Most Read
    Image 01 Image 02 Image 03

    Appeals Ct to Consider Fate of Elizabeth Warren’s Consumer Financial Protection Bureau

    Appeals Ct to Consider Fate of Elizabeth Warren’s Consumer Financial Protection Bureau

    An agency answerable to no one?

    Back when Senator Elizabeth Warren (D-MA) still claimed to be a Republican, she came up with the idea of the Consumer Financial Protection Bureau (CFPB).

    That idea, however, morphed into a partisan Democrat operation under Obama, with a structure that sought to exclude itself from Executive or Congressional oversight.  The constitutionality of the CFPB will be decided, yet again, on Wednesday by the D. C. Circuit Court.


    Elizabeth Warren’s brainchild was purportedly spawned by a real interest in consumer protection.

    Ronald Rubin, writing for the National Review, explains:

    In 1988, during my first year of law school, I met a young professor named Elizabeth Warren. She was like a tornado — energetic, fascinating, and scary. She was also a Republican. Despite that last bit of trivia, she hadn’t changed much when Americans began to notice her two decades later.

    In fact, a Reagan Republican might have written her 2007 article “Unsafe at Any Rate,” which proposed a new regulatory agency to help consumers understand credit products by simplifying disclosures and ending deceptive industry practices. Free-market economists would approve of her rationale for a “Financial Product Safety Commission:”

    To be sure, creating safer marketplaces is not about protecting consumers from all possible bad decisions. . . . Terms hidden in the fine print or obscured with incomprehensible language, unexpected terms, reservation of all power to the seller with nothing left for the buyer, and similar tricks and traps have no place in a well-functioning market. . . .

    When markets work, they produce value for both buyers and sellers, both borrowers and lenders. But the basic premise of any free market is full information. When a lender can bury a sentence at the bottom of 47 lines of text saying it can change any term at any time for any reason, the market is broken.

    And she wasn’t wrong.  Government meddling in the free market hobbles it, makes it less free.  What Warren didn’t apparently consider is that “good” meddling could be just as crippling as “bad” meddling.  Maybe she did consider it.

    As the market destabilized and the political winds shifted, she conveniently jumped ship and joined the Democrats in restructuring her CFPB into a political entity.

    Rubin continues:

    Over the next two years, the economy collapsed, Democrats gained control of Congress and the White House, and Warren grew famous criticizing big banks in congressional hearings. She lobbied Democrats to include her agency in their Wall Street–reform legislation, arguing that effective enforcement of consumer-protection laws required a regulator independent from politicians beholden to the financial industry. The Democrats had a better idea: They would make her agency independent from Republicans.

    To make this work, they had figure out how to circumvent that peskiest of thorns in the side of Democrats: the United States Constitution.

    Rubin explains how this was attempted:

    Circumventing the Constitution took two steps. First, Democrats inserted a few clever workarounds into the Dodd-Frank Act, which created the CFPB on July 21, 2010. Commissions such as the one Warren first proposed are ostensibly bipartisan, so a president-appointed director would lead the new agency. Since there might be a Republican president one day, the director would be practically irremovable after Senate confirmation to a five-year term that could extend indefinitely until the next director’s confirmation. To prevent future Republican-led Congresses from cutting the bureau’s budget, funding would be guaranteed through Federal Reserve profits rather than taxpayer dollars.

    Next, the enlarged new agency would be staffed with Democrats, top to bottom. There would not be a Republican director nominee for at least five years, and if one was ever confirmed, entrenched left-wing managers could undermine “attempts to weaken consumer protection.” The plan wasn’t perfect, but it was pretty good.

    The Crux of the Matter: Who Gets to Hire and Fire Executive Branch Officers

    Built into the CFPB is a directive that the President can fire its officials only for cause, specifically for “inefficiency, neglect of duty, or malfeasance.”

    In short, the president’s authority to hire and fire at will is restricted; the CFPB does not serve at the pleasure of the president, but can remain in place unless the president can show misconduct.  Serving at the president’s will, then, is nonexistent in the makeup of the CFPB.

    The Boston Globe explains:

    [Richard] Cordray heads the consumer lending bureau championed by Senator Elizabeth Warren, and the White House is actively weighing whether Trump should fire him, according to Republican congressional aides and lobbyists who are in contact with the administration about Cordray’s fate.

    . . . .  Politics and legal issues make firing Cordray more complicated than a typical changing of the guard with a new president. The agency is independent, and Cordray enjoys an appointment that does not end until 2018. That means Cordray cannot be dismissed at Trump’s whim.

    Under the law that created the agency, the president can dismiss the director only for “inefficiency, neglect of duty, or malfeasance.” That language is why White House lawyers are combing through Cordray’s five-year record as the agency’s chief, looking for infractions that could justify his dismissal, sources said.

    “They want to fire him. Their legal counsel are looking at every angle,” said one well-connected lobbyist.

    The Question: Is it Constitutional for Congress to Limit Presidential Powers?

    . . . or must there be “cause”?

