Obama Installs Richard Cordray as Consumer Head in Defiance of Republicans

President Barack Obama installed Richard Cordray as head of the Consumer Financial Protection Bureau with a recess appointment today, testing the limits of his executive authority to fill the post without Senate approval.

“I am now the director and my work will be to protect American consumers,” Cordray said at the airport in Cleveland, where he was accompanying the president to a speech on the economy. “I’m going to be 100 percent focused on that.”

Obama nominated Cordray to be the bureau’s first director in July, almost one year after enactment of the Dodd-Frank financial regulatory law creating the agency. Republicans blocked Cordray’s confirmation by the Senate last month. Putting him in the job today may set up an election-year court fight between the White House and Congress.

The president’s decision drew quick criticism from Senate Republican leader Mitch McConnell, who said in a statement that Obama “arrogantly circumvented” the American people and upended “long-standing” practices that limited recess appointments.

“Breaking from this precedent lands this appointee in uncertain legal territory, threatens the confirmation process and fundamentally endangers the Congress’s role in providing a check on the excesses of the executive branch,” said McConnell, of Kentucky.

House Speaker John Boehner, an Ohio Republican, called the appointment an “extraordinary and entirely unprecedented power grab” by the president.

Ohio Announcement

Obama, who is making confrontation with congressional Republicans a part of his re-election strategy, has said filling the consumer bureau post is critical to protecting middle-income Americans from “unscrupulous” lenders. He plans to make the announcement this afternoon in Ohio, a key battleground for the 2012 presidential election.

Cordray is the former attorney general of Ohio and accompanied Obama on Air Force One for the trip to the state.

The Constitution gives a president the power to make appointments when the U.S. Senate is in recess. To keep Obama from appointing officials after Congress started a holiday break last month, congressional Republicans refused to adopt a resolution to formally adjourn and senators have appeared every three days for a brief pro forma session.

Senate Recess

The Congressional Research Service, in a 2001 memo, said congressional practice and Justice Department opinions have backed the position that the Senate should be out of session for more than three days before the president can make a recess appointment.

Pfeiffer, in a post on the White House website, accused Senate Republicans of making an “overt attempt” to block the president from using his constitutional authority to make recess appointments by insisting the chamber remain in pro forma session.

“Gimmicks do not override the president’s constitutional authority to make appointments to keep the government running,” Pfeiffer wrote. Lawyers who advised President George W. Bush on recess appointments wrote that the Senate “cannot use sham ‘pro forma’ sessions to prevent the president from exercising a constitutional power,” he wrote.

Obama’s press secretary, Jay Carney, cited a legal opinion by the White House counsel’s office that determined the Senate was in recess and not conducting any business.

Legal Justification

“When the Congress refuses to act, the president will,” Carney told reporters traveling with the president. “The fact of the matter is that the Senate has been in recess and will continue to be in recess.”

In making the appointment, Obama is going beyond the power asserted by previous administrations to install officials without Senate action. In a 1993 court case involving the Postal Service Board of Governors, Justice Department lawyers argued in court papers that presidents can make recess appointments when the Senate is out of session for more than three days.

The brief suggested that a president might lack that authority during shorter breaks. Pointing to the constitutional requirement that the Senate and House get one another’s consent before adjourning for more than three days, the Justice Department said the constitutional framers might not have considered shorter recesses to be significant.

“If the recess here were of three days or less, a closer question would be presented,” the Justice Department argued.

Support from Democrats

Obama was backed by congressional Democrats, including Senate Majority Leader Harry Reid of Nevada and Senate Banking Committee Chairman Tim Johnson, a South Dakota Democrat.

Reid said in a statement that filling the job will give middle-income families “the advocate they deserve to fight on their behalf against the reckless practices that denied so many their economic security.”

In choosing Cordray last July, Obama passed over Elizabeth Warren, the Harvard University professor who set up the bureau and is running for the U.S. Senate from Massachusetts.

Even before Cordray received the nod, the bureau became ensnared in a partisan fight over demands by Senate Republicans for changes in the agency’s structure and funding. In May, 44 Republicans -- a 45th later joined them -- said they wouldn’t confirm a director without the changes, and on Dec. 8 they blocked the nomination on a procedural vote.

Consumer Bureau

Without a director in place, the consumer bureau can’t supervise and regulate non-bank financial firms, such as mortgage originators and payday lenders. On July 21, it acquired the authority to supervise and regulate deposit-taking banks.

The appointment heightens a clash between Obama and Congress, including December’s showdown over a two-month extension of a payroll tax (FFSTEMPL) cut for workers. Obama will need Congress to pass a full-year extension, which is “essentially the last must-do item of business on the president’s congressional agenda” in 2012, White House spokesman Josh Earnest said on Dec. 31.

The president also may need Congress’s cooperation on pending nominations to the Federal Reserve Board and judgeships and on his proposals in a jobs bill.

The Senate is scheduled to stay symbolically open for business until lawmakers resume work on Jan. 23.

To contact the reporters on this story: Hans Nichols in Washington at hnichols2@bloomberg.net; Laura Litvan in Washington at llitvan@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.