Removal of the Director of the Consumer Financial Protection Bureau

Recently, a three judge panel on the D.C. Circuit held in PHH Corp. v. Consumer Financial Protection Bureau, that the for cause removal provision for the director of the Consumer Financial Protection Bureau was unconstitutional. Rather than striking down the entire statute, the court struck the for cause removal provision, leaving the director subject to removal at the pleasure of the President.

The Bureau is an example of the newest philosophy in administrative governance, which the Democrats have pursued in Sarbanes Oxley, Obamacare, and the Dodd-Frank banking act. The idea is to maximize the independence of administrative agencies and to enhance their power. In terms of maximizing the independence of the Bureau, the Bureau does not answer to the President (that is what the for cause removal provision means) and it is funded through the Federal Reserve, so that the Congress cannot use its appropriations power to control the agency. The power of the agency is enhanced, because it is controlled by a single director rather than a bipartisan commission as virtually all independent agencies are. Needless to say, this new philosophy of governance is extremely problematic.

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De-Rigging Capitalist Privilege

Internet Abstract

When Charles G. Koch, the chief executive officer of his family business, recently wrote an op-ed for the Washington Post saying he agreed with Democratic presidential candidate Bernie Sanders that our economic system is “often rigged to help the privileged few,” it raised eyebrows even among the company-town’s power structure.

The online version was absolutely swamped with comments. Almost all of the commenters agreed about the evils of crony capitalism but most of them unfairly attacked Koch as hypocritical for being a capitalist himself. The examples he presented of Koch Industries’ opposing government subsidies that could have advantaged its business counted for exactly nothing. Pretty tough to crack the capitalist stereotype even when the capitalist supports one of the Left’s core precepts.

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Other People’s Money

In a very fine investigative article in the Washington Examiner, Sean Higgins reports on “Obama’s Big Bank Slush Fund.” As part of their “settlements” with the feds over alleged misdeeds, big banks routinely agree to make donations to various “fair housing” outfits, to the tune of several hundred millions of dollars.

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Dodd-Frank’s Frankenstein Creeps Forward


The NLRB Goes Down

The much-awaited argument in Noel Canning, arising over purported recess appointments to the National Labor Relations Board and the Consumer Financial Protection Bureau, was a bit of a yawner (transcript here). And it won’t be a big test of originalism, textualism, etc: If (as here) the government doesn’t have an argument from text, or structure, or history, or functionality, what does it matter? And if the Senate was in session anyhow, why are we arguing about recess appointments? You don’t have to follow the argument. Just count the lines in the transcript: the justices let Miguel Estrada, who made that…

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Friday Roundup, March 15th

The current Liberty Law Talk is with Amity Shlaes on Calvin Coolidge. There are many impressive elements in Shlaes' new biography of the thirtieth president. Of note is Coolidge's discipline and refusal to place tax dollars at the service of numerous projects: agriculture, pensions, public works, etc. Federal coffers were flush, why not spend it, many asked? Coolidge frequently chose the pocket veto to say no to them. He vetoed over 50 bills while in office. So Ronald Reagan is adored by advocates of limited government, but it was Coolidge who actually cut the government, halved tax rates and didn't…

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Policy-Based Evidence-Making at the Consumer Financial Protection Bureau

New mortgage rules released by the CFPB show why heightened oversight is necessary.

The BadgeThe Consumer Financial Protection Bureau is one of the most powerful and least accountable regulatory agencies in American history.  Immune from budgetary oversight by Congress and headed by a single director who cannot be removed by the President, the agency wields unconstrained, vaguely-defined powers to regulate virtually every consumer and small business credit product in America.  The Bureau has defended its extraordinary independence by claiming that its regulations will be “evidence-based” on unbiased, unimpeachable economic evidence, and thus is above the usual political concerns that justify bipartisan commissions and engaged congressional oversight.

The Rules

Last week’s issuance of its new rules on residential mortgages (summarized here), however, shows why the new regulator can’t be trusted to regulate itself. The rules impose new burdens on lenders to ensure borrowers’ “ability to pay” their loans and create a safe harbor for so-called “qualified mortgages” that are perceived as especially safe by regulators, such as fixed rate mortgages and—don’t laugh—loans issued according to Fannie Mae and Freddie Mac’s underwriting criteria. 

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The Revenge of Richard Nixon: The Consumer Financial Protection Bureau Spreads Its Tentacles

Last month marked the one-year anniversary of the Consumer Financial Protection Bureau (CFPB).  At the time the Bureau was created I predicted that it would be a bureaucratic train wreck: an institution that is almost perfectly designed to manifest all of the worst pathologies that scholars of regulation have identified over the past several decades.  Unfortunately, its operations to date have confirmed those fears.

The institutional structure of the CFPB is novel in American history—not merely an independent agency, it is an independent agency tucked inside another independent agency (the Federal Reserve).  Its decision-making is not only independent of any review by the President or Congress, but also from the Federal Reserve itself. 

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