- - Tuesday, January 17, 2012


President Obama’s appointment of the embattled Richard Cordray to head the controversial Consumer Financial Protection Bureau, and three others to the National Labor Relations Board, eviscerates the well-settled practices undergirding the constitutional advice-and-consent process, and it mocks the founders’ insistence on checks and balances.

As I have written in this space and elsewhere, the CFPB is one of the most dangerously unconstitutional parts of the Dodd-Frank financial reform law. The statute conveys effectively unlimited power to the CFPB regulators, and then compounds that constitutional error by removing every meaningful check and balance against the CFPB’s misuse of that power.

Congress cannot use its “power of the purse” to rein in the regulators, because CFPB funds its own budget out of the Federal Reserve. The president is prohibited from firing the CFPB director, except under strictly limited circumstances; in fact, the CFPB director’s five-year term ensures that a president newly elected in 2012 would not get to choose his own CFPB director.

The courts are also limited in their oversight, because Dodd-Frank directs them to defer to CFPB’s interpretation of consumer finance laws, even though those statutes were long administered by other agencies and Dodd-Frank provides no guidance for the CFPB.

In short, Dodd-Frank’s CFPB provisions are unconstitutional in and of themselves - and that is precisely why the Senate did not confirm the president’s nomination of Mr. Cordray to lead the CFPB. Earlier this year, 44 senators signed a letter calling on the president and Congress to amend Dodd-Frank to remedy CFPB’s constitutional deficiencies; and consistent with that position, when the Senate failed to do so, it also rejected Mr. Cordray’s nomination.

Unwilling to tolerate this check on his power, the president last week installed Mr. Cordray at the CFPB anyway, without the Senate’s advice and consent, calling it a “recess” appointment.

Now, no one denies that the president has constitutional power to appoint officers during an actual recess. But in this case, there was no actual recess, which the president and Congress long have understood to be an adjournment of more than three days, an understanding that Mr. Obama’s own Justice Department reiterated in a recent Supreme Court argument. Instead, the Senate conducted a number of consecutive adjournments, broken by short sessions in which business was not planned but some occurred anyway.

After Mr. Cordray’s “recess” appointment, the Justice Department opined that the president can make recess appointments anytime he deems the Senate to be “unavailable” to act on his nomination, including whenever the Senate breaks action - weekends, holidays, even at night. The Justice Department memo stressed that the administration has not found any “lower limit to the duration of a recess” sufficient for a recess appointment, and it quoted from a 1993 brief asserting that there is in fact no limit on the president’s recess appointment power.

Mr. Obama attempted to justify his action by asserting that the Cordray and NLRB appointments were necessary for the proper execution of the laws. But the Senate created these agencies as independent of the president and has every right to decline to staff them. In fact, Dodd-Frank itself contained a provision expressly explaining how CFPB would operate until its director is “confirmed,” demonstrating that Congress (and the president, who signed the law) understood that a CFPB director might not be confirmed.

In the end, this controversy is fundamentally a matter of liberty. Writing in Federalist No. 51, James Madison urged that the Constitution’s two fundamental structural principles - a division of sovereignty between federal and state governments, and the checks and balances within the federal government - insured “a double security” for “the rights of the people.”

Dodd-Frank violated both of those principles by concentrating far too much power at the federal level and eliminating all checks and balances against the CFPB’s use of that power. Mr. Obama’s unconstitutional “recess” appointment of Mr. Cordray only reinforces the threat to liberty. Dodd-Frank thus deserves particular attention from the courts - and ultimately the voters.

C. Boyden Gray served as White House counsel in the administration of President George H.W. Bush.

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