Zywicki Weighs in on Cordray Recess Appointment

President Obama's recess appointment of Richard Cordray as head of the Consumer Financial Protection Bureau (CFPB) doesn't pass muster with Professor Todd Zywicki, who said in an interview that Senate confirmation was necessary.

"It seems to me that the answer is no, Cordray cannot" take on the duties of nonbank lending and credit regulation, Zywicki said. "It seems pretty clear to me what they are saying" in the Dodd-Frank legislation, "which is that these powers do not transfer until certain things happen," he maintained, saying the chief thing that needed to happen was Senate confirmation.

Democrats and Republicans differ on the matter of the recess appointment. At issue is an argument that the statute creating the CFPB requires that the director actually be confirmed by the Senate, rather than appointed, in order to activate the agency's new powers to regulate consumer and business transactions.

A counter argument is that the language in Dodd-Frank is merely a restatement of the requirement for the Senate's advice and consent contained in Article II, Section 3 of the Constitution, which is followed by a paragraph that allows for recess appointments by the president, and that Constitutional intent prevails.

Will recess appointment handcuff top consumer cop? Cleveland Plain Dealer, January 17, 2012. By Stephen Koff.
"We're intrigued by a different argument put forth by Republican Sen. Rob Portman of Ohio: that Obama might have limited Cordray's ability to do his full job because of the way he put the Ohioan in the director's chair.

"'The irony is that while this recess appointment may advance the White House's political goals, it does nothing to advance the work of the CFPB,' Portman said in a prepared statement the afternoon of Jan. 4, after Obama announced he was appointing Cordray. 'The statute creating the CFPB makes clear that only Senate confirmation of a director – not a recess appointment – can activate the new powers of this agency to regulate consumer transactions with Main Street businesses.'

"Portman, an attorney, was referring to the Dodd-Frank financial reform legislation of 2010, which created the consumer agency and split its duties. Starting in late July of 2011, this single agency would take over duties previously held by an assortment of other, often disconnected agencies that regulated consumer loans and credit cards issued by banks. But that excluded so-called nonbank lenders, such as some student loan companies, mortgage brokers and payday lending operations.

"Under the legislation, the agency could not pick up those additional duties and write new rules for those industries until it had a director in place. That's why Obama and congressional Democrats had been so adamant about installing a director. They said they wanted the consumer bureau to be able to do its full job."

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