Obama appoints Richard Cordray to head consumer watchdog bureau

Correction: An earlier version of this article incorrectly referred to Rep. Barney Frank (D) as being from New York. He is from Massachusetts. This version has been corrected.

January 4, 2012

In a bold act of political defiance, President Obama installed Richard Cordray as head of a new consumer watchdog agency Wednesday, bypassing Republican opposition in the Senate that derailed his nomination last month.

Obama cast the move as an effort to protect the interests of middle-class Americans who have suffered as a result of the Great Recession, which stemmed in part from abuses in the financial system.

“I will not stand by while a minority in the Senate puts party ideology ahead of the people they were elected to serve,” Obama told an enthusiastic crowd at Shaker Heights High School here. “Not when so much is at stake. Not at this make-or-break moment for middle-class Americans.”

Senate Republicans had successfully filibustered Cordray’s nomination to head the Consumer Financial Protection Bureau (CFPB) last month, and Obama said he would use a recess appointment to overcome their objections and put Cordray, a former Ohio attorney general, in the job. Cordray, 52, has been leading the day-to-day functions of the bureau as an employee of the Treasury Department.

In announcing the decision, Obama said he refused “to take no for an answer” and added that he has an obligation to act when Congress does not.

The appointment marks both the escalation and the denouement of one of the most contentious fights in Washington since Obama, in July 2010, signed into law the legislation establishing the watchdog agency.

Obama’s initial choice to head the bureau was Elizabeth Warren, a Harvard law professor who had been championed by liberals and who had spent the better part of a year setting up the agency.

But just as the agency was preparing to open its doors in July, the White House opted not to nominate Warren — who had been strongly opposed by Republicans — and instead tapped Cordray for the job. Warren has since announced a bid for the Senate seat held by Scott Brown (R-Mass.), who shifted on the issue in a statement Wednesday, saying that he backed Obama’s move.

Constitutional question

The political debate over Obama’s appointment of Cordray hinges on the question of how long a legislative recess is necessary for a president to be able to install a nominee without Senate approval.

Republicans argue that precedent, over the past two decades, has been that no president can make such an appointment during a recess of less than 10 days.

Democrats contend that according to that standard, Republicans’ move to hold “pro forma” sessions every three days while both chambers are on a longer recess would effectively block the White House from ever making a recess appointment. Such sessions are “a sham,” Democrats and the White House argue – even though Senate Majority Leader Harry M. Reid (D-Nev.) used the same tactic to block President George W. Bush from making recess appointments in 2007 and 2008.

Complicating matters is the fact that the Constitution doesn’t explicitly say how much time is needed for a recess appointment to be made.

The White House also announced Wednesday that the president would appoint three of his blocked nominees to the National Labor Relations Board. Obama will use the Senate recess period to appoint Sharon Block, Richard Griffin and Terence F. Flynn to the NLRB. The appointments have been held up by a partisan fight over the role of government regulation and the right of workers to unionize.

Republicans denounced the Cordray move as arrogant and accused Obama of abusing his executive authority. In addition to the political fight it has ignited, the decision could spark a legal confrontation over his authority to make such an appointment.

Senate Minority Leader Mitch McConnell (R-Ky.) said in a statement Wednesday that Obama “has arrogantly circumvented the American people,” and he called the tactic of using a recess appointment “uncertain legal territory.”

The action “threatens the confirmation process and fundamentally endangers the Congress’s role in providing a check on the excesses of the executive branch,” McConnell said.

The move was in sharp contrast to Obama’s handling of the Warren nomination during the summer.

Then, as now, the Senate remained technically in session during holidays to block Obama from installing Warren without its approval, and the president chose not to force the issue. In the past several months, the president has changed tactics, electing to try to work around Congress rather than negotiate with Republican lawmakers.

Administration aides have said that Obama will try to draw contrasts between his efforts to stimulate the economy and what he argues is a Congress stuck in partisan gridlock.

In a rebuke to Republican leaders, the White House determined that it might make an unprecedented recess appointment even though the Senate remains in pro forma session. Obama is essentially declaring that session a gimmick designed to stymie the administration.

The Congressional Research Service says that the shortest recess during which a presidential appointment has been made in the past 20 years was 10 days. The appointee also could serve only until the next session of Congress; a confirmed director would serve for five years.

Democrats’ defense

The Consumer Financial Protection Bureau was created under the Dodd-Frank Wall Street Reform and Consumer Protection Act to oversee mortgage companies, payday lenders and debt collectors, among others. Obama pushed through the financial reform act during a fierce battle with Republican leaders, who have since vowed to dismantle it.

Rep. Barney Frank (D-Mass.), a co-author of the law, praised Obama’s move.

“Republicans’ complaints about the president’s decision to make this recess appointment are equivalent to objections leveled by arsonists at people who use the fire door to escape a burning building,” Frank said in a statement.

Senate Democrats defended the administration’s move Wednesday.

The chairman of the banking committee, Sen. Tim Johnson (S.D.), said in a statement that Cordray “is eminently qualified for the job, as even my Senate Republican colleagues have acknowledged.”

“It’s disappointing that Senate Republicans denied him an up-or-down vote, especially when it’s clear he had the support of a majority of the Senate,” he said.

Sen. Jeff Merkley (D-Ore.), also on the banking committee, said: “American families deserve a cop on this beat — someone to keep the marketplace fair and protect against the financial scams and predatory schemes that have resulted in millions of Americans losing their homes and livelihoods. . . .

“Given the importance of ending predatory schemes aimed at working families across America, I am pleased that the president is appointing Richard Cordray and giving the American people a fully up-and-running Consumer Financial Protection Bureau.”

Cordray attended the University of Chicago Law School and clerked for two moderate Supreme Court justices, Byron R. White and Anthony M. Kennedy.

He worked for more than a decade at the Kirkland & Ellis law firm, a significant Democratic donor. During his two years as Ohio’s attorney general, he launched a number of high-profile lawsuits to recover money for injured investors. Well before a furor erupted over shoddy and fraudulent foreclosure paperwork at the nation’s major lenders, Cordray aggressively went after financial firms for such practices.

In rejecting Cordray’s appointment, Senate Republicans said they were challenging the structure of the agency’s oversight, which they argue should be handled by a five-member commission.

“Everyone agrees that he’s more than qualified,” Obama said of Cordray in his remarks. “The only reason Republicans in the Senate have blocked Richard is because they don’t agree with the law setting up the consumer watchdog in the first place. . . . Does anyone think the reason we got in such a financial mess was because of too much oversight? Of course not. We shouldn’t be weakening oversight and accountability. We should be strengthening it.”

Sonmez reported from Washington.

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