Independent Agencies Must Follow the President’s Interpretations of Law

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President Trump must soon decide whether to say “You’re fired” to Richard Cordray, the Director of the Consumer Financial Protection Bureau (CFPB). Cordray’s policies are clearly at odds with the deregulatory impulse of the administration, whose fate depends  on whether it can substantially increase prosperity beyond the sluggish growth of the Obama years.

The obstacle to getting rid of Cordray is that the statue setting up the CFPB permits the President to fire Cordray only on the basis of “inefficiency, neglect of duty, or malfeasance in office.” One possibility would be to fire him anyway on the theory that the restriction is unconstitutional.   Indeed, in PHH Corp. v. CFPB, a panel of the District of Columbia Circuit held that it was unconstitutional to limit the President’s removal power over the director. It acknowledged that the Supreme Court has upheld insulating other executive agencies, like the FTC, from presidential removal.   But those independent agencies were directed by multi-member commissions composed of members from different parties. The panel concluded that CFPB lacks the important check of collegial, bipartisan control, concentrating power in a single official.  Thus, the Constitution required that the President have the power to remove him at will.

The difficulty with acting on the panel’s analysis is that the full District of Columbia Circuit has vacated the PHH ruling to hear the case en banc.  It is true that the President could still follow the reasoning of the panel ruling and dismiss Cordray. But that action would be portrayed by the press as flouting a judicial order, even though the President is not a party to PHH v. CFPB.   Moreover the President’s substantial latitude to decline to follow statutes that violate his constitutional authority is premised in part on the need to obtain judicial resolution. But here the issue would already be before a court.

The President has a better option, because he has the constitutional duty to “take Care that the Laws be faithfully executed. “

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Dodd-Frank’s Frankenstein Creeps Forward

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The Recess: Appeals Court Dings Obama Appointments

In a much-noted decision, a panel of the D.C. Circuit (Judges Sentelle, Henderson and Griffith) has invalidated President Obama’s putative “recess” appointments to the National Labor Relations Board (NLRB). The appointments were made—without the advice and consent of the Senate—on January 4, December 2012, when the Senate was meeting in pro forma sessions (and even conducted official business), precisely for the purpose of blocking recess appointments.

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Unforced Error

My earlier posts on Dodd-Frank contain a bad mistake that requires correction before it turns into an urban legend. In Free Enterprise Fund v. Public Company Accounting Oversight Board (2010), I wrote, the Supreme Court invalidated an arrangement under which officers of the PCAOB, an agency housed in and under the SEC (an independent agency), enjoyed “double-layer” protection against removal: the President (the Court stipulated) could not fire SEC Commissioners except for good cause, and the SEC could not fire PCAOB officers except for good cause. So far, so accurate. Dodd-Frank’s Bureau of Consumer Financial Protection (CFPB) is an independent agency nested “in” another independent agency (the Fed), just like the PCAOB. Also correct. However, as “Admin Guy” notes in his comment, the CFPB’s Director, unlike the PCAOB’s members pre-Free Enterprise Fund, does not enjoy double-layer protection: he is removable, “for cause,” by the President. That is so, and my statement to the contrary was wrong.   Apologies for the embarrassing error (all the more idiotic because I quote and cite the pertinent provision before ignoring it), and thanks for the correction.

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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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