Former TARP IG: Recess Appointment Will Weaken CFPB

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 said in an interview 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.

"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.