Several readers have requested a post about this week's PHH federal appellate court decision that set off an IED in the middle of the CFPB's road to world domination. I think that it's premature to judge the ultimate impact of that decision because the CFPB is likely to appeal it, first to the full court (if they'll take it) and then, if the full court upholds the two-judge majority decision, to the SCOTUS. If CFPB wins before the full court, PHH is certain to appeal to the SCOTUS. I think that there's a lot of water to flow under the bridge before this one is done.
One bank lawyer friend's immediate comment was that the CFPB would be foolish to appeal. He thinks that the majority opinion "saved the CFPB's bacon" by not declaring its entire structure unconstitutional and blasting it out of existence. As Dorsey & Whitney partner Joe Lynyak opined several months ago, the court could have clearly found the CFPB's entire existence to be unconstitutional. Instead, the court merely struck the provision of Franken Dodd that made the CFPB's Pontifex Maximus removable only for cause. Hereafter, the Commander-in-Chief can remove would-be despots like Little Richard Cordray "at will." Not that a president in tune with the unbridled expansion of federal power to "do good, as I see the good," like the current occupant of the Oval Office, or his most likely successor, might be opposed to King Richard's gentle ministrations, but in theory, he or she could kick the tin-horn to the curb on a whim, as opposed to having henchman have to manufacture evidence of wrongdoing out of whole cloth.
I don't see how the CFPB could avoid appealing the decision. It sets a precedent that will not be helpful when the same court hears the appeal of "The Little Bank That Could," which is now about to resume steaming down the tracks. That four year-old lawsuit, which directly challenges the constitutionality of the CFPB, has been up and down and all around, and most recently was put on hold until the PHH decision was rendered (although those with an eye for such things observed that State National Bank filed an amicus brief in the PHH case). As the dissent in the PHH case observes, " in all likelihood, that challenge will be before this Court relatively quickly." If you think C. Boyden Gray and his cohorts won't seek to disinherit the rest of the CFPB's red-headed stepchildren, you don't understand that the steam generated when you piss off a Texan must be released only with scaldingly extreme prejudice. No, I don't see the CFPB letting pass what Princess Fauxcohontas, with her characteristic facility for blowing smoke, characterizes as a "a small, technical tweak." She also states flatly that her brainchild will appeal and will be vindicated upon appeal. In light of her direct connection with the mind of The Great Spirit, we'll take her at face value, although, simultaneously, one must remember that she's made a career out of mythical connection to the Cherokee nation that the Cherokees are unable to discover, because, you know, "it's the cheekbones."
I'm not a fan of "activist judges" (an epithet launched against the majority of the court panel by consumer advocates, who favor activists who lean to the left, not to the right), whatever their "leanings." I favor the exercise of judicial restraint, regardless of the effect of the ruling. I know that flies in the fact of an era in which the SCOTUS creates constitutionally protected "rights" it discovers in "zones" created by "penumbras, formed by emanations from" the Bill of Rights. Nevertheless, that's the way I roll. I'm a quaint little "Burkean-Kirkian" conservative kind of guy. Therefore, I agree with the dissent that, since the court could have decided in favor of PHH without reaching the constitutionality of the CFPB, it ought not to have addressed the constitutionality issue. God knows, all three judges determined that Cordray was dead wrong on RESPA, statutes of limitation, the retroactive application of new agency interpretations, due process, the sun not rising in the west and setting in the east, and the fact that in 1964, "She Loves You," not "Please Please Me" replaced "I Want To Hold Your Hand" as #1 on the Billboard Top 40. There was enough ammunition to overturn Cordray's obviously daed-wrong decisions without going where no man (not even William Shatner) has gone before. I think that the dissent may have provided ammunition for overturning that aspect of the decision on appeal.
Anyone who reads this blog knows my long-term objection to the structure of the CFPB and my concerns about its constitutionality and its potential, as a basically unchecked power, to overreach. However, when you put a horse down, you want it to stay down, not stagger to its feet and start running around the ranch again, blood flowing from the bullet hole in its noggin. You want it moving in only one direction: straight to the glue factory.
The DC Court of Appeals should get another crack at this one. Although "removal at will" is better than nothing, I'd prefer a more permanent solution on a more appeal-proof basis. However, I also think that, following November 8th, bi-partisan support in Congress might grow for a governing commission for the CFPB (as was originally proposed, before Warren, Frank, Dodd, Pelosi, and the rest of the Nanny State crew opted for the "God Emperor" alternative). That would allow some other "tweaks" that Warren might not like, but would remove future constitutional challenges to the CFPB's existence. A wild card, of course, is the prospect of President Clinton picking a progressive to fill Scalia's empty chair on the SCOTUS. That could embolden the CFPB to go all-in on a series of "no surrender" appeals, reasonably confident that ideology will trump (no pun intended) solid legal reasoning in upholding the current structure, as well as the unimpeded right of the CFPB to strike down all evildoers when, where, and as it sees fit.
As I said previously, this saga is far from over, and it's too early in the game to bet on the outcome.