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Cordray Recess Appointment Will 'Weaken' CFPB: Barofsky

Neil Barofsky is not letting the Obama administration off the hook.

Nearly a year after he resigned as special inspector of the Troubled Asset Relief Program, Barofsky renewed his criticisms of how the administration has handled the housing crisis — and blasted Obama for fumbling the startup of the Consumer Financial Protection Bureau.

The president's recess appointment of Richard Cordray to run the CFPB will create legal uncertainties and litigation that are "going to weaken the agency," Barofsky told American Banker editors in an interview on Friday.

He argued that those legal uncertainties "could have been avoided, had they acted more decisively earlier" by nominating Elizabeth Warren, the CFPB's original architect, or even another candidate during the 2010 recess, when the Senate did not stay in pro forma session.

Barofsky, a former assistant U.S. attorney who is now a senior fellow at New York University's School of Law, has been an outspoken critic of the Treasury Department and the Obama administration since he left his TARP oversight role in March 2011. He has repeatedly argued that the government should have used TARP funds for effective loan-modification programs or other efforts to meaningfully help the millions of homeowners currently in foreclosure.

But a year later, "absolutely nothing has been done … It seems like nothing has changed since I stepped down," Barofsky said on Friday.

"It's remarkable how little you hear about TARP" since then, he said. The administration has "done almost nothing to deal with the foreclosure crisis."

The White House appointed Cordray after several months marked by swelling public anger against the banking industry, as manifested by Occupy Wall Street and related protests.

Obama acknowledged that anger on Wednesday, announcing the recess appointment as an effort to "look out" for consumers: "Financial firms have armies of lobbyists in Washington looking out for their interests. It's time someone fought for you, too," he said in a speech.

But Barofsky, who calls the CFPB fundamentally "a good idea," on Friday dismissed Cordray's recess appointment as a political move without real concern for distressed homeowners or other consumers.

"The administration's actions have shown an inherent bias towards big banks and Wall Street," he said.


(5) Comments



Comments (5)
A recess appointment would have been a political move in 2010 also, and it is impossible to game out when it would have been politically optimal to challenge Republicans over the CFPB nomination in the context of all the other flash points in the administration's agenda. - Harry Terris, Data Editor, American Banker
Posted by hterris1 | Monday, January 09 2012 at 9:36PM ET
There is enough speculation about the legality of Cordray's appointment that one could presume that the first enforcement actions will be legally challenged by those in the cross hairs of the CFBP. If you are for better consumer protections, why would you support this so called "recess appointment" that will undoubtedly be put the first steps of enforcement on the sacrificial alter??
Posted by SEG NSFP | Monday, January 09 2012 at 3:26PM ET
Agreed, after Citi and HSBC went deep into the finance company business, it is clear that strong oversight is needed. First it protects us Bankers because both Citi and HSBC suffered HUGE losses from this foray, and many borrowers got in way over there heads on hyper expensive credit.
Posted by Old School Banker | Monday, January 09 2012 at 10:30AM ET
The President was left with no other recourse. Time for Congress to lead, follow or get out of the way. Dodd Frank is the law and the public deserves to have it implemented. A recess appointment is better that no appointment.
Posted by andkel | Monday, January 09 2012 at 10:28AM ET
So what, Neil? The CFPA needs a director. The Republicans are in full battle mode, and will not confirm anyone or take any action. The Senate only operates if the minority approves.

We are no longer governed by the principle of majority rules. That will continue until forcefully challenged. This is a good call by the President.

For a description of the rulers of the disfunctional Senate Republicans, see this remarkable article by Mark Lilla in the New York Review of Books: http://www.nybooks.com/articles/archives/2012/jan/12/republicans-revolution/
Posted by Ed Walker | Saturday, January 07 2012 at 1:00PM ET
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