Thursday, February 18, 2016
Check this out: Alden Abbott outlines the case against the Consumer Financial Protection Bureau over at Heritage.
The CFPB, an independent regulatory agency created under Dodd-Frank that's charged with doing just what its name says, has been subject to a non-stop barrage of attacks from the right ever since its creation--for policy reasons, and for violations of separation of powers. Abbott summarizes the latter, drawing on Free Enterprise Fund:
The Free Enterprise Fund case strongly indicates that the CFPB's degree of independence goes beyond constitutionally acceptable norms.
First, the CFPB is more than one level removed from presidential oversight. Its director is independent from management supervision by the institution within which the bureau sits--the Federal Reserve System--and the Federal Reserve System is independent from presidential control.
Second, the bureau's independence from congressional appropriations or budgetary review prevents Congress from exercising its key means of oversight: the power of the purse.
Taken as a whole, these features grant the bureau greater autonomy than is allowed to any regulatory institution whose structure has been reviewed by the Court.
But neither feature of the CFPB is problematic. As to supervisory independence, Abbott's claim is simply wrong, on his own terms. He earlier says, correctly, that the head of the CFPB serves for five years, and can be removed by the President for cause. This isn't the kind of double-insulation that the Court found offensive in Free Enterprise Fund; instead, it's a direct line of accountability to the President that the Court has long approved. It doesn't matter that the CFPB sits within the Federal Reserve System, because the head of the CFPB answers to the President.
As to financial independence, it's hardly novel for an agency to self-fund outside the regular appropriations process, through fees or fines. Indeed, the Congressional Research Service says (correctly) that CFPB's funding--which comes from the Fed's combined earnings (and not regular appropriations)--"give the Bureau less flexibility than the OCC, FDIC, and other banking regulators that are able to increase assessments on the institutions within their jurisdiction to raise revenue, as needed to carry out their responsibilities." And Congress still has oversight: the CFPB reports regularly and is subject to audits by the Comptroller General, and the director must testify at least twice a year before Congress.
We'll continue to see challenges to the CFPB in the courts. But unless the Court changes its approach to independent agencies, or unless Congress changes things, don't expect the CFPB to go away.