A unconstitutional bureaucracy gets a judicial reprieve

  • 31 January 2018
  • NormanL
Don't get too comfortable

The Consumer Financial Protection Bureau is one of those weird bureaucracies that seems to defy both logic and the Constitution. The CFPB, brain child of Massachusetts progressive darling Elizabeth Warren, is stranger than others, because it's director is almost entirely unaccountable for his actions, making that director -- potentially -- on par with the president for sheer bureaucratic power.

Conservatives have challenged the constitutionality of the CFPB, and at one point appeared to have won a key victory over the agency. But that victory was taken away by a federal appeals court, which said the whole, mostly unaccountable, mess is, indeed, constitutional:

Unlike other independent agencies not under the direct supervision of Congress or the president, the CFPB was given a single director instead of a panel of three or five commissioners. In theory, that was meant to insulate the bureau from political influence. In practice, it made the director one of the most powerful people in the federal government. Last year, a three-judge panel on the D.C. Circuit Court ruled the CFPB's structure was unconstitutional, but the bureau was allowed to continue operating while the case was appealed to the full court.

The en banc panel of the court upheld the CFPB's structure in a split decision issued today. In reversing the earlier ruling, the court accepted the argument that Congress could create a uniquely structured agency as a way to shield the bureau from political influence.

"Congress's decision to provide the CFPB director a degree of insulation reflects its permissible judgment that civil regulation of consumer financial protection should be kept one step removed from political winds and presidential will," Judge Cornelia Pillard wrote for the majority.

Although the court upheld the CFPB's structure, it tossed out penalties that the CFPB had issued to PHH Corp., a mortgage services firm and the plaintiff in the case.

That's swell. But it doesn't cover the whole constitutional angle. Which also means, we've likely not heard the last of the litigation:

This ruling might not be the last word on the CFPB. Ilya Shapiro, a senior fellow in constitutional studies at the Cato Institute, thinks the Supreme Court should take the case. The D.C. Circuit ruling was disappointing but not surprising, Shapiro says, because the court has a history of being deferential to the government's case.

"The director of the CFPB reports to no one but himself, and, under the terms of Dodd-Frank, can be removed by the president only for cause," says Shapiro. "This structure violates core principles of separation of powers and allows the agency to exist unfettered by any accountability to the people."

The Supremes should take the case -- the sooner, the better. But until then, the agency is under the control of Mick Mulvaney, the president's budget director. And Mr. Mulvaney is none too keen on the CFPB:

As long as Mulvaney—a longtime critic of the CFPB dating back to his time in Congress—is in charge, the CFPB is likely to take a more limited view of its role as chief enforcer of the rules Congress passed after the 2008 financial collapse.

Here's hoping Mr. Mulvaney sticks with that job for a good long time -- or at least until the Supreme Court decides the Bureau's fate.