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Bench Memos

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The CFPB’s True Debilitating Uncertainty



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Two journalists in the Wall Street Journal yesterday floated the “uncertainty” argument in favor of the CFPB; in advance of this piece, that argument hadbeen made by the CFPB’s own former senior counsel for enforcement strategy when reacting to last week’s court decision that struck down President Obama’s attempt to appoint federal officers without the Senate’s constitutionally required advice and consent. As the press and many others have noted, this decision casts a grave shadow of doubt upon the constitutionality of Richard Cordray’s own installation as CFPB director without Senate confirmation.

The suggestion that the banking community would suffer greater uncertainty from CFPB Director Cordray’s removal from office than from his continued unconstitutional exercise of the CFPB’s broad, unchecked power strains credibility. 

To apply the same rule of law to Cordray’s unconstitutional appointment that the D.C. Circuit applied to the improperly appointed NLRB directors — to remove him and require the president to secure Senate approval of his next nomination — poses no threat of harmful “uncertainty” to banks. The truly debilitating uncertainty that confronts banks, especially Main Street community banks, is the uncertainty inherent in Dodd-Frank itself. Dodd-Frank disrupted the longstanding structure of federal and state regulation of community banks and other small lenders and replaced it with the CFPB, an unprecedented agency that enjoys open-ended grants of power and which is largely immune to oversight by the president and Congress.

The uncertainty we should be worried about doesn’t come from requiring the president to follow the Constitution’s plain rules; rather, it’s produced by giving the CFPB director, a single unelected regulator, limitless power and no oversight. It is that generous helping of power that led the CFPB director to testify before the House Oversight Committee that it is “probably not useful to try to define” financial regulations in advance, and that instead he would define much law after the fact, on a case-by-case basis. That expansive power similarly emboldened Cordray to testify before the Senate Banking Committee that he believes that even as an unelected regulator he has “exception authority” empowering him to “waive” the requirements of other federal laws passed by Congresses and signed by presidents.

In short, the real, dangerous uncertainty is found in the unconstitutional appointment of a regulator who claims the power to write laws on an after-the-fact, case-by-case basis, and to nullify laws already on the books.

If the president actually cared about the specter of “uncertainty” that his surrogates now invoke, then he never would have appointed Director Cordray in clear violation of the Constitution, inviting lawsuits to restore the document’s rule of law. If, last year, the CFPB was actually concerned about this newly alleged “uncertainty,” then Cordray never would have promulgated rules that would be cast into doubt by his own unconstitutional appointment. And if, today, Director Cordray were worried about this newly alleged “uncertainty,” then they can immediately alleviate it by suspending their newly promulgated regulations while the recess-appointment lawsuits remain pending, and allow the pre-CFPB regulatory structure to continue to foster responsible borrowing and lending by community banks and Main Street companies.



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