Obama Says Cordray Appointment Will Help Protect Consumers

President Barack Obama bypassed the Senate to make Richard Cordray the U.S. consumer financial watchdog and name three members to National Labor Relations Board, escalating an election-year fight with Republicans he accuses of obstructing efforts to help the middle class.

“When Congress refuses to act and as a result hurts our economy and puts people at risk, then I have an obligation as president to do what I can without them,” Obama said in remarks at a high school in Shaker Heights, Ohio.

Obama nominated Cordray to be the Consumer Financial Protection Bureau’s first director in July, almost a year after enactment of the Dodd-Frank financial regulatory law creating the agency. Senate Republicans blocked Cordray’s confirmation last month. Republican congressional leaders criticized Obama’s decision and said it may threaten confirmation of other nominees. The move may also set up a court fight.

Obama made the announcement in Ohio, where Cordray was attorney general from 2009 to 2011 and treasurer before that. The state will be a key battleground in the 2012 presidential race, and Obama is using his confrontations with congressional Republicans and a populist economic message as part of his campaign strategy.

“Financial firms have armies of lobbyists in Washington looking out for their interests,” Obama said with Cordray on stage with him. “You need someone looking out for you, fighting

Labor Board

Obama later appointed three members to the NLRB, which has been in the middle of a partisan fight over the role of government in regulating business. The board last month lost the quorum needed to make decisions because only two of its five positions were filled.

The three are Sharon Block and Richard Griffin, who Obama nominated last month, and Terence F. Flynn, whose nomination has been stalled in the Senate since last January.

Republicans in Congress have vowed to curb the NLRB’s authority after complaint filed in April by its acting general counsel said Boeing Co. violated laws protecting striking workers when it decided in 2009 to build a factory in South Carolina. The complaint was withdrawn last month.

The administration argues that Obama has authority to make such appointments because the Senate isn’t conducting business even though it’s in a so-called pro forma session. Senate Republican leader Mitch McConnell of Kentucky said Obama was breaking with “long-standing” practice.

‘Uncertain’ Territory

“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,” McConnell said.

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

Obama accused Republicans of blocking Cordray because they don’t like the Dodd-Frank law, which intended to provide more oversight and regulation of the financial industry. “They want to water it down,” he said.

Even before Cordray received the nod last year, the bureau became ensnared in a 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.

Limits on 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 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.

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.

Potential Challenge

The U.S. Chamber of Commerce is considering whether to challenge the appointment in court, according to David Hirschmann, president of the chamber’s Center for Capital Markets Competitiveness.

White House Communications Director Dan Pfeiffer, in a post on the White House website, said Senate Republicans made 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 have said the Senate “cannot use sham ‘pro forma’ sessions to prevent the president from exercising a constitutional power,” he wrote.

One of those lawyers, John P. Elwood, now a partner in the firm of Vinson & Elkins in Washington, said in an interview it was “just a matter of time that some president” would challenge the Senate on pro forma sessions.

‘High-Roller Move’

Making Cordray the test case is “a high-roller move,” said Elwood, who was deputy assistant attorney general in Bush’s administration, because Cordray is likely to take high-profile actions that can be challenged in court.

Elwood said if he were advising Obama he would have urged the president to make several other recess appointments during pro forma sessions first, to posts with less interaction with the public, to set a precedent. He said it’s difficult to predict how courts would rule if Obama’s action is challenged.

“The alternative would be giving the Senate the unilateral power to prevent the president from making recess appointments,” Elwood said. “I think he has the better of the argument here.”

Democratic Support

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.”

The appointment heightens a clash between Obama and Congress, including December’s showdown over a two-month extension of a payroll tax 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 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 Jan. 23.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE