By Julian Hattem - 07/13/13 10:00 AM EDT
Rep. Jeb Hensarling (R-Texas) thinks the administration does not appear to have a Plan B, if the Supreme Court invalidates Obama's recess appointment of Richard Cordray to head the Consumer Financial Protction Bureau, his office said in response to information recently obtained by The Hill under a Freedom of Information Act request.
After his staff was briefed by a top official from the CFPB earlier this year, the House Financial Services Committee chairman’s office said the agency is unprepared for the possible fallout of the court’s ruling.
Fuchs and Hensarling also exchanged multiple letters on the issue earlier this year.
The April meeting was disclosed in a May 17 letter from Fuchs to Hensarling, obtained by The Hill under a FOIA request.
In the letters, Hensarling asked Fuchs to explain how the agency was planning for the possibility that Cordray’s appointment is negated, but the response left him wanting. His office called the meeting “disappointing” and said Fuchs still has not shown that the agency is doing any contingency planning.
"They have provided nothing the Chairman requested concerning their contingency planning," committee spokesman Jeff Emerson said in an email to The Hill. "Absolutely nothing on contingency planning."
A federal appeals court ruled in January that Obama's 2012 appointments of three members
to the National Labor Relations Board were unconstitutional. Obama appointed Cordray to lead the CFPB on the
same day as the NLRB members, a day when the Senate was in a "pro forma" session -- that is, not technically recessed.
In June, the Supreme Court agreed to take up the NLRB case and will hear it some time after its next term begins, which is in October. Rulings usually come out at the end of the term, probably in June 2014.
Though Cordray's appointment is not technically at issue before the high court, a ruling would likely have repercussions for him as well, including the possibility that his appointment would be considered unconstitutional. That decision would have wide-ranging effects for the bureau.
“As a practical matter, I don't think it really matters that they're not a party, because if the Supreme Court holds that the appointments made on January 4 of 2012 were invalid, then that would include the president's appointment of Richard Cordray,” said Alan Kaplinsky, a partner who focuses on consumer finance issues at Ballard Spahr.
“It’s almost a merry-go-round of horrors that people are going to have to work through if his appointment is not upheld,” said Joseph Lynyak, a partner with the Pillsbury law firm.
Kaplinsky echoed the sentiment.
“One thing I can say, it will be pure chaos,” he said.
The Supreme Court had not yet agreed to take up the case, Noel Canning v. NLRB, when Fuchs met with Hensarling’s staff in April. After that meeting, Hensarling barred Cordray from appearing before the committee, claiming his appointment was invalid.
A CFPB official said that the April briefing was at Hensarling's office's request.
"The CFPB has not made any proactive attempt to contact members of Congress or their staff about this case," the official said.
"In response to questions about Noel Canning v. NLRB, the CFPB has explained that it is not party to the case, and the Court’s ruling has no legal effect on the Bureau," the official said. "The Bureau continues to proceed with business as usual."
In the May letter, Fuchs said that the CFPB "has not adopted a notional legal opinion or operational plan describing the manner in which it might operate under hypothetical scenarios."
Additionally, she said that in her meeting with Hensarling staffers she "noted that the Bureau's thinking may evolve over time in response to factual and legal developments that may occur going forward."
The agency has publicly shrugged off concerns about Cordray's legitimacy and the possible effect of the court ruling.
They've kept "a stiff upper lip" to the public, though they are surely having urgent discussions behind the scenes, Kaplinsky ssid.
He urged the agency to exercise a provision of the Dodd-Frank Act -- the law that created the CFPB -- which allows the Treasury secretary to step in if no director has been confirmed by the Senate.
“I would be making plans right now -- and maybe they've made them but they haven't publicly announced them -- to have Jack LewJack LewHatch asks Treasury for memo that decreases transparency of tax rules Ryan fights to win GOP majority on Puerto Rico Overnight Finance: Puerto Rico pressure builds; Big tariff vote Wednesday MORE confirm all of the actions which Cordray has taken from the day he got appointed, in the event that the Supreme Court ends up affirming the Canning opinion,” Kaplinsky said.
Still, even the prospect of the court’s ruling may be having an effect on the bureau, Lynyak said.
Firms investigated by the bureau might feel emboldened by the questions surrounding the director, he said.
“I think that you end up with a better bargaining position than you might otherwise get if the authority of the CFPB were clear,” Lynyak said.