Weekly Standard: An Unconstitutional Appointment This week President Obama made Richard Cordray the director of the Consumer Financial Protection Bureau, but it's an appointment that the Weekly Standard's Adam J. White argues, is unconstitutional. In fact, he argues that the existence of the bureau itself is unconstitutional.
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Weekly Standard: An Unconstitutional Appointment

Richard Cordray, incoming head of the Consumer Financial Protection Bureau, stands offstage after President Barack Obama spoke about the economy at Shaker Heights High School in Ohio. Saul Loeb/AFP/Getty Images hide caption

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Saul Loeb/AFP/Getty Images

Richard Cordray, incoming head of the Consumer Financial Protection Bureau, stands offstage after President Barack Obama spoke about the economy at Shaker Heights High School in Ohio.

Saul Loeb/AFP/Getty Images

Adam J. White is a lawyer in Washington, D.C.

Normally, the Constitution requires the president to secure Senate confirmation before appointing cabinet secretaries and equivalent officers to lead federal agencies. But the Constitution carved out one exception to that rule: The president may appoint such an officer without Senate confirmation when the Senate is in recess.

And that's why President Obama's announcement yesterday that he would use his "recess appointment" power to install Richard Cordray as the first director of the Consumer Financial Protection Bureau, a new agency created by last year's Dodd-Frank Act and vested with effectively unlimited power to regulate and punish lenders, is so controversial. The Senate is not in "recess" for purposes of the Appointments Clause.

In fact, the Senate has refused to recess precisely to deny the president the ability to evade Senate confirmation requirements for Cordray and other nominees. Rather than recessing, the Senate has been careful not to adjourn for more than three consecutive days. That was in accordance with Congress's and the President's longtime understanding that no "recess" occurs, for purposes of the Constitution's Appointments Clause, when an adjournment lasts three days or less.

This three-day cycle is not a novel GOP creation; it was established long ago, and used most recently by Sen. Harry Reid to avoid a recess during the last years of the Bush administration. (And during President George W. Bush's term, by contrast, recess appointments never occurred during breaks of less than ten days, consistent with the three-day definition of "recess.") The Obama administration's deputy solicitor general reiterated the Justice Department's longtime understanding of this definition of "recess" in a 2010 Supreme Court oral argument involving the NLRB (an agency that, as it happens, also received "recess" appointments yesterday).

Some argue that the Senate's non-recess strategy inappropriately "serve[s] but one purpose: to prevent the president from exercising his constitutional authority to make recess appointments." Two well-respected Bush administration veterans, Steven Bradbury and John Elwood, made that argument in a Washington Post op-ed last year. Bradbury and Elwood are two of the GOP's very finest lawyers, and both executive branch veterans, but in this case they are putting the cart before the horse. The Senate isn't inappropriately blocking the president's exercise of powers to which he is entitled — the president is inappropriately blocking the Senate from deciding when to go into recess, and when not to. Only once the Senate has actually gone into recess does the president's recess-appointment power actually vest.

Faced with this constitutional problem of asserting that a "recess" has occurred contrary to the longstanding interpretation of what a "recess" is, the White House's response has been that, although the Senate has not formally been in recess, "[t]he Senate has effectively been in recess for weeks." The absurd results of that argument quickly become apparent. If the Senate is "effectively" in recess during a few slow winter weeks, just because most of the Senators left town, then when else is it in "effective" recess? On the weekends? At night?

And one branch's powers can be triggered by another branch's "effective" actions in the recess-appointment context, than what about other constitutional provisions? Could the Senate announce that the president has "effectively" nominated a judge or ambassador, and then confirm him? Could the Senate announce that the president "effectively" made a treaty, and then ratify it? Of course not. In each of those cases, the president would prove the absence of a nomination or treaty by pointing to the absence of the formal trappings of either. Whether or not the Senate thinks a judge has "effectively" been nominated, in the end only formal actions count. There are no "effective" nominations, and there are no "effective" recesses.