    The central question of the suit is one of constitutionality: can the President fire Executive Branch heads at will?  Or can Executive Branch agencies be created to specifically circumvent the president’s authority?

    Yahoo News reports:

    On Wednesday, 11 D.C. Circuit Court judges will hear arguments over the constitutionality of the Consumer Financial Protection Bureau, an agency created in the wake of the great recession of 2008.

    . . . . As it happens, Trump can’t currently fire Cordray, and that’s precisely what lies at the heart of the legal dispute the D.C. Circuit judges will be pondering. In the lawsuit, PHH Corp, a mortgage lender, is challenging the constitutionality of the CFPB’s structure.

    . . . . PHH appealed, protesting not only its innocence, but also claiming that Congress violated constitutional separation of powers principles when it specified that the president could remove the director of the CFPB only for cause (e.g., neglect of duty or malfeasance) rather than at will (e.g., for mere policy differences). This arrangement granted the director too much insulation from public accountability, PHH claimed, thereby threatening the liberty of those who fall within the CFPB’s enforcement jurisdiction.

    Ramifications of the pending ruling: Federal Housing Finance Agency

    Yahoo continues:

    Though the fate of the CFPB is a huge question in itself, it’s only part of what’s in play. While not formally challenged in this lawsuit, the structure of the Federal Housing Finance Agency—yet another hotbed of controversy—is also effectively on trial. Since September 2008 FHFA, whose structure closely resembles the CFPB’s, has been the conservator for the giant mortgage finance twins, Fannie Mae and Freddie Mac, which were deemed insolvent during the housing crisis.

    Due to FHFA’s contentious 2012 decision to send all future profits of the rebounding companies to the Treasury, effectively nationalizing them, it has become the target of sprawling stockholder litigation with at least $130 billion at stake.

    This one will almost certainly make its way to the Supremes.  Have I mentioned lately how grateful I am for the newest Supreme, Justice Gorsuch?


    Donations tax deductible
    to the full extent allowed by law.


    Re Fauxahontas’ “Elizabeth Warren” Protection Bureau: kill it, roll up what’s left and stick it where the sun don’t shine on Warren.

    We are in a civil war. It’s just not apparent because we’re in the middle of one. The gunshots and bombings haven’t started more regularly.

    Thank God obama was stupid enough to bet the commie farm on a fool like hillary clinton enabling the rest of us, via Donald Trump.

      Milhouse in reply to | May 21, 2017 at 11:49 pm

      The problem with your proposal is, as usual, that the Dems will filibuster it. You keep ignoring the fact that they can do so, and also the fact that when they had the numbers to abolish the filibuster they chose not to, so there’s no reason to suppose that next time they have the numbers they will decide otherwise.

        Let them do so – for the public to see.

        Giving up thinking you’ll be defeated ahead of time is no way to win a battle. That’s GOPe thinking. (Look where that’s get us.)

        Think Trump.

        The Filibuster isn’t nearly the boogeyman that everyone seems to think it is. It merely requires the Leadership to force the Democrat members to ACTUALLY stand there and speak.

        The Democrats have to hold the floor, and the two-speech rule applies, and the Democrat members are OLD. Let them stall business for a few days, ram-rod the bills down their throat and get things moving.

    Milhouse | May 21, 2017 at 11:53 pm

    What many people seem not to understand is that the president is no the head of the executive branch, he is the executive branch. The constitution says so. Congress has no authority to grant executive power to anyone but the president. Therefore this CFPB is unconstitutional.

      Yes. Actually, a LOT of the Executive Branch “delegations” from Congress are unconstitutional.

      Unfortunately SCOTUS won’t take up the matter because they will call it a non-justiciable political question.

    TTMartin | May 22, 2017 at 10:24 am

    It has long been established that most Federal Employees do not serve at the political whims of the President. In fact very few Executive Branch Employees serve at the political whims of the President, the majority of Executive Branch Employees can only be fired for cause. Think of the disaster if Obama had been able to fire every Republican who worked for the Government, and rehired Democrats when he was elected in 2008.

      The individual Civil-Service level employees: Yes, you are technically correct.

      The “management” level employees, though: Generally no.

      The bureaucracy IS vast, but it is not immutable. Those Civil-Service level employees are there to carry out the will of the Administration (theoretically impartially).

      If they have direction from the Mid-Level managers, who have direction from the political appointees, and the line-workers or mid-levels fail to carry out those directives, that is grounds for FOR CAUSE termination for insubordination / failing to carry out duties of the job for which the line-worker was hired.

      This really isn’t all that difficult. The system just has to have accountability up the food chain, and President Trump WILL bring that to the system.

      Dave in reply to TTMartin. | May 22, 2017 at 1:03 pm

      Cordray, as an agency head, would be at the Senior Executive Service level, all of whom serve at the pleasure of the president. It was 3-0 that CFPB was unconstitutional the first time around in the DC Circuit. That’s significant. Don’t expect a change in the ruling from the 11 member panel.

    Leave a Comment

    Leave a Reply

    You must be logged in to post a comment.

    Notify me of followup comments via e-mail (or subscribe without commenting.)

    Send this to a friend