The Challenge To Richard Cordray Not Being Discussed

The internets are alive with the sound of excitement over the appointment today by President Obama of Richard Cordray to be Director of the Consumer Finance Protection Bureau (CFPB). And, as Brian Buetler correctly points out, by doing it today, the first day of the new legislative session, Obama (assuming he gets re-elected) has provided Cordray with the longest term possible to serve as a recess appointee:

By acting today, with session two of this Congress technically under way, Obama has given Cordray the rest of this session and the full next session of the Senate to run the bureau. Cordray could potentially serve through the end of 2013.

The Congressional Research Service outlined this in a recent report (PDF) — and the White House and Senate leaders of both parties confirm the analysis.

If Obama loses in 2012, that could shorten Cordray’s tenure — and of course Cordray can leave early if he wants to. But this move makes it much more likely that the CFPB will truly take root.

Most of the banter so far has been on the viability of Obama’s move to recess appoint in this manner. I have looked at this issue for years, going back to early in the Dawn Johnsen imbroglio, and find no reason to believe this was not a proper exercise of Presidential power and prerogative.

The long and short of it is, there is no restriction on timing of recess appointments by a President pursuant to Article II, Section 2 of the Constitution. Both the “10 day rule”, which got narrowed to the “3 day rule” were practices and, at best were based on non-binding dicta from an early 90s DOJ memo; they are not now, nor have they ever been, binding law or rule. Legally, they are vapor. The issue was actually litigated in the 2004 11th Circuit case of Evans v. Stephens.

And when the President is acting under the color of express authority of the United States Constitution, we start with a presumption that his acts are constitutional.2 See United States v. Allocco, 305 F.2d 704, 713 (2d Cir. 1962) (Recess Appointments Clause case); see also U.S. v. Nixon, 94 S.Ct. 3090, 3105 (1974) (observing “In the performance of assigned constitutional duties each branch of the Government must initially interpret the Constitution, and the interpretation of its powers by any branch is due great respect from the others.”).
…….
The Constitution, on its face, does not establish a minimum time that an authorized break in the Senate must last to give legal force to the President’s appointment power under the Recess Appointments Clause. And we do not set the limit today.

And there you have it. There is no minimum time. Also, somewhat significant, is that Evans was decided by the full 11th Circuit, not a three judge panel, and SCOTUS considered a full cert application, and denied it, leaving the 11th Circuit decision standing as good law and citable precedent.

Oh, and if you wonder if SCOTUS has a real hard on for Presidential recess appointments, the answer would appear to be no. During the oral argument in New Process Steel v. NLRB last year, Chief Justice Roberts scoldingly asked Deputy Solicitor General Neal Katyal “And the recess appointment power doesn’t work why?” I am not sure the blustering Republicans like McConnell and Boehner will find quite as receptive an ear from the Roberts Court as they think.

Well, as Beutler notes, things should be all rosy and good to go for Cordray and CFPB, right? Not so fast, there is another issue not receiving any attention by the chattering classes.

The CFPB was promulgated by a pretty bizarre act – The Dodd Frank Act – bizarre, specifically, in how it structures and empowers the CFPB in its various duties. Notably, several of the key powers flow not necessarily through the agency, but through the “confirmed director” of CFPB. If there is no director, the bureau is run in the interim by the Treasury Secretary. Yep, good ‘ole Turbo Tax Timmeh Geithner. Specifically, Section 1066 provides:

The Secretary is authorized to perform the functions of the Bureau under this subtitle until the Director of the Bureau is confirmed by the Senate in accordance with section 1011. (emphasis added)

So, in all this meantime, and despite the White House trying to put the patina on that Liz Warren was running the CFPB, it has actually been Geithner. And the problem with this has been (remember I said the enabling language was bizarre??) that not all of the full powers of the CFPB vest, nor can they be exercised, until there is a director.

A director “confirmed by the Senate” according to the literal wording of the Dodd Frank Act.

If I were speculating on legal challenges to Cordray, rather than focusing solely on Obama’s ability to so appoint him (which, again, I think stands up), I might be more concerned about the issue of whether Cordray has full powers to lead and operate CFPB because he is not “confirmed by the Senate”. That should be a stupid argument you would think, but the words “confirmed by the Senate” in the enabling act make it at least a very cognizable question.

Normally a confirmed appointee and a recess appointee have the same legal authority and powers but, to my knowledge, there is no other situation in which substantive power for an agency flows only through its specific “confirmed” director. If I were going to attack Cordray, I would certainly not restrict it to the propriety of Obama’s recess appointment, I would also attack his scope of authority since he was not “confirmed”. I would like to think such a challenge fails, but Congress sure left a potential hidden boobytrap here.

