Judges Weigh the Constitutionality of the Consumer Financial Protection Bureau
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The U.S. Court of Appeals for the D.C. Circuit heard oral arguments this week in a case arguing that the Consumer Financial Protection Bureau, established by the Dodd-Frank Act of 2010, is unconstitutional. A ruling for the Petitioners (which according to observers, seems very possible) could deal a major blow to the Bureau, and to President Obama’s legacy.
Unlike executive departments and agencies, which are answerable to the President, or independent regulatory agencies, which are generally are headed by a bipartisan commission, the CFPB is completely independent; not only can the President not control or remove the Bureau’s Director, but Congress cannot cut or eliminate its budget. The Petitioners in this case, PHH Mortgage, argued that:
The [Dodd-Frank Act] places sweeping legislative, executive, and judicial power all “in the same hands” of a single person who is entirely unaccountable to the democratic process—what James Madison called “the very definition of tyranny.”
If the Appeals Court panel sides with Petitioners on this point, it has a couple options. It could strike down the language in the Dodd-Frank law that limits the President’s power to fire the Bureau director. That would be a relatively modest step that might have the effect of making the CFPB more like other executive branch agencies (though it would still have an unconstrained budget). Alternatively, the Court could rule that the Bureau itself is unconstitutional, potentially nullifying every action it has taken. We probably won’t know the outcome for several months, and even then, the losing side is likely to appeal the decision to the full Circuit or to the Supreme Court. In the meantime, the future of something President Obama considers one of his main accomplishments hangs in the balance.
Read more on this issue at Forbes.
North Carolina Court of Appeals
Director, GW Regulatory Studies Center & Distinguished Professor of Practice, Trachtenberg School of Public Policy & Public Administration, The George Washington University
Susan Dudley is the Founder and Director of the George Washington University Regulatory Studies Center, established in 2009 to raise awareness of regulations’ effects and improve regulatory policy through research, education, and outreach. She is also a distinguished professor of practice in the Trachtenberg School of Public Policy and Public Administration. She is past-president of the Society for Benefit Cost Analysis, a senior fellow of the Administrative Conference of the United States, and on the Regulatory Transparency Project Regulatory Practice Working Group. Her book, Regulation: A Primer, with Jerry Brito, is available on Amazon.com.
From April 2007 through January 2009, Professor Dudley served as the Presidentially-appointed Administrator of the Office of Information and Regulatory Affairs in the U.S. Office of Management and Budget and was responsible for the review of draft executive branch regulations under Executive Order 12866, the collection of federal-government-wide information under the Paperwork Reduction Act, the development and implementation of government-wide policies in the areas of information policy, privacy, and statistical policy, and international regulatory cooperation efforts.
Prior to OIRA, she directed the Regulatory Studies Program at the Mercatus Center at George Mason University, and taught courses on regulation at the George Mason University School of Law. Earlier in her career, Professor Dudley served as an economist at OIRA, as well as the Environmental Protection Agency and the Commodity Futures Trading Commission. She was also a consultant to government and private clients at Economists Incorporated. She holds a Master of Science degree from the Sloan School of Management at MIT and a Bachelor of Science degree (summa cum laude) in Resource Economics from the University of Massachusetts, Amherst.