Corporate Accountability

Gibson Dunn’s Ted Olson, on Capitol Hill, Smacks CFPB

By C. Ryan Barber

As members of Washington’s legal elite gathered Tuesday morning for the second day of Judge Neil Gorsuch’s confirmation hearing, the veteran appellate litigator Ted Olson wasn’t there—but he was close.

Olson, a former U.S. solicitor general and now a Gibson, Dunn & Crutcher partner, appeared on Capitol Hill to assail an Obama-era agency that he’s also fought in the courts: the Consumer Financial Protection Bureau.

Olson, testifying at the U.S. House Financial Services Committee, made the same argument to lawmakers that he made earlier for his client, the mortgage lender PHH Corp., in a federal appeals court last year: the agency’s director needs a greater check on his authority.

The U.S. Court of Appeals for the D.C. Circuit in October, ruling for Olson’s client, erased a $109 million penalty. But the victory was short-lived—the full D.C. Circuit in May will rehear the dispute. Olson got a chance to preview his argument Tuesday.

“The CFPB’s structure is the product of aggregating some of the most democratically unaccountable and power-centralizing features of the federal government’s administrative state,” Olson said Tuesday. “The president is prevented from removing the head of the bureau except for very limited circumstances. And therefore the president was stripped of the power to faithfully execute the laws in these circumstances.”

Olson said his views were “not necessarily those of my firm or any client.” But his leading role in the PHH case against the CFPB was not lost on the committee’s Democratic members.

U.S. Rep. Al Green of Texas, a ranking member of the financial services committee’s subcommittee on oversight, criticized the Republicans’ scheduling of the hearing as a “shameful and  disrespectful abuse of power.” The Republicans, he said, were siding with Olson’s client.

“The Republicans are abusing their power by taking one side in a piece of litigation that is presently pending in a federal court right here in Washington D.C.—taking the side of a mortgage company that has been accused of ripping off Americans. Taking one side by allowing Mr. Olson to testify and present evidence and issues that will benefit his client,” Green said.

“Wouldn’t it be great if every lawyer could have his client’s case presented to the Congress of the United States of America? I suppose we have to ask ourselves, ‘Is this something that we’ll do in the future for every lawyer who has a case pending? Or is this simply a special congressional fix for Mr. Olson’s client?’ It’s a shameful and disgraceful circumstance that we find ourselves dealing with today.”

Olson said he understood Green’s point of view “entirely” and emphasized that he was speaking only for himself, not for Gibson Dunn, PHH or any other client.

“These are my own views on separation of powers, issues that I’ve spoken and written about for 50 years,” he said.

U.S. Rep. Jeb Hensarling, chairman of the House financial services committee, has been the architect of reform legislation that would take the CFPB off its independent funding stream and subject it to congressional appropriations.

Last term, he proposed transforming the CFPB into a bipartisan commission akin to the U.S. Securities and Exchange Commission and Federal Trade Commission. This term, he is proposing to allow the president to remove the CFPB’s director at will—a remedy that matches what the D.C. Circuit panel proposed.

“It should not go unheeded that a three judge panel of the second-highest court in the land has ruled it unconstitutional,” Hensarling, R-Texas, said Tuesday.

“I don’t know what’s going to happen once the entire panel meets en banc,” said Hensarling. ”I don’t know what would happen if this is appealed to the Supreme Court. But very learned jurists have found this to be an unconstitutional agency.”

During the campaign, President Donald Trump said he would “dismantle” Dodd-Frank, a post-crisis financial reform law that created the CFPB. His election has spurred speculation that he would fire the agency’s director, Richard Cordray, whose five-year term expires in July 2018.

Fire Richard Cordray?

Any such move would likely trigger a legal challenge over Trump’s firing power over the CFPB. Olson flatly stated Tuesday that the president has the constitutional authority to fire Cordray, “notwithstanding the limitations that are imposed in the statute.”

U.S. Rep. Ann Wagner of Missouri, the oversight subcommittee’s chairwoman, said the CFPB has grown “arrogant in its cloak of unaccountability.” She asked Olson if the president’s “constitutional duty” requires him to abide by a statute he views as unconstitutional.

“I believe the president has the responsibility to the Constitution, not to an unconstitutional statute,” Olson replied.

Olson was joined on the panel Tuesday by Saikrishna Prakash, a professor at the University of Virginia School of Law; Brianne Gorod, chief counsel at the Constitutional Accountability Center; and Adam White, a research fellow at the Hoover Institution.

U.S. Rep. Keith Ellison, D-Minnesota, said the witnesses—excluding Gorod—were “defending a kick-backer, which I think is shameful.”

“I know that the hearing today is a very real legal conversation about construction and funding for the CFPB. But I want the people watching this broadcast, if they are, to know that this is not really what this is about,” Ellison said. “This is about protecting a deeply vested, incredibly profitable industry. That’s what’s happening here. It’s not about the Constitution. That is a subterfuge.”

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