by Jonathan Decker
A recent column in Investor’s Business Daily gives an important perspective on why the stakes for confirming Brett Kavanaugh are so high: If conservatives obtain a majority on the Supreme Court, it could spell doom for Elizabeth Warren’s Consumer Financial Protection Bureau (CFPB). Warren’s CFPB is, as author James Bowers notes, “the federal government’s youngest and most aggressive federal agency.” This predatory bureaucracy has come under fire since its inception for inflicting far more harm on the same consumers it purports to protect.
Bowers explains why the CFPB may be on borrowed time:
The Competitive Enterprise Institute along with The State National Bank of Spring, Texas, and the 60 Plus Association recently filed a petition with the Supreme Court to hear the case State National Bank of Big Spring v. Mnuchin. The Plaintiffs are asking the court whether Title X of Dodd-Frank Wall Street Reform and Consumer Protection Act, which established the CFPB, is constitutional.
The lawsuit’s question is valid. The CFPB was intentionally created to be insulated from oversight by the three branches of government. What’s more, the CFPB’s director can only be removed by the president for specific causes, such as neglect of duty or extreme wrongdoing. This gives the director unilateral control of how to run the agency with restricted oversight from the president.
The bureau is also exempt from Congress’ “power of the purse,” and instead receives its funding from the Federal Reserve. That funding arrangement renders the bureau unaccountable to Congress. These parts to the bureau’s structural creation should be enough cause for the courts to rule it unconstitutional.
The CFPB was created via the Dodd-Frank Act, and quickly became the federal government’s new favorite tool for shaking down American businesses. Although Congress provided small relief from a few of Dodd-Frank’s provisions this year, the CFPB emerged largely unscathed (despite improvements under Director Mulvaney’s leadership).
This is likely one of the reasons JPMorgan Morgan Chase CEO Jamie Dimon recently told CNBC (to paraphrase) that large financial institutions have not seen significant regulatory relief under the Trump administration. The CFPB has levied millions of dollars in fines against JP Morgan Chase, and as long as big banks feel the CFPB breathing down their neck, this bureaucracy will continue to chill the financial sector.
And why do we want to reduce the regulatory burden on big banks?
Infamous bank robber Willie Sutton summed it up succinctly. As legend goes, when Willie Sutton was asked by a reporter “why do you rob banks,” he responded, “because that’s where the money is.”
Similarly, we must eliminate the CFPB’s attack on major US financial institutions because “that’s where the money is.”
While Congress has been unable to tackle the CFPB, a Supreme Court case potentially could — if Brett Kavanaugh is confirmed. As I previously wrote:
Judge Kavanaugh’s 12 years on the D.C. Circuit provide ample evidence of his support for constitutionally limited government. But in the interest in brevity, I will showcase one particular ruling which I believe to be his “greatest hit.” Back in 2016, Judge Kavanaugh declared liberal Senator Elizabeth Warren’s Consumer Financial Protection Bureau (CFPB) unconstitutional. Here are some excerpts from his opinion:
Because the CFPB is an independent agency headed by a single Director and not by a multi-member commission, the Director of the CFPB possesses more unilateral authority – that is, authority to take action on one’s own, subject to no check – than any single commissioner or board member in any other independent agency in the U.S. Government.
At the same time, the Director of the CFPB possesses enormous power over American business, American consumers, and the overall U.S. economy. The Director unilaterally enforces 19 federal consumer protection statutes, covering everything from home finance to student loans to credit cards to banking practices. The Director alone decides what rules to issue; how to enforce, when to enforce, and against whom to enforce the law; and what sanctions and penalties to impose on violators of the law.
That combination of power that is massive in scope, concentrated in a single person, and unaccountable to the President triggers the important constitutional question at issue in this case.
The petitioner here, PHH, is a mortgage lender and was the subject of a CFPB enforcement action that resulted in a $109 million order against it. In seeking to vacate the order, PHH argues that the CFPB’s status as an independent agency headed by a single Director violates Article II of the Constitution.
Recognizing the broad and unaccountable power wielded by independent agencies, Congresses and Presidents of both political parties have therefore long endeavored to keep independent agencies in check through other statutory means. In particular, to check independent agencies, Congress has traditionally required multi-member bodies at the helm of every independent agency. In lieu of Presidential control, the multi-member structure of independent agencies acts as a critical substitute check on the excesses of any individual independent agency head – a check that helps to prevent arbitrary decisionmaking and thereby to protect individual liberty.
This new agency, the CFPB, lacks that critical check and structural constitutional protection, yet wields vast power over the U.S. economy. So “this wolf comes as a wolf.”
In light of the consistent historical practice under which independent agencies have been headed by multiple commissioners or board members, and in light of the threat to individual liberty posed by a single-Director independent agency… We therefore hold that the CFPB is unconstitutionally structured.
In sum, we grant PHH’s petition for review, vacate the CFPB’s order against PHH, and remand for further proceedings consistent with this opinion.
Judge Kavanaugh’s strongly worded opinion in PHH Corp. v. CFPB shows that, as a Supreme Court justice, he could be the vote that eliminates Elizabeth Warren’s CFPB. He has already ruled it unconstitutional in a lower court ruling.
Since eliminating the CFPB would unleash America’s banking sector, reduce the cost of credit for consumers, and provide a shot of adrenaline for our already booming economy, the stakes behind Kavanaugh’s confirmation are extremely high. We’ll see where the dust settles.
Photo credit: Matt Wade via Flickr, CC BY-SA 2.0