Magazine article American Banker

Why Obama Shouldn't Recess Appoint Cordray

Magazine article American Banker

Why Obama Shouldn't Recess Appoint Cordray

Article excerpt

Byline: Rob Blackwell


WASHINGTON a Sometimes where you are giving a speech is just as important as what you plan to say.

For political observers this week, the fact that President Obama is planning a speech today on the economy in Shaker Heights, Ohio, was the first clue that he will make a recess appointment for Richard Cordray, the state's former attorney general, to the Consumer Financial Protection Bureau.

Sources have now confirmed that's Obama's plan. While he may have the legal right to do so a an issue very much in question a I do know this: a recess appointment for Cordray is going to hurt the financial system and cripple the CFPB before it even gets off the ground. Here's how:

1) Republicans Will Retaliate

Senate Minority Leader Mitch McConnell is holding up the nominations of two agency heads and the vice chairman of the Federal Deposit Insurance Corp. because he is waiting to see if Obama will make a recess appointment. Once Cordray is appointed, it's very likely McConnell will refuse to let those nominations proceed. That means no permanent chairman for the Federal Deposit Insurance Corp. or new comptroller of the currency. Marty Gruenberg and Tom Curry, respectively, would be left out in the cold, along with Tom Hoenig, the Republican pick for the No. 2 spot at the FDIC. Moreover, President Obama's just-announced nominees for two open spots on the Federal Reserve Board are also unlikely to proceed.

In short, the GOP will view this appointment as a nuclear option and what little cooperation there is between the two political parties will melt away like snow. Far worse, it will leave the FDIC and OCC without Senate-confirmed leadership at a fragile time for the economy and the banking system.

2) The CFPB Will Get Sued

The new consumer agency already has a lot of enemies, and not all of them are politicians. …

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