I know it can be a mistake to make too much of what judges say during oral arguments in the course of civil litigation, but I was still encouraged when I read that a Federal judge this week wondered out loud whether the Consumer Finance Protection Bureau, that regulatory monstrosity created by the Dodd-Frank bill, is even constitutional.
He’s on to something! The judge, Brett Kavanaugh of the U.S. Court of Appeals for the D.C. Circuit, is part of a panel hearing a case between the CFPB and PHH Corp. over the size of a fine PHH must pay the regulator. During the course of the argument, Kavanaugh noted (according to the Daily Caller) that it is “very dangerous in our system” that an agency has so much power and yet is unaccountable to elected officials. I haven’t seen the full transcript of Judge Kavanuagh’s remarks, but I suspect I know what makes him so uneasy. Like, for instance, the fact that a) the CFPB is funded via directly by the Federal Reserve rather than Congressional appropriation and so is essentially immune to oversight; b) the agency is run by a single director rather than a bipartisan board the way other regulatory agencies are run; and c) its director can’t be fired by Congress or the president. Kavanaugh suspects the CFPB’s structure violates the separation of powers laid out in the Constitution and so may be unlawful.
Good. As I’ve noted here before, the CFPB is an abomination, and an affront to representative democracy. The head of the agency can do whatever he wants–and often does. Which is why, for instance, the CFPB can gave itself an essentially unlimited budget on its headquarters renovation (the project is costing almost twice per square foot than the Bellagio in Las Vegas!) without any ramifications. Institutions that fall under its heavy hand have little recourse other than to do whatever it wants.
The Daily Caller reports that Judge Kavanaugh told the CFPB’s lawyers to “address whether other federal agencies had ever been headed by one person and, if such a structure violated separation of powers, what the court should do about it.” Hopefully, the case will make to the full D.C. Circuit, which will then do the right thing and declare the CFPB’s structure to be in violation of the Constitution.
The CFPB can actually do a lot of good, in my view. Financial services providers occasionally have trouble resisting the temptation to take advantage of their customers, so that reasonable oversight can be a good thing. But an unaccountable regulator like the CFPB isn’t just bad for the system, it’s bad for the country.
What do you think? Let me know!