Politics

Portman: Obama’s Cordray play won’t advance CFPB

The junior senator from Ohio dismissed Jan. 4 President Obama’s recess appointment that day of Richard Cordray to be the first director of the Consumer Financial Protection Bureau as a political maneuver and not the Senate confirmation required by law to spin off the bureau from Treasury as an independent regulatory agency.

“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,” said Sen. Robert J. Portman (R.-Ohio), who represents Cordray’s home state and has reached out to the White House to resolve his stalled confirmation.

“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,” he said.

“Portman seems to be right on the money, he is right to zero in on what the letter of the law is,” said John Berlau, the director of the Center for Investors and Entrepreneurs at the Washington-based Competitive Enterprise Institute.

“The unconstitutional process for this appointment compounds the constitutional defects in the agency,” he said. “Obama’s appointment of Cordray may have been too clever by half.”

If the CFPB tries to issue new mandates and regulations, they will be open to numerous challenges because of the flawed appointment of its first director, especially given the central role the director plays in the bureau becoming an independent agency, he said.

“The Constitution ensures accountability and transparency of agencies, and there would be several grounds for the CFPB to be challenged,” he said.

“President said today he wants to increase accountability in the private sector, but he wants to weaken accountability in the government sector, but that won’t work,” he said.

A Senate staffer,  who have been close to the workings of the Cordray nomination, said, “Under the Dodd-Frank Act, it is clear that the CFPB’s powers to regulate non-banks, its ‘new’ powers, are activated upon Senate confirmation — not recess appointment — of a Director.”

In Section 1066 (a) of the 2009 Dodd-Frank financial reform and consumer protection law that created the CFPB, it is spelled out that the Secretary of the Treasury holds the director’s authority until the director of the bureau is confirmed by the Senate, he said.

“This section makes clear that the Treasury Secretary’s interim authority terminates, and the Director’s full authority begins, only upon confirmation,” he said. “Further, it is well-established that the Secretary’s interim authority is limited to the powers transferred by other federal agencies to regulate and supervise banks.”

There is nothing to stop the Treasury Secretary from appointing a deputy to exercise these powers in his name, but both that deputy and the bureau would remain inside Treasury and they could not function with the independence Dodd-Frank grants the bureau, when it fully matures.

“But then, even that deputy cannot activate the Bureau’s new powers to regulate non-banks,” he said.

The fight to reform the CFPB in the Senate was led by Sen. Richard C. Shelby (R.-Al.), who in May 2011 wrote a letter, co-signed by 44 other GOP senators, to the president detailing his objections.

Portman, who was one of the 45 on the letter said, “These concerns — voiced by 44 other Senators — cannot be addressed if the White House continues to refuse to work together despite my and others’ efforts to reach out to them to find a way forward.”

“The President responded to legitimate concerns about potential abuse of this new regulator’s powers by abusing his own appointment power in an unprecedented fashion,” he said.

Shelby said the president’s move was a mistake, which was about more than just one appointment.

“President Obama actually created one job today,” Shelby said.

“Unfortunately, this new employee is an unaccountable bureaucrat who will have immense power over the economy,” he said.

“President Obama’s philosophy is clear: government knows best, and the bigger, the better.  In light of his record, it’s not surprising that he end ran the elected representatives of the American people to avoid accountability to them,” he said.

Portman said he is trying to keep the focus on the process, not the personalities.

“As I have said many times, this is not about Rich Cordray, who I believe is a good public servant. Long before he was nominated to be CFPB Director, I expressed my strong concerns about the impact this new regulator would have on all of us as consumers, on job creation, and on our economy, and recommended some commonsense reforms,” he said.

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