Bmaz is a rather large saguaro cactus in the Southwestern Sonoran desert. A lover of the Constitution, law, family, sports, food and spirits. As you might imagine, a bit prickly occasionally. Bmaz has attended all three state universities in Arizona, with both undergraduate and graduate degrees from Arizona State University, and with significant post-graduate work (in physics and organic chemistry, go figure) at both the University of Colorado in Boulder and the University of Arizona. Married, with both a lovely child and a giant Sasquatch dog. Bmaz has been a participant on the internet since the early 2000’s, including active participation in the precursor to Emptywheel, The Next Hurrah. Formally joined the Emptywheel blog as an original contributing member at its founding in 2007. Bmaz grew up around politics, education, sports and, most significantly, cars; notably around Formula One racing and Concours de Elegance automobile restoration and showing. Currently lives in the Cactus Patch with his lovely wife and beast of a dog, and practices both criminal and civil trial law.
31 replies
  1. Teddy Partridge says:

    Why would Congress write the stupid law that way? It sounds like some bank-captive staffer knew exactly how to head off the full powers of a recess-appointed Director.

  2. MadDog says:

    As opposed to the legal issue (or not as the case may be), bmaz rightly points out that the recess appointment timing issue has a history involving the custom and practices of both the Executive branch and the Senate.

    Whether or not the Obama Administration has its legal ducks in a row (I will defer to bmaz on this), the custom and practices in regard to recess appointment timing have irrevocably changed forever.

    While we may applaud the appointment of Richard Cordray to the CFPB, note that what is sauce for the goose is sauce for the gander. This is one of the boomerang policies that we will see used in future Administrations, and not just with the ones we vote for.

  3. bmaz says:

    @MadDog: Meh, the next Republican President, if confronted with this kind of obstruction, would do this in a heartbeat. I do not think holding water now would have stopped that later.

  4. Benjamin Franklin says:

    Originally recess appointments were practical when Legislators were absent for periods of 6-9 months. So the expanded powers advocates have pushed the envelope, and now a Democratic President is just using the precedent ‘easement’ to end-run the recalcitrant herd of the Senate. When will we have an executive who
    believes in Publicly funded Elections enough take that risk?; Re-establish habeus corpus? Prosecute war criminals?; Refuse to extend Constitutional grey areas until the document is brought to irrelevance?

    Only when his Party controls both Houses and a majority of governerships?

    We can only hope the slim chance all those ducks line up will produce the desired results.

  5. Peterr says:

    Suppose Cordray decides to act as if he has the powers of his office. Who would have standing to challenge these acts in court?

    IANAL, but I suspect that it wouldn’t be Congress, but either Geithner (“Your honor, he’s trying to exercise *my* powers”) or whatever bank Cordray was trying to act against (“Your honor, he doesn’t legally possess the powers he’s trying to use.”)

    I can’t see Geithner taking Cordray to court. (Well, not after Obama went to all this trouble of thumbing his nose at Mitch McConnell.)

    The banks, OTOH, would be all over this in a heartbeat — and assuming a courtroom victory for the banks, it would put the ball back in Cordray/Geithner’s court.

    This is when it could get really fun.

    Says Cordray to a large bank of microphones at a press conference: “While I disagree with the decision of the court, I have sent the relevant documents over to Secretary Geithner for his signature, so that the unfair practices we were trying to curtail can be stopped. I’m sure he’ll sign them by close of business today.”

    And all eyes turn to Timmeh . . .

  6. MadDog says:

    @bmaz: Perhaps, or perhaps not. As I noted previously today: “Even the Bush/Cheney regime declined to cross this line.”

    It may be that this move was, and is, a valid method for overcoming the “invalid” obstruction to up or down nomination and appointment votes in the Senate, but I think all would agree that whether the obstruction tactic was legal, or merely the custom and practice, it now has been firmly cast aside.

    As I also noted in my comment from earlier today, this was but a single appointment (though it appears that the NLRB will get the same treatment).

    What will the future hold now regarding obstructed Federal judiciary appointments? I have a feeling that they too may soon find the very same water is inviting.

  7. Bay State Librul says:

    @tonycpsu:

    I hope so. This is the President I hoped for after three years, finally dealing with those fucking Repubs. As I said, he ain’t got nothing to lose.

  8. bmaz says:

    @tonycpsu: Yeah, I think that is fairly thin. It may ultimately be the determination (and I very much hope it is) but I think the issue is a hell of a lot more compelling and arguable, at least for litigation purposes until a final determination is made, than Mike gives it credit for being.

