Results matching “CFPB”

Recess Appointments and National Security - PointOfLaw Featured Discussion

Jason Mazzone
Gerald Baylin Professor of Law, Brooklyn Law School

Earlier this month, President Obama, invoking his power to make recess appointments, named Richard Cordray director of the Consumer Financial Protection Bureau and added three members to the National Labor Relations Board. Critics contend that these appointments were unconstitutional because the Senate was not in recess: although virtually all Senators were out of town and no business was being conducted, the chamber was kept open through pro-forma sessions.

I am no fan of recess appointments particularly when, as here, they are used to put into office nominees the Senate has had before it but has refused to advance to a vote. Nonetheless, the President was on solid constitutional ground when he determined that not withstanding the pro-forma sessions, he could make use of his appointment power. To see why requires shifting the focus from the CFPB and the NLRB and onto the bigger stakes.

The Constitution is a document for times of war as well as times of peace. Many of the Constitution's provisions are explicitly directed at matters of national security; many other provisions serve a security function. The President's "Power to fill up all Vacancies that may happen during the Recess of the Senate" is a power that plays an important national security role by ensuring that even in times of war or other national crises high-level governmental offices remain staffed and functional. The power is located in section 2 of Article II of the Constitution, along with other presidential powers (to act as Commander in Chief, to make Treaties, to appoint Ambassadors, public Ministers and Consuls) that secure the nation. Early interpreters of the power emphasized its security role. For example, in 1823, Attorney General William Wirt, invoking military analogies, explained that were the President dependent upon the resumption of the Senate, a vacancy could "paralyze a whole line of action in some essential branch of our internal police."

Allowing the Senate to block presidential use of the appointment power with pro-forma sessions (the equivalent of an "In Session" sign on the door of a vacant chamber) would have grave security implications. In assessing President Obama's recent use of the power, we should ask about the scenario that is at the heart of the Recess Appointments Clause.

Consider this: While most Senators are in their home states, terrorists attack Washington, DC, with a dirty bomb. Cabinet officials and heads of federal agencies charged with the response effort are killed. A lone Senator bangs the gavel in an otherwise empty chamber and calls the body into pro-forma session. It would be foolish to say that the Senate has not recessed and thus the Constitution prohibits the President from replacing dead and wounded federal officers.

To be sure, the security of the nation does not depend upon staffing the CFPB and the NLRB. But the President's recess appointment power extends to filling "all Vacancies." And, as with other constitutional provisions, it is a mistake, and a danger, to measure that power by judging its perceived necessity in times of peace.


James R. Copland

On January 4, President Obama invoked executive recess appointment authority to place former Ohio attorney general Richard Cordray as the first director of the new Consumer Financial Protection Bureau, as well as to place three new members of the National Labor Relations Board. Senate Republicans had previously refused to permit a confirmation vote on Cordray and one of the president's NLRB appointments.

The president's action was controversial because the Senate was technically not in recess -- having held "pro forma" sessions that appeared to prevent the President from exercising his constitutional recess appointment authority. White House lawyers advised the president that he had the constitutional authority to make recess appointments while the Senate is hosting "pro forma" sessions only for the purpose of blocking those appointments. The Department of Justice defended the legal authority of the President in a memorandum.

Various legal scholars in turn reacted to the president's action: Professors John Yoo and Laurence Tribe, on opposite sides of the issue, examined the scope of executive authority and congressional authority under a separation of powers framework; and Professor Richard Epstein looked to the text of the Recess Appointment Clause and challenged not just President Obama's appointments but the current practice of recess appointments more broadly.

This week on Point of Law, we are fortunate enough to host a lively back-and-forth discussion with Jason Mazzone, Gerald Baylin Professor of Law at Brooklyn Law School and Andrew M. Grossman, visiting legal fellow in The Heritage Foundation's Center for Legal and Judicial Studies and litigator at Baker & Hostetler. Mr. Mazzone and Mr. Grossman will explore the constitutionality of the president's controversial recess appointments, exploring legal arguments that have been advanced in the debate and others not yet expressed. The featured discussion will be available below; please check back throughout the week as the discussion continues.

