Predatory paycheck loan sharks, bait-and-switch mortgage brokers, deceitful student loan originators and other nonbank financial fraudsters will laugh-out-loud on July 21, 2011. When the Consumer Financial Protection Bureau opens its doors in less than a week, the new federal agency will not be able to protect our most vulnerable consumers (the working poor and the struggling middle class) against their worst financial abusers.
Congressional opponents of the CFPB -- who were unable to defeat the agency's enabling legislation -- have redoubled efforts to sabotage its fledgling operations. House foes have repeatedly used committee oversight hearings to question the CFPB's budgetary and structural independence.
Senate Republicans have preemptively filibustered the appointment of a founding director for the independent agency. Without a director, the CFPB will not have authority to regulate both bank and nonbank financial operations. It cannot fulfill its mission "to eliminate the hidden tricks and traps" that damage consumers, investors, and economic stability.
Standing Up Consumer Financial Protection
In September, 2010, Barack Obama charged Elizabeth Warren with standing up the CFPB by giving her a dual appointment as a Treasury advisor and presidential assistant. She assembled a top team and framed-out an agency with transparency of information as its central, stated purpose. The CFPB website reveals this purpose in plain language: "The CFPB will work to ensure that financial companies make the true price clear to consumers so they can compare prices and features of consumer financial products and services and make the decisions that are best for them."
Perhaps Professor Warren and her team were too successful in building an efficient, consumer-oriented agency. In May, 2011, CFPB opponents struck back: 44 GOP Senators pledged to block "any" CFPB director nominee. While the preemptive filibuster was directed against any nominee President Obama might select, the promised obstruction was a clear assault against Elizabeth Warren -- this generation's champion of financial consumer protection.
Republicans then manipulated the Senate into holding pro forma sessions over Memorial and July 4th holiday breaks seeking to block a CFPB recess appointment. Every three days, the near-empty Senate was gaveled open and closed for a sham, do-nothing session. Obstructionists falsely assert that the Senate must be formally recessed for more than three days in order for President Obama to exercise his recess appointment authority.
Like the "trips and traps" of financial fraudsters, the procedural tactics of partisan obstructionists are purposely hidden, layered and complicated. Fortunately, our Constitution is written in large font; it is transparent in giving the president absolute, unilateral authority to appoint officials during Senate breaks.
Constitutional Transparency: No Minimum Recess Time
Our Constitution's Framers provided two appointment methods. In addition to the nomination-confirmation process that is being obstructed, Article II, Section 2 states: "The President shall have Power to fill up all Vacancies that may happen during the Recess of the Senate, by granting Commissions which shall expire at the End of their next Session."
In Federalist No. 67, Alexander Hamilton explained that this "auxiliary method of appointment" is needed for vacancies "which it might be necessary for the public service to fill without delay."
As I detailed in a prior post, in a 2010 National Law Journal op-ed, and most recently, in a July 4, 2011, Connecticut Law Tribune commentary, there is no three day minimum recess requirement needed to trigger the Executive's recess appointment authority.
In 2004, the U.S. Court of Appeals for the Eleventh Circuit explicitly stated that the Constitution "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." The opinion broadly reaffirmed the Executive's unilateral recess authority to "keep important offices filled and the government functioning."
Prior appellate court opinions have consistently ratified recess commissions signed during short, intra-session Senate breaks as being necessary for the "orderly functioning of our complex government."
News reporters, analysts, and others continue to do great disservice by repeating the obstructionists' false assertion that the Senate's pro forma sessions trump the Executive's constitutional recess appointment authority. The Senate scheduling shell games cannot block President Obama from signing recess commissions during any Senate break.
A CFPB Soft Launch
CFPB's headless "soft launch" will at least allow it to begin streamlining and enforcing consumer regulations for traditional banks. The CFPB inherits authority from seven existing federal agencies including the Federal Trade Commission and the Federal Reserve. Instead of the myriad of authorities, one independent regulator will insure information symmetries and mandate product transparency. This progress alone will provide a needed boost of confidence to fearful actors in a troubled marketplace.
Until a director is appointed, however, the nation's first and only consumer finance guardian will be unable to tackle some of the worst financial abusers hiding in nonbank operations. The CFPB top leadership vacuum is the clearest example to date of the damage inflicted on our economy's fragile recovery by continued partisan appointment obstruction.
A Consumer Financial Protection Bureau head may be appointed anytime the Senate is on a break -- a long weekend will do just fine. It is past time to end the "trips and traps" of both the financial fraudsters and the partisan obstructionists.
Victor Williams is an attorney in Washington D.C. and clinical assistant professor at Catholic University of America School of Law.
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