  9. DonS says:

    Any chance this gets fast tracked to SCOTUS, like some bogus original jurisdiction claim for injunctive relief . . . and we find ourselves at a Bush v Gore moment?

    It does seem pretty far fetched, but politics/government seems to have become mostly theater.

  10. bmaz says:

    @DonS:

    I don’t think so.

    Also, just for the record, Bush v. Gore was not original jurisdiction, but cert from a final state decision in Florida.

  11. JohnLopresti says:

    There’s probably a lot more happening here than I had the time to review.

    There is a kind of ferment ongoing in implementing some of the first tranche reforms of the stockmarket and consumer affairs effort in the fairly new legislation bmaz referenced. Consider: the government possibly offering quicker sooner cash rewards for people who report irregularities in their own company instead of reporting sleazy goingson thru ‘channelz’ up the food chains inside a company.

    My workstation had trouble with downloads of the Alderson version of the live argument transcript from 08-1457, the nlrb of which, by the way, expands to national labor relations board. Goldstein and Howe’s site had only a short though agitated discussion of the decision in that case, new process steel v nlrb issued in June 2010 after March argument; though it was a humdinger of an outcome, nlrb having existed without a quorum but deciding cases bravely nonetheless, all of which Scotus discredited because of the fundamental quorum defect. It almost is reminiscent of Bush-2’s refusal to populate fully boards which were to provide oversight for problems Bush preferred not to be overseen; or the way the fec works with its imperfect structure comprised of equal numbers of Democrats and Republicans, a sure recipe for stasis rather than decisionmaking. Good old less government.

    What occurred to me with the consumer agency construct and the fallback to Geithner is sausage lawmaking; the NY fed classically being the most modern and progressive of the entire stodgy fed system. Geithner could be offered to Republicans as the bulwark of federal reserve bank perspective, albeit a flavor of which typically is very much aligned with stockmarket interests and concerns.

    Republicans are not too lax about resisting consumer protections. Consider: there is a flock of Republican presidential candidates who espouse government spending reductions by eliminating entire branches of the government, the segments which control pollution, monitor electricity market scams like Get Shorty, oversee quality of kids’ textbooks, and the like; I am sure gov Perry can remember the full list, as can his fledglings of a feather.

    Then, peering over another germane fence bmaz referenced contextually, reflect on the Republican hay made over the passle of measures to mobilize against terrorism, including the experiments in legal torture and indefinite detention in all its permutations. I forget how many years office of legal counsel had been without an advise and consent assistant attorney general by the time Johnsen withdrew from the nomination and renomination processes in April 2010. Memory tells me Goldsmith’s departure in 2003 was the last approved AAG until the process which took place following Johnsen’s exit from the nomination. Reactionary Republicans had made a theocratic argument against Johnsen’s labors as an attorney. This is new Republicanism. It seeks the ill informed and the simplest hyperbole for voter allure. And OLC is an abstruse part of the executive branch. But Democrats had blocked the earliest coverups for torture and refused to advise and consent approve GWBush nominations to the OLC leadership post.

    I guess all this is just politics, and bmaz has seen a way Scotus would be an unwise pathway for reactionary Republicans to send the consumer affairs director nomination.

    Though I am reminded that more than a few Republicans have expressed distaste for nlrb’s very existence, as well.

  12. bmaz says:

    @JohnLopresti: I am loathe to say it, and absolutely think it would be asinine but, if the Republicans really feel aggrieved by this act and find it to be that egregious an usurpation of their Congressional advise and consent power, there is a remedy process specifically7 provided for just such an occasion in the Constitution – impeachment.

  13. Jon Shields says:

    This is wrong. The sentence you quote contains three words: “under this subtitle.” The subtitle in question is subtitle F. Subtitle F is about the transfer of authority from the FTC/OCC/etc to the CFPB.

    However, all the new power that goes to a director is elsewhere in the act (such as subtitle A). Your quoted provision does not affect that authority at all.

    I think it is unlikely the courts are going to distinguish between a recess appointment and a confirmed appointment, regardless of what a statute says. (Almost every relevant statute says that a director shall be appointed by the President and confirmed by the Senate, yet recess appointments have been made for scores of such positions.) This is particularly true, because your quote references section 1011, and section 1011 uses identical language to scores of other statutes for which recess appointments have been made.

    Yet in the worst case, if a court distinguishes the two here, it won’t matter. Geithner will continue to have the subtitle F authority, and Cordray will have the authority in all the other subtitles (all the new authority the CFPB has). The silliness of this outcome is precisely why courts will probably continue to not distinguish between recess appointments and confirmed appointments, but someone in government will have the appropriate authority regardless of the resolution of that question.

