This past week, a unanimous panel of the D.C. Circuit (Judges Kavanaugh, Pillard, and Rogers—Judge Kavanaugh writing) held that State National Bank of Big Spring, Texas (“SNB”) may proceed with its lawsuit challenging the federal Consumer Financial Protection Bureau’s authority on various constitutional grounds.
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…
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…
New mortgage rules released by the CFPB show why heightened oversight is necessary.
The 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.
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.
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.