In a recent hearing before a federal appeals court, some of the justices appeared to be sympathetic to arguments by mortgage giant PHH Mortgage that the CFPB is unconstitutional. In Forbes, Susan Dudley, Director of the GW Regulatory Studies Center and a former White House official in the "W" administration, explores the arguments in favor of knocking the CFPB off its high horse and finds that they might have traction. She cites the following critical passage from PHH's brief:
The Director is not answerable to the President, as he is removable only for cause. Nor is Congress able to rein in the Director using its power over the purse, as he has the sole power to fund his agency from the Federal Reserve System’s operating expenses, and Congress is prohibited from reviewing the Director’s budget determinations. The Director is not checked by the deliberative decision-making process of a multi-member commission structure, nor is he checked by a short tenure, as he serves a fixed five-year term. And far from a limited scope of power, the Director wields vast authority under eighteen statutes previously enforced by seven different agencies. Never before has so much power been accumulated in the hands of one individual so thoroughly shielded from democratic accountability. The combination of these unprecedented structural features violates the separation of powers.
As Dudley correctly observes, the CFPB is unique. Other federal regulatory bodies are either executive branch agencies or independent commissions. In either case, they are subject to executive and/or legislative control directly or through an oversight body composed of members selected by the president and confirmed by Congress. Most are also subject to control through the appropriations process, giving another body control of the purse strings.
The CFPB is controlled not by a commission, but by a single director (currently, King Richard Cordray, Champion of Jeopardy) who is subject to removal by the president only "for cause." Other agency heads can be removed for wearing a tie with an offensive motif. calling the First Lady "Babe," or for an infinite variety of spurious reasons. Moreover, the CFPB's budget cannot be controlled by Congress. The FRB, is required to fund it by law, and Congress has no oversight.
This lack of checks and balances has concerned us since the CFPB sprang from the nether regions of Lizzie Warren, who deliberately concocted the Adjustment Bureau to be completely outside the control of anyone other than the reichsführer who runs it on any given day, which Warren originally intended be herself. The Director would be guided only by his or her knowledge of what was best for all consumers, applying truth, justice, and anti-abusiveness as Gaia gave him or her to see the light.
About six months ago, I attended a conference at which one of the panelists was a millennial former member of the CFPB's enforcement "arm" who recently rushed out the revolving D.C. door into a high-paying job with a banking law firm where he, naturally, advised those being persecuted prosecuted by the CFPB. In addition to possessing his generation's endearing narcissism and lack of respect for his elders, he scoffed, with a self-satisfied smirk, at concerns about the lack of controls over the CFPB because the Adjustment Bureau had been around for several years "and nothing horrible had occurred." One of the older panelists interjected one word: "Yet." I might have added: "Ask PHH."
As Dudley points out, even if the appeals court rules in favor of the petitioner, there are half-steps between nothing and abolishing the CFPB in its entirety as being an unconstitutionally created monster of Franken-Dodd. It could strike down the sole director structure; it could strike down the provision of Franken-Dodd that permits the president to fire the director only for cause; it could strike down the funding structure; it could do none of the above or all of the above. Whatever it decides, the decision is almost certainly to be appealed. By the time it reaches the SCOTUS, who knows what the composition of that august body might be, given the insanity that is the current season of "Election 2016"?
Nevertheless, Dudley asserts that "the future of something President Obama considers one of his main accomplishments is hanging in the balance."Here's hoping that the U.S. Court of Appeals for the District of Columbia Circuit gives the CFPB a little nudge in the "right" direction.