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DOJ Enters the Fray…Against the CFPB

Monday, March 20, 2017 9:09
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(Before It's News)

There’s another installment in the ongoing saga of PHH v. CFPB, the legal case challenging the constitutionality of the newest federal agency, the Consumer Financial Protection Bureau. And this installment is a weird one. The Department of Justice has now joined in, filing a briefagainst the CFPB. Yes, the federal government is now effectively on opposing sides of this case.

If you haven’t been following the story, I have a few posts that can bring you up to speed. At this point, a panel of judges has ruled against the CFPB, and a majority of them found that the CFPB’s structure is unconstitutional. (I find it difficult to see how anyone could find otherwise.) Part of the problem with the agency’s structure, as the court found, is that it has a single head who is removable only for cause. The director is not accountable to any elected official. To cure this problem, the court decided that the director should be removable by the president at will. This would make the agency more like a traditional executive agency—like the Department of Justice, for example—and less like existing independent agencies. Although it is important to note that even most independent agencies, like the Securities and Exchange Commission, are headed by a multi-member board and the chair of that board serves as chair at the will of the president. 

Now the federal appeals court in D.C. is rehearing the case en banc. That means that all 11 of the active judges on the court will hear the case and issue an opinion together. On Friday, the DOJ filed a friend of the court brief in support of PHH.

While it is extremely rare (although not unheard of) for one part of the government to file a brief in opposition to another part, it is not entirely surprising in this case. In ruling against the CFPB in the earlier hearing, the court handed the president a new bit of power. One of the reasons that our government has three co-equal branches is to allow them to serve as checks on one another. As Judge Kavanaugh noted in his opinion for the panel in the original hearing, quoting Justice Scalia “The purpose of the separation and equilibrium of powers in general, and of the unitary Executive in particular, was not merely to assure effective government but to preserve individual freedom.” Arguably, the government filing on both sides of a case is a sign the system is working as planned. 

What does this mean for the ongoing case? Not much. It’s no surprise that President Trump would like to get rid of Director Cordray. And the brief itself raises no new arguments that weren’t already made elsewhere (in Cato’s own amicus brief, for example). But it does increase the wattage of the spotlight already trained on this case. It also sharpens this question: if the CFPB loses, does it try to appeal to the Supreme Court? In most cases, the answer would be “yes,” but the CFPB can only pursue litigation in the Supreme Court with the Attorney General’s blessing. It seems unlikely that the DOJ would bless an appeal of a case in which its side won. 

The litigation is going to be long and messy. It’s not entirely clear it will be resolved before Cordray’s term is up in 2018. It may be that the resolution is ultimately not found in either the judicial or executive branch at all, but in the branch that created this mess: Congress. Despite being constitutionally suspect (given there’s no provision for them in the Constitution), independent agencies like the Securities and Exchange Commission or the Commodities Futures Trading Commission provide a useful template. If the CFPB were changed into a multi-seat commission, and if its funding were to come through the appropriations process instead of through a demand on the Fed, much of its mischief would be curtailed. The ball is ultimately in Congress’s court on this one. Let’s hope they decide to play.



Source: https://www.cato.org/blog/doj-enters-frayagainst-cfpb

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