The White House's emphasis on the "effective" recess was not its only subtle admission of the constitutional problems with its position. In defending the Cordray appointment, press secretary Jay Carney said that the appointment's constitutionality was vetted by the White House counsel — not the Justice Department's office of legal counsel, the DOJ office traditionally charged with vetting tough constitutional issues. (The administration has circumvented OLC review in other constitutionally dubious circumstances.) While it remains to be seen whether the Justice Department will produce an OLC memo supporting this action, it may well be the case that the administration simply decided not to bother with an OLC memo, knowing that such a memo would have to grapple with the well-established three-day rule for recess appointments.

In any event, the president's reliance upon unconstitutional means to "appoint" Cordray was ironically appropriate, because Cordray will in turn carry out unconstitutional duties.

When the president and Congress created the Consumer Financial Protection Bureau ("CFPB") in the Dodd-Frank legislation, they granted the agency unconstitutionally broad powers: By the terms of its statute, it may regulate or, even without regulations, litigate against whatever it deems to be an "unfair, deceptive, or abusive" lending practice, or a violation of the "purposes and objectives" of myriad pre-existing consumer financial protection laws. But the statute does not define what an "unfair" or "deceptive" practice is, or what the "purposes" or "objectives" of the financial laws are. According to the Supreme Court, the Constitution requires Congress to set an "intelligible principle" to guide and limit agency discretion; CFPB's mandate falls far short of that requirement.

The agency's orientation toward "regulation-by-litigation" — signified especially by the appointment of a litigation prone former Ohio attorney general to lead it — makes this constitutional flaw particularly pernicious. Even the CFPB's original proponent, Elizabeth Warren, warned in the run-up to Dodd-Frank that regulation-by-litigation was "too blunt" a "tool" for proper regulation of consumer credit.

And the constitutional problems underlying CFPB's mandate are compounded by a no less dangerous constitutional flaw: the elimination of every effective check and balance on the agency's exercise of that power. Other agencies — even other "independent" agencies — wielding broad powers face a number of checks and balances. But in Dodd-Frank Congress intentionally eliminated the most important checks and balances:

First, Congress renounced its most important power — "the power of the purse," in James Madison's words — by putting CFPB outside of the appropriations process. CFPB can simply write itself a check out of the Federal Reserve's operating costs, up to 12 percent of the Fed's costs (roughly $400 million).

And second, Dodd-Frank limited White House control of the CFPB, prohibiting the president from removing the CFPB's director except under a limited set of circumstances. This form of removal protection is constitutional in certain cases, but not without limits. When the Supreme Court approved such protections for the independent counsel in 1990, it stressed that "the independent counsel is an inferior officer under the Appointments Clause, with limited jurisdiction and tenure and lacking policymaking or significant administrative authority." The CFPB director, by contrast, has effectively unlimited policymaking authority.

Finally, Dodd-Frank did not even use the type of intra-agency check most common for "independent" agencies: iInstead of creating CFPB as a multi-member, bipartisan commission where the commissioners push against each other, CFPB is controlled by the single director. Even Elizabeth Warren originally envisioned the CFPB as a multi-member commission.

Some argue that although CFPB is free from congressional, presidential, or intra-agency oversight, it remains sufficiently checked by the Financial Stability Oversight Council, an inter-agency organization created by Dodd-Frank, which may veto CFPB regulations. But they conveniently neglect a few important caveats that effectively nullify this veto. First, the council may veto only regulations, not litigation, leaving Cordray free to litigate unchecked. Second, even for regulations, the council's veto comes into play only if the regulation "would put the safety and soundness of the United States banking system or the stability of the financial system of the United States at risk" — a standard that many regulations, especially regulations burdening small banks and lenders, may well not satisfy. And third, the council's veto occurs only upon the votes of two-thirds of the council's ten voting members. With ten members, that effectively requires a 70 percent supermajority. Worse still, the CFPB Director is one of the ten voting members, and so a veto really requires a 77.7 percent supermajority of the nine non-CFPB members. Simply put, the veto never will occur in the real world; its inclusion in Dodd-Frank was at best the product of ignorance, at worst the product of outright cynicism.

These serious, structural defects were what led the 44 Senate Republicans to solidly oppose the Cordray nomination. Cordray's "recess" appointment makes those defects all the more immediately dangerous.