  14. bmaz says:

    @Jon Shields: As I clearly stated, while I do not necessarily think it a winning argument, I do think it is a cognizable one for litigation. Professor Zwicki at Fordham has also subsequently noted the issue over at Volokh. And I do not believe your attempted distinction puts any dent in the ability to fashion a cognizable argument on this point; again, whether it ultimately succeeds is a different question. I think a decent argument could be fashioned that the wording did indeed indicate affirmative legislative intent. Don’t know that I ultimately believe that, but the argument can, and I think will, be made.

    Secondly, your statement:

    However, all the new power that goes to a director is elsewhere in the act (such as subtitle A). Your quoted provision does not affect that authority at all.
    …..
    Yet in the worst case, if a court distinguishes the two here, it won’t matter. Geithner will continue to have the subtitle F authority, and Cordray will have the authority in all the other subtitles (all the new authority the CFPB has).

    is false. As the CRS has delineated (report is in a link in the post)

    Until a CFPB Director is appointed, the CFP Act provides the Secretary the authority to exercise some, but not all of the Bureau’s authorities. Although not beyond debate, the CFP Act appears to provide the Secretary the authority to exercise the Bureau’s transferred powers, but not the authority to exercise the Bureau’s newly established powers.

    From my previous reading of the CFPB portions of the act, this is almost certainly correct and, yes, would be problematic should a challenge to Cordray succeed.

  15. Jon Shields says:

    bmaz, what you said about the Secretary’s authority is not at all inconsistent with what I said. As I said, in the worst case, the secretary would retain all subtitle F powers. Those include the powers previously transferred from other agencies, as the CRS report states. (Subtitle F is all about the transfer of power from other agencies.) These were the only powers Geithner had before there was a director, and in the worst case, Geithner would retain them.

    But the key point is that Cordray would have all OTHER powers, including all new powers that Geithner never had.

    There is literally no way to read the statute any other way. Your quoted provision clearly says “under this subtitle.” “under this subtitle” means subtitle F. It does not mean any other subtitle (such as subtitle A, which grants the new powers). In the worst case, your quoted sentence means that Geithner can keep any power he already had, but it does not refer to any new power (that Geithner never had) at all.

    To put it another way, the only way you are correct about a loss of agency power is if you read “under this subtitle” right out of the statute. Obviously, that makes no sense. But even if it did make sense, that would mean that Geithner would have had the full power of the bureau to begin with, and no recess appointment would have been required to obtain it. The words “under this subtitle” are precisely the words that limit the power of the Geithner-run agency (when there was no director) to the power transferred from other agencies (as the CRS report says). They are also the words that ensure that the “confirmed by the Senate” language is not linked to any power in any subtitle other than F.

    The correct reading is to leave the words “under this subtitle” in the statute, which means that there is at least one person that can sign any rule the agency promulgates. (Geithner for old authority, Cordray for new authority.)

  16. Jon Shields says:

    And just to be clear, my previous post assumes that the actual act of appointing Cordray is ruled Constitutional, and that the only question is over what power the agency has.

    If the actual act of appointing Cordray is ruled unconstitutional, then all the new power cannot be used, and we are back to Geithner being able to use only the old power (subtitle F).

    On the other hand, if the actual appointment is ruled constitutional, and we are just talking about what authority the bureau has (and who has it), the only case one can make of “affirmative legislative intent” is that Congress somehow intended Geithner to keep the subtitle F powers until a director was confirmed. No case can be made that Congress intended Geithner to keep non-subtitle-F powers, because Geithner never had any non-subtitle-F powers, and the words “under this subtitle” are not ambiguous.

    And in any case, if the appointment is valid and the question is only the power the agency has, I believe (but could be wrong) that the executive’s interpretation of the law is accorded significant deference under Chevron. The bar for a court to overturn an executive’s interpretation is very high; the only way a court can overrule an executive interpretation of a statute it is administering is if the executive’s interpretation is not a permissible construction at all. I don’t think we need to even go there, since the statute does not appear to me to be ambiguous on this particular point, but even if it was ruled ambiguous, the executive would likely win under Chevron.

  17. bmaz says:

    @Jon Shields: Your argument is one of statutory interpretation, your magic words may mean and result in what you allege, they may not; that is yet to be decided. That is what happens in litigation. I understand perfectly your argument, and that is one reason, out of several, that causes me to say I doubt such a challenge ultimately succeeds.

