Corporate Accountability

House hearing gathers experts to debate CFPB structure & more

Does Richard Cordray possess more power than President Trump? No matter what Trump’s possible tweets might be to the contrary, one of the Constitution experts who testified during a U.S. House hearing on Tuesday declared that, in fact, the director of the Consumer Financial Protection Bureau holds more leverage than the occupant of the White House’s Oval Office.

During the session orchestrated by Subcommittee on Oversight and Investigations, former U.S. Solicitor General Ted Olson opened the witness testimony segment with a 16-page explanation about how the CFPB’s structure and the director’s enforcement capabilities are not what the Constitution writers intended.

Olson went so far as to say the CFPB director can overrule the president stemming from how the Dodd-Frank Act created the bureau.

“Within his vast realm, the director wields unchecked legislative, executive, and judicial powers — including the power to issue far-reaching regulations, bring actions to enforce those rules, punish businesses and individuals by adjudicating enforcement actions in the CFPB’s in-house court, and independently litigate in the government’s name,” said Olson, who was Solicitor General from 2001 through 2004, serving as the law officer directly below the attorney general in the Department of Justice and responsible for arguing cases before the Supreme Court.

“And if the director and the president, acting through an executive agency, disagree on the interpretation of federal consumer finance law, the director’s view controls. Thus, the CFPB’s organic statute even purports to give the director greater power than the president in the execution of federal consumer finance law,” continued Olson, who now is a lawyer with Gibson, Dunn & Crutcher in Los Angeles and Washington, D.C. and also lead counsel for PHH Corp., a Mount Laurel, N.J.-based finance company that operates in the mortgage space. PHH is involved in a rehearing against the CFPB before the U.S. Court of Appeals for the District of Columbia Circuit.

“Never before has so much federal power been concentrated in the hands of one individual so thoroughly shielded from constitutional accountability,” he went on to say.

Olson closed his prepared testimony by emphasizing what he considered to be the Constitutional flaw in the CFPB’s construction.

“This structure potentially relegates the chief executive to the role of a spectator as the CFPB director executes a vast body of federal law according to his own notions. The CFPB’s perpetual self-funding authority, moreover, removes the external check that Congress ordinarily exercises through the power of the purse,” said Olson, who was selected by TIME in 2010 as one of the 100 most influential people in the world.

“These and other features of the CFPB violate the Constitution and should be remedied expeditiously by Congress,” he went on to say.

The hearing entitled “The Bureau of Consumer Financial Protection’s Unconstitutional Design” continued with two other witnesses questioning how the CFPB is designed and the power of its director. The pair were Saikrishna Prakash — a James Monroe Distinguished Professor at the University of Virginia School of Law — and Adam White — a research fellow at Hoover Institution.

Coming to the CFPB’s defense was Brianne Gorod, who is chief counsel at Constitutional Accountability Center (CAC). Gorod reiterated why lawmakers crafted the Dodd-Frank Act and how the CFPB is similar to many other regulatory agencies.

“To start, the CFPB’s leadership structure — namely, the fact that it is led by a single director removable only for cause — is consistent with the text and history of the Constitution, as well as Supreme Court precedent,” said Gorod, who joined CAC from private practice at O’Melveny & Myers where she was counsel in the firm’s Supreme Court and appellate practice.

“In drafting the Constitution, the framers gave Congress considerable flexibility in determining how to shape the federal government. Consistent with that constitutional design, the Supreme Court held over 80 years ago that Congress may choose to shield the heads of independent regulatory agencies from presidential removal at will,” continued Gorod, who also spent two years from 2009 to 2011 as an attorney adviser in the office of legal counsel at the Justice Department.

Gorod closed with simple assertions.

“As this review of the bureau’s jurisdiction and authorities demonstrates, there is nothing extraordinary or unprecedented about the powers it exercises. These powers resemble those of comparable financial regulatory agencies and are subject to the same restrictions, along with additional limits unique to the bureau,” Gorod said.

“In sum, the text, structure and history of the Constitution, together with decades of Supreme Court precedent, demonstrate that the CFPB is constitutional. A close examination of its powers, and the checks on those powers, make clear that it is also politically accountable,” she went on to say.

The entire subcommittee hearing can be viewed here or via the video window at the top of this page.

Before the House event, the American Financial Services Association (AFSA) submitted a letter for the record, supporting reform of the CFPB’s single-director structure and adding that its annual budget should be appropriated by Congress.

“The CFPB should be subject to traditional checks and balances,” the association wrote. “Rather than the CFPB director dictating his own budget, Congress should exercise its constitutional power of the purse to determine the bureau’s budget. The CFPB should be placed under the appropriations process to ensure that the agency is not self-regulated and that Congress has proper oversight and funding authority over the bureau, as it does for other federal agencies.”

Like some of the experts at the hearing, AFSA also said that the agency should not be run by a single director with unilateral decision-making power and virtually no oversight.

“…the CFPB should be reconstituted as a bipartisan ‘Consumer Financial Opportunity Commission’ to ensure certainty, fairness and transparency…leading to more balanced and effective regulation,” AFSA said in its letter.