Another small step was taken last week on the steep and winding ascent back to constitutional norms. The U.S. Court of Appeals for the D.C. Circuit, the nation’s second-most important court, did its judicial duty by reprimanding Congress for abandoning constitutional propriety.
The court declared unconstitutional the unprecedented independence that Congress conferred on the Consumer Financial Protection Bureau. This legal skirmish about one aspect of this one tentacle of the administrative state may seem recondite and trivial. It concerns, however, two momentous matters. One is the integrity of the federal government’s Madisonian architecture. The other is something that not even the prescient James Madison could have anticipated — Congress’ modern eagerness to diminish itself.
The CFPB is empowered to “regulate the offering and provision of consumer financial products or services.” Being able to define financial products, it can regulate almost everything touching finance, from mortgages to financial advisers to retirement plans — even car loans, although expressly forbidden to do so.
Acting like a freewheeling little legislature, it concocts laws as it improvises standards. It is authorized to “declare,” with scant congressional guidance, certain business practices “abusive,” “unfair,” “deceptive” or involving “discrimination.”
Until the court’s decision last week, the CFPB, unlike any federal institution created since 1789, was uniquely sovereign: Its director was appointed by the president for a five-year term — longer than the president’s — and the director could be removed by the president only “for cause.” That is, only for “inefficiency, neglect of duty or malfeasance,” not for reasons of policy.
The court held that the CFPB is “unconstitutionally structured” because of its “novel agency structure.” There are several agencies that are controlled by bipartisan commissioners who can only be removed for cause, and they are described as “independent” agencies as a result.
Unconstitutional power
The court has just held that as created by Congress in the 2010 slapdash Dodd-Frank legislation, the CFPB’s single director “enjoys more unilateral authority than any other officer in any of the three branches of the U.S. government, other than the president.”
The court’s ruling makes the director subject to presidential control through dismissal. Another important challenge to the CFPB’s operations, currently in a federal district court, concerns Congress’ voluntary abandonment of its power of the purse: Dodd-Frank, which was passed with the support of only three House Republicans and three Republican senators, says the CFPB’s funding shall be “determined by the director” and shall come not from congressional appropriations but from the Federal Reserve. Small wonder it spends lavishly on itself.
The CFPB’s progressive authoritarianism reflects, in the language of the Hudson Institute’s Christopher DeMuth, “regulatory insouciance” made possible by “legislative abnegation.” Both will continue until conservatism reappears.
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