I’ve been expecting a lawsuit somewhere down the road related to the President’s recess appointments from late last year. At some point, either the Consumer Financial Protection Bureau or the National Labor Relations Board were bound to issue a ruling that the subjects affected didn’t like, and they would resort to claiming that the recess appointments were unconstitutional, and therefore the rulings handed down inapplicable and illegitimate. It took a bit longer than I thought, but we finally saw that today.
A small Texas bank, together with two conservative advocacy groups, have filed suit against the Consumer Financial Protection Bureau, claiming that its powers and Obama’s recess appointment of its director are unconstitutional.
The State National Bank of Big Spring, Tex., the Competitive Enterprise Institute and the 60 Plus Association, a conservative advocacy group for seniors, claim that Dodd-Frank effectively gives “unbounded power to the CFPB,” resulting in “unprecedented violations of ‘the basic concept of separation of powers’ ” laid out in the Constitution.
The lawsuit also alleges that President Obama’s recess appointment of CFPB Director Richard Cordray was unconstitutional because it did not happen during an official Senate recess. Finally, it claims that the new Financial Stability Oversight Council is also unconstitutional for having “sweeping power and effectively unbridled discretion” to determine which banks are “too big to fail” and thus subject to greater oversight.
This suit really overreaches, in my estimation, from the narrow point that the recess appointment is unconstitutional, to a broader view that consumer financial protection regulation in general is unconstitutional. There is no grounding for a claim that a bureau with a single director that gets its funding from the Federal Reserve’s budget violates the separation of powers; that’s a fairly crazy claim. Indeed, the CFPB is still subject to all kinds of oversight, from judicial review to comptroller general audits. And Congress has had no problem finding Richard Cordray and other CFPB officials and hauling them before hearings.
The whole lawsuit is here. The recess appointment piece is the only thing I can see that could get a legitimate hearing. I happen to believe that the Administration was on solid footing to blow up the pro forma session fiction. But they could be a bit more forthcoming with their reasoning. The White House recently sent out a Bush-era OLC opinion on recess appointments, subject to a FOIA request, with most of it redacted. They can do better than that, and a court would presumably make them.