A Federal appeals court ruled that at least one of President Obama’s recess appointments was unconstitutional, leading to speculation that his appointment of Consumer Financial Protection Bureau director Richard Cordray would also be overturned.
That’s led to all sorts of speculation, such at a US News piece, “With CFPB Appointment In Limbo, So Is the Housing Recovery.” If Cordray’s appointment is tossed out, the reasoning goes, those new CFPB rules (e.g., qualified mortgage standards) will also go. We’ll be back in limbo waiting for a new director and wondering what the QM rules will be. (After all, one of the big complaints lenders had was the ‘uncertain regulatory environment’ as they waited for the CFPB to release those rules.)
So if the Cordray appointment is out, we’re back to square one, right? Skittish lenders, slowed market, etc.?
I wouldn’t worry, for a few reasons.
1. Cordray is qualified. If the Senate has to vote to approve him, that’s what matters — Congress isn’t there to be sure that every appointment is someone it likes, just that they are each qualified for their position. So there’s every reason to believe Cordray would get the spot anyway.
2a. Even if Cordray is out, the rules won’t necessarily be. If his appointment is tossed, that doesn’t mean all the work the agency has done will also be rendered null and void. It wasn’t as if Cordray issued an edict; he just oversees the CFPB. Even without Cordray, its rules might very well stand.
2b. A different director would likely leave the rules in place. Remember, the CFPB spent months working with various industry associations, holding hearings and comment periods, and working out regulations that fulfilled its requirements and didn’t send anyone off the deep end. All that work is still done, so there’s good reason to think that no matter who sits in the director’s office the rules would remain the same.
3. With the ‘uncertain regulatory environment’ having been such a huge issue, the various groups that were concerned about it should push Congress to leave things as they are. After all, removing Cordray would — in the worst-case scenario — set the recovery back. And no one wants that.