Legitimacy of Cordray confirmation under the microscope - PointOfLaw Forum

On December 8, 2011, after Senate Republicans blocked the confirmation of Richard Cordray, former Ohio attorney general nominated to serve as the first director of the Consumer Financial Protection Bureau, President Obama vowed that his administration would not give up on the appointment. On Wednesday, the President followed through on his pledge with a recess appointment of Cordray, officially expanding the authority of the CFPB over non-bank institutions/lenders that can offer loans to consumers.

While there was an expected partisan response to the President's strategy from both sides of the aisle, a serious and legitimate legal issue was identified by constitutional scholars. The issue is whether the President has the authority to make recess appointments while the Senate is hosting "pro forma" sessions for the purpose of blocking those appointments.

The White House argues that the President does indeed have such authority:

The Constitution gives the President the authority to make temporary recess appointments to fill vacant positions when the Senate is in recess, a power all recent Presidents have exercised. The Senate has effectively been in recess for weeks, and is expected to remain in recess for weeks. In an overt attempt to prevent the President from exercising his authority during this period, Republican Senators insisted on using a gimmick called "pro forma" sessions, which are sessions during which no Senate business is conducted and instead one or two Senators simply gavel in and out of session in a matter of seconds. But gimmicks do not override the President's constitutional authority to make appointments to keep the government running. Legal experts agree. In fact, the lawyers who advised President Bush on recess appointments wrote that the Senate cannot use sham "pro forma" sessions to prevent the President from exercising a constitutional power.

In response, Andrew Grossman, visiting legal fellow in The Heritage Foundation's Center for Legal and Judicial Studies and litigator at Baker & Hostetler, points to contradictions that could occur as a result of executive authority in deciding whether the Senate is functionally in session or not.

...on December 17, the Senate agreed to an order instituting "pro forma" sessions, of the kind the President now claims are actually recess. (See the PDF of the Congressional Record here.) But it was at one of those sessions, on December 23, that the Senate passed the payroll tax cut extension that the President signed into law later that day. (Again, see the Congressional Record entry.)


Of course, if the Senate was actually on recess that day, it couldn't have passed the bill, and the President couldn't have signed it into law. (The President has not claimed--at least, not yet--that he can enact laws that have not passed Congress.) But in that case, the President chose to respect the Senate's own view as to whether it was open for business.


As Andrew also notes, the Constitution vests the Senate with the express authority to "determine the rules of its proceedings."

Professor Richard Epstein and Professor John Yoo both identify the danger in the recognition of executive authority to determine whether the Senate is in session. Professor Epstein then articulates a strong textual argument in the interpretation of Article II, Section 2 of the Constitution concluding that Cordray's confirmation does not fall within the scope of the President's recess appointment authority. The U.S. Chamber of Commerce echoed that sentiment in their sharp admonition of the President's recess appointment calling it "unprecedented, constitutionally questionable, and puts the authority of the director and the validity of the bureau's work in legal jeopardy."

Among the many viewpoints expressed, we can probably all agree that this appointment is not likely to go unchallenged.


In an interview with Jim Blasingame of The Small Business Advocate radio program, Jim Copland, director of Manhattan Institute's Center for Legal Policy, addressed the Consumer Financial Protection Bureau in light of the Senate's recent rejection of an up-or-down vote for Richard Cordray's confirmation as the director of the CFPB.

In one of several segments, Jim tackled the question, "How will the CFPB affect small business? He replied:

Credit has really dried up for small businesses. This is really the lifeline for small business; small banks making small loans to small businesses to go and invest. Of course, some of these small businesses are going to keep going, individuals will take out their personal credit lines, their credit cards. People running small businesses will find ways to get credit. But, the unavailability of low-cost credit for small businesses is one of the biggest, if not the biggest, problem right now in the economy.

The concern the Republicans have is that this bureau, while in concept defensible, was written into this law where there is basically no check on the power of the person running the bureau.

...And this person can effectively make unilateral decisions. No question that person is going think that these are intended to help consumers, but, they also might have massive implications for the broader economy, the ability to generate credit and the ability to generate financing mechanisms. This could have dramatic ripple through effects on the broader economy.

So I think that their concerns are well founded and what they're basically saying is, before we take one of these up for a vote, we've got to restructure this so that it is structured more like most of these federal agencies. Where there is some congressional oversight, some sort of bi-partisan commission, something so that you don't have one individual acting basically as a czar for the country's consumer finance because that's very, very dangerous if you get the wrong person in there. And I'd argue that Richard Cordray is exactly the person you have to worry about.

Jim wrote an op-ed piece published in the Washington Examiner on this topic months before the rejection of Cordray's confirmation, expressing similar views with a focus on Cordray's record as Ohio's Attorney General.

Cordray Blocked: Obama vows he won't give up - PointOfLaw Forum

PointofLaw returns to its coverage of the Richard Cordray confirmation standoff. In a 53-45 vote, Senate Republicans effectively blocked the confirmation of Richard Cordray, former Ohio attorney general, nominated to serve as the first director of the Consumer Financial Protection Bureau. While the CFPB can currently regulate the nation's banks, without a director, the new agency cannot assume its arguably most important role of regulating non-bank institutions that can offer loans to consumers.

In a subsequent press conference, President Obama pledged that this was not the end of the road and that, "we are not giving up on this... we are going to keep at it." Some Senate Democrats are urging the President to make a recess appointment of Cordray when the Senate adjourns as expected at the end of the month. The President has not ruled that option out. Republicans however, can avert such appointments by preventing the Senate from adjourning and holding short sessions during the vacation periods. Such a stalemate, we would hope, will force the Senate to engage in a real and honest debate focused on the structure and regulatory authority of the CFPB.

In the meantime, both parties will appeal to the public by accusing each other of unprecedented partisanship; the Senate Democrats pointing to the first time in Senate history that a candidate of an agency has been blocked because of opposition to the agency itself and Senate Republicans citing an unparalleled grant of absolute unchecked authority to a regulatory agency.

Neither party has questioned Cordray's qualifications which are at issue in Jim Copland's op-ed in the Washington Examiner and Manhattan Institute's Trial Lawyers Inc.: Attorneys General report.

Since it first opened its doors in July, the Consumer Financial Protection Bureau has been unable to exercise its full authority as promulgated under Dodd-Frank. Without a confirmed director, the CFPB cannot extend its oversight to non-bank consumer lenders, arguably the most essential to its intended role.

The White House's greatest obstacle has been trying to convince a block of 44 Senate Republicans who have written a letter pledging to filibuster the confirmation of Obama's nominee, former Ohio Attorney General, Richard Cordray. Despite Cordray's alarming record as Ohio's AG, more specifically his contracts with private attorneys on a contingency-fee basis to handle the state's lawsuits, Senate Republicans refuse to confirm Cordray because of concerns about the CFPB's leadership structure, authority and funding.

In response, the Obama administration has decided to take its message to the people via media, public appearances and an information campaign targeting seven states in particular: Alaska, Indiana, Iowa, Maine, Nevada, Tennessee and Utah. The goal is to lobby the Senators deemed most likely to change their minds by encouraging public pressure from constituents.

Simultaneously, state AGs and other officials have already joined the effort to gain the 60 votes necessary for a vote that may come as early as Thursday. Even Republican Attorney General Mark Shurtleff of Utah has come forward to support Cordray in this effort.

Coincidentally, both Democrat Cordray and Republican Shurtleff are among the eight "leaders" of state AGs recognized for their unsavory alliances with trial lawyers. The White House seeks to frame this confirmation debate as a choice between either protecting the financial industry or the middle class however, Cordray's record as Ohio's AG and the broad authority delegated to the CFPB director and State AGs by Dodd-Frank may paint a different picture.

