President Obama's new Consumer Financial Protection Bureau may be one of the biggest casualties if the Supreme Court rules he overstepped his authority by appointing members to another federal board while the Senate was in recess last year.
The high court said Monday it would take up the challenge to the president's three recess appointments to the National Labor Relations Board.
The same day the president made those appointments — Jan. 4, 2012 — he also named former Ohio state Attorney General Richard Cordray to head the newly launched consumer board. Like the NLRB nominees, Cordray was never confirmed by the U.S. Senate.
A federal appellate court ruled in January that the recess appointments to the labor board violated the Constitution. If the Supreme Court upholds that ruling, the consumer agency's entire set of rulings over its lifetime could be nullified as well.
At risk are hundreds of rulings issued so far by the brand new consumer agency. Its regulations affect banking, mortgage companies and the broad area of consumer finance.
The bureau has been a lifelong dream of progressive activists who regard the agency as a major counter to America's banks and mortgage companies.
Part of the CFPB's problem is its unique structure. When the bureau was created under the Dodd-Frank law in the wake of the 2008 economic meltdown, it was not established like most federal regulatory commissions, with oversight given to a bipartisan board.
Instead, the law mandated the agency be run by a single, all-powerful director and housed in the Federal Reserve, which also made it immune to congressional oversight.
The House Committee on Financial Services has so far refused to recognize Cordray's authority. Last week he was barred from testifying before one of its subcommittees.
"The court's unanimous ruling makes it clear that there is no legally-appointed director of the CFPB at this time," committee chairman Rep. Jeb Hensarling, R-Texas, explained in April. "By law, the committee can receive this testimony only from a director who is appointed in accordance with the Constitution and the Dodd-Frank Act, which created the bureau."