Top House lawmaker questions validity of consumer bureau funding

House Financial Services Committee Chairman Jeb Hensarling (R-Texas) is a leading critic of the Consumer Financial Protection Bureau.
(Carolyn Kaster / Associated Press)

WASHINGTON -- A top House lawmaker is questioning the validity of the Consumer Financial Protection Bureau’s funding, arguing that a recent court decision invalidating some of President Obama’s recess appointments could make it unlawful for the agency’s director to seek money to pay for its operations.

The move is the latest in a long battle by many Republicans against the bureau, which was created in 2010 by the Dodd-Frank financial reform law. Republicans say the bureau is too powerful and not accountable enough to Congress.


Senate Republicans have been blocking the confirmation of a director, which led Obama to use a recess appointment to install Richard Cordray as the bureau’s head last year.

Obama has renominated Cordray, who will have his Senate confirmation hearing Tuesday, and nearly all Senate Republicans have promised again to block him.

House Financial Servics Committee Chairman Jeb Hensarling (R-Texas), a leading critic of the agency, wrote to Federal Reserve Chairman Ben S. Bernanke last week asking for clarification about the funding of the bureau.

Under the financial reform law, the Fed provides the money to run the bureau. Hensarling said the law authorizes the Fed to transfer the money “only at the request” of the bureau’s director, according to the letter released Tuesday.

In light of January appeals court ruling calling into question the validity of Obama’s recess appointment of Richard Cordray as bureau director, the Federal Reserve Board might not be able to transfer the money.

“Because it appears there is not presently a validly-appointed director of the CFPB, I question the circumstances under which the board may lawfully fund the CFPB’s operations,” Hensarling wrote.

The ruling by a panel for the U.S. Court of Appeals for the District of Columbia did not address Cordray’s recess appointment. But it found that Obama’s recess appointments of three members of the National Labor Relations Board -- on the same day as Cordray and using the same rationale -- were invalid.

The panel ruled that the Senate was not in recess at the time, making the NLRB appointments invalid. Obama argued that the Senate was holding pro-forma sessions simply to prevent him from making recess appointments and was not really in session.

The Obama administration is expected to appeal the decision.

Hensarling wrote that because Cordray’s appointment was “at the same time and in the same manner” as the NLRB appointments, “I anticipate that a federal court will soon reach a similar conclusion with respect to the validity of Mr. Cordray’s appointment.”

A Fed spokesman did not immediately respond to a request for comment.


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