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An Unconstitutional Appointment to an Unconstitutional Office

12:35 PM, Jan 5, 2012 • By ADAM J. WHITE
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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.  

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

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