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.