    And I never stated agency powers would be lost, I very clearly phrased it in terms of “not all of the full powers of the CFPB vest, nor can they be exercised, until there is a director.” And, again, in the hopefully unlikely event this argument did actually succeed, contrary to your statement here

    But the key point is that Cordray would have all OTHER powers, including all new powers that Geithner never had.

    is just flat false. If the argument were successful, Cordray would NOT acquire, nor be able to exercise those powers, because he would NOT be a confirmed director. One last time, I also find this probably unlikely, but were that position upheld by a court that is exactly the result.

  18. bmaz says:

    @Jon Shields: Yes, “great deference” must be accorded any Presidential exercise of Constitutionally assigned powers, and this would absolutely qualify. I too argue from the assumption that the recess appointment stands up to scrutiny. Irrespective of that, however, there is at least a cognizable scenario where the scope of power is scrutinized as a related, but separate issue. I agree with your analysis framework as to the types and sources of power, but if the “confirmed director” issue were for some reason be decided negatively, then how could those powers still vest and be exercisable by Cordray or anyone else until such time as there is, indeed, a director confirmed by the Senate?

    Now that is a theoretical question, as there is little question but that the Administration, Cordray and CFPB will claim those powers and start exercising them. The real rubber/road moment then is whether or not a federal court would enjoin the same pending decision on the merits. My hunch is no, and then the rest is for legal wonks, but would not impinge on the actual operation of the agency. I much prefer your argument and outcome, and think that the likely end result; but I could could stand up in a court and put on a pretty good counter to it. Just because one side is right, and righteous, does not mean the whole gig cannot be fouled up by aggressive litigation. And the Wall Street/Chamber of Commerce side will bring immense talent, money and effort to the fight. Also, the fight will be in DC federal courts, not their home turf of SDNY, so that is a plus for the good side here.

  19. bmaz says:

    @Jon Shields: Lastly, I think we are actually more in agreement than you think, and may both be getting hung up on the other’s semantics and phrasing. At any rate, an excellent discussion.

    Oh, and welcome to Emptywheel; please join in more often! I think there is a lot you could lend to many of our discussions.

  20. Jon Shields says:

    I agree with your analysis framework as to the types and sources of power, but if the “confirmed director” issue were for some reason be decided negatively, then how could those powers still vest and be exercisable by Cordray or anyone else until such time as there is, indeed, a director confirmed by the Senate?

    I’m just saying that if

    a) The actual appointment of Cordray is declared valid, but
    b) the “confirmed director” issue in 1066 is interpreted to not apply to a recess appointment (which is what I think you mean by “decided negatively”)

    Then I think the most the court could do is apply 1066, and enjoin Cordray from issuing regulations “under this subtitle” (subtitle F). It just seems that this is the way the section is written. It gives a superset of authority to the director (in subtitle A, B, etc), and a subset of that set to Geithner (subtitle F) until there is a “confirmed director.” If “confirmed director” is taken literally, it just doesn’t seem that it could possibly affect the authority in subtitles A/B/etc.

    Now, of course I agree with you that the Court has the raw power to ignore the law and do whatever it wants (as in Bush v. Gore, etc). If it wants to, it can probably write an opinion saying that the intent of 1066 was to affect subtitles other than F (notwithstanding “under this subtitle”), and that Cordray has no power (and Geithner has what’s under F). I think it would be almost comically wrong, but that hasn’t stopped them before.

    I think that would be quite unusual though for a court to do (unless there is something I am missing from the rest of the statute, which is certainly possible. Hopefully someone with a more knowledge of the whole statute will chime in.) If they really wanted to kill the new power of the CFPB, they might just rule that the appointment was unconstitutional, rather than overrule the Executive’s clear adherence to the text of the statute. Even though I wouldn’t agree with that at all, at least the definition of a recess is not something the text of the Constitution unambiguously addresses.

    I suppose I shouldn’t assume anything though (especially with regards to the current DC circuit, and the current Supreme Court). In any event, I agree that we mostly agree. :)

  21. Bay State Librul says:

    Charlie Pierce has nailed it:

    ‘The Republicans have chosen deliberately to paralyze the government at a very fragile time in our history. They have done so because they were paid to do so, and because their own ambition and petty dislike for a president has drained whatever interest they had left in acting in the national interest. This is serious political malpractice, and it has to be fought as such, every day, on every front. There is no compromise on this point. Not any more.”

    2012 will be political ugliness.

    All incumbents need to be ousted.

    The American people are in a very foul mood.

    We need to work together, not waste a whole year.

  22. DonS says:

    I imagine one Congressional committee or another will have Cordray summoned as a prop so the repubs can rail against him, the CFPB, the president, the dems, and possibly apple pie. Hopefully it wont become so burdensome as to render the appointment irrelevant. Pretty hard to imagine it getting that bad. After all, it’s just one issue and the repubs have to spread their ignorant vitriol so widely.

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