Cordray Confirmation Stalemate Continues to 'Handicap' CFPB - PointOfLaw Forum

The Consumer Financial Protection Bureau, the highly controversial centerpiece of the Dodd-Frank Wall Street Reform and Consumer Protection Act, is still struggling to assume its full regulatory authority. Without a confirmed director, the CFPB cannot extend its oversight to non-bank consumer lenders.

In response to criticism for withholding their confirmation, Republicans insist that "...the objection isn't to any particular nominee. Rather, the concern is with the lack of transparency and accountability at the CFPB."

In this case however, an objection to the particular nominee Richard Cordray may be warranted. Trial Lawyers Inc.: Attorneys General, a new report released by Manhattan Institute's Center for Legal Policy, identifies Cordray among the greatest allies to the plaintiffs' bar while serving as Ohio's Attorney General. In a separate article, James Copland, the author of this report and director of the Center for Legal Policy, cites $830,000 that Cordray received from out-of-state plaintiffs' firms while during his term parceling out at least six lawsuits on a contingency-fee basis.

Those Senate Republicans critical of the potentially broad and vague authority of the CFPB as evidenced by its 802 page regulatory manual would be justified in objecting to the appointment of a nominee with Cordray's record. The CFPB might very well be in need of reforms to its leadership structure, transparency and general authority, but, the unsuitability of a nominee for the director position is at the very least relevant to making the case for withholding a confirmation to that nominee.

In the meantime, the CFPB has certainly ramped up its efforts to convince the public and legislators of the severity of the gridlock in the Senate. Political opponents and critics however, seem to be unwilling to comply with the administration until their concerns are addressed.

Cordray suit against ratings agencies thrown out - PointOfLaw Forum

State AGs often use the power of their office and bad publicity to mau-mau defendants in meritless suits; perhaps that was the plan of then-Ohio AG Richard Cordray when he sued ratings agencies for violations of the Ohio Securities Act, though the ratings agencies were not sellers of securities as the act requires. A federal district court judge threw out the case this week, nothing that the "complaint identifies who the issuers of the securities were, but it does not contain even a general allegation that the issuers violated the Ohio Securities Act, let alone plead a violation with particularity." The law firms bringing the suit on behalf of Ohio were indirect donors to Cordray's campaign. [LNL]

As J.W. Verret and Michael Krauss point out in separate articles, part of the problem with the Consumer Financial Protection Bureau is that it is run by a single czar; when the SEC or NLRB exceed their authority for partisan political gain, the minority members of the commission can speak out and draw attention to the abuses. That can't happen when the decisions are made by a single individual. Krauss argues against the nomination of Cordray because of his ties to the trial bar. [Krauss @ American Thinker; Verret @ WaTi] Dodd-Frank is already vague and overbroad; if the CPFB can bring the sort of abusive lawsuits that the Ohio AG's office did, it will be problematic.

Update, October 20: see also IBD.

Zywicki on CFPB - PointOfLaw Forum

The Battle over the CFPB - PointOfLaw Forum

Yesterday I tried to give some historical context to the continuing controversy over whether President Obama should nominate Elizabeth Warren to head the CFPB. I want to return to that subject today.

This morning’s New York Times has an article addressing the issue. Part of the objection to Warren is her outspoken criticism of the banking industry.  Bankers apparently feel that “she has unfairly accused them of exploiting consumers.”   This has become a familiar refrain of late in the financial community (see for example Jamie Dimon’s comments at Davos earlier this year).         

But such expressions have a much older lineage than that. In 1939, Ferdinand Pecora wrote Wall Street under Oath, his memoirs of the Senate investigation he led in 1933 and 1934. This quote is from his introduction.

Frequently we are told that regulation has been throttling the country’s prosperity. … That its leaders are eminently fitted to guide our nation, and that they would make a much better job of it than any other body of men, Wall Street does not for a moment doubt. Indeed, if you now hearken to the oracles of The Street, you will hear now and then that the money-changers have been much maligned. You will be told that a group of high-minded men, innocent of social or economic wrongdoing, were expelled from the temple because of the excesses of a few. You will be assured that they … were simply scapegoats, sacrificed on the altar of unreasoning public opinion to satisfy the wrath of a howling mob blindly seeking victims.

A good deal of the New York Times article was devoted to chronicling attempts to weaken the agency. Warren described the efforts this way:

Every day, somebody’s got a plan to undercut this agency, to knock it down,” she said. “The conversation is effectively: ‘Oh, we’d really like to kill this thing but it might be too popular for that — that might cause too much blowback. So can we find a way to maim it?’ ”

In 1939, Pecora ended Wall Street under Oath this way:

When open mass resistance fails, there is still the opportunity for traps, stratagems, intrigues, undermining—all the resources of guerilla warfare. These laws are no panacea; nor are they self-executing. More than ever, we must maintain our vigilance. If we do not, Wall Street may yet prove to be not unlike that land, of which it has been said that no country is easier to overrun, or harder to subdue.

The more things change …

Around the web, September 29 - PointOfLaw Forum

  • MI's Marie Gryphon: Congress shouldn't force citizens to fly blind. [Wash. Examiner]
  • Supreme Court cert grant in Astra v. County of Santa Clara, on whether there's a private right of (class) action over pharmaceutical prices agreed to by HHS. [Santa Clara v. Astra (9th Cir.)]
  • Paycheck Fairness Act criticism roundup. [Overlawyered]
  • Are plaintiffs or defendants worse actors when it comes to confidentiality of documents? [Drug and Device Law]
  • Which CFPB will we get? [Wright]
  • On remand in Rodriguez v. West Publishing Co.,, Judge Manny Real reduces proposed attorneys' fees from $12M to $500,000. [ABA J]
  • "Lawyer Bluster on Display in Oil Spill Litigation" [WSJ Law Blog]
  • Ninth Circuit lawlessly stays an execution planned for a Death Row inmate, Albert Greenwood Brown, who raped and murdered 15-year-old Susan Jordan in 1980, two lifetimes ago for the victim. The grounds: questions over the constitutionality of lethal injection, concerns that the Supreme Court resolved in 2008. Judges can do this because Congress has abdicated its constitutional responsibility to impeach such judges. [SF Chronicle]
  • Lost in the fuss over Stephen Colbert's testimony: Christopher Coates, a former ACLU attorney who joined DOJ in the Clinton years, testified about racial bias in Obama's Civil Rights Division. [Politico; Bader]

Elizabeth Warren complains about overdisclosure - PointOfLaw Forum

I saw her quoted on television complaining about the length of credit card contracts being "tricks and traps," and it's apparently a regular talking point:

In 1980, according to the Wall Street Journal, the typical credit card contract was about a page and a half long. It told you about the interest rate, about being late and that was pretty much it. Today, the typical credit card contract according to the Wall Street Journal is about 31 pages long. So, tricks and traps? It's that other 29 and a half pages.

To which I respond, "No, Professor Warren. The reason that credit-card contracts are 31 pages long is because your trial-lawyer buddies persistently sued credit-card companies for failure to disclose, and the lawyers kept making them add more and more to credit-card contracts to settle past or avoid future lawsuits. And all of this could have been avoided if you permit credit-card customers to opt out of the expensive and inefficient legal system that requires such overdisclosure, except your future Consumer Financial Protection Bureau is almost certain to bar consumer choice to agree to arbitrate these disputes."

Perhaps if Warren is appointed CFPB head, she'll require credit-card contracts to be a page and a half long again—and then start a new cycle of state-law class actions complaining about failure to disclose and arguing that CFPB regulations don't preempt those lawsuits. That'll surely make lawyers better off; consumers, not so much.

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