term is defined.  This has already been the subject of publicrncomment and the Bureau has received thousands from trade and consumer groupsrnand various other regulators. </p

The Dodd-Frank Act also gives CFPB authority to supervise any nonbank thatrnit has a reason to determine is engaging or has engaged in conduct that posesrnrisks to consumers with regard to consumer financial products or services. ThernCFPB will be publishing rules setting out procedural guidelines forrnimplementation of this provision.</p

In the meantime the controversy over Cordray’s appointment itself is roilingrnWashington.  President Obama firstrnnominated Cordray, former Attorney General of Ohio and CFPB’srndirector of enforcement on July 17.  Hernwas chosen after Senate Republicans made it clear that they would not confirm thernappointment of Elizabeth Warren who had conceived the idea of the Bureau andrnmight not confirm anyone at all based on their objection to the existence ofrnthe CFPB itself despite its authorization by the Dodd-Frank Wall Street ReformrnAct.</p

Cordray’s name has never been brought to an up or down vote but in therncurrent Senate, where a 60 vote majority is now required to bring any bill tornthe floor, he did receive a simple majority in the “cloture” vote.  Tapes are now endlessly running on televisionrnwith Republicans explaining at that time that, while Cordray was more thanrnqualified, no one would be acceptable for the position. </p

A recess appointment is set out in the Constitution for periods whenrnCongress is not in session and it has been widely used throughout history.  Obama has used it 31 times in three yearsrn(four of these occasions occurred yesterday as he appointed three people to thernNational Labor Relations Board who had also been waiting for months, leavingrnthe Board without a quorum).  Reagan usedrnthe device 243 times, George H.W. Bush 77, Clinton 171, and George W. Bush 171.</p

Republicans however, charge that this was a grab for power.  Even though the Senate sort of recessed onrnDecember 22, as they have over the last few vacations they have continued tornhold sessions every few days in which a Senate member gavels an empty chamberrnto attention, declares Congress open for business and adjourns secondsrnlater.  The sole reason for this is torndeter presidential recess appointments.  </p

It may well be that this somewhat minor appointment may be headed for arnmajor court battle – and the intriguing part is that almost any citizen canrnstart it.  According to some legalrnauthorities, anyone who can claim injury from any action taken by CFPB afterrnthis appointment can challenge the legality of the Bureau’s action on the basisrnthat its Director is an illegal appointment.</p

More fun and games for election year.

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