The Founders believed that consolidating executive, legislative, and judicial powers would threaten liberty, so to avoid this tragedy, they built our constitutional framework with checks and balances. James Madison, the Father of the Constitution, wrote in Federalist 47 that “The accumulation of all powers, legislative, executive, and judiciary, in the same hands, whether of one, a few, or many, and whether hereditary, self-appointed, or elective, may justly be pronounced the very definition of tyranny.”
Whew! Thank goodness we avoided that kind of government.
On second thought, we didn’t. Despite the Founders best efforts, Congress has concentrated executive, legislative, and judicial powers into regulatory agencies. Lazy legislators pass vague laws and then permit regulators to fill in the devilish details. Many of these regulatory agencies employ their own adjudication panels with internal appeal boards that judge the rightness or wrongness of their own actions. (A final appeal may be made to outside courts, but usually not until all of the agency’s protocols have run their course.) Lastly, regulatory agencies execute their own interpretation of laws, with—if White House responses to regulatory scandals are to be believed—no oversight by the top executive.
Surely, this can’t be right. It would violate every precept of the Founders. Unfortunately, it’s true. In fact, amassing vast powers in regulatory agencies has become so commonplace, few take notice anymore. At least, few took notice until the Consumer Financial Protection Bureau raised this liberty-sapping drift to a brand new level.
The Dodd–Frank Wall Street Reform and Consumer Protection Act created a committee, a study group, and a powerful regulatory agency. (Respectively, the Financial Stability Oversight Council, the Office of Financial Research, and the Consumer Financial Protection Bureau.) The Consumer Financial Protection Bureau (CFPB) has been assigned regulatory authority over more than twenty major laws, and the Dodd-Frank Act press-ganged civil servants from the Federal Reserve, the Federal Trade Commission, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Department of Housing and Urban Development.
The CFPB operates as an independent regulatory agency that can draw money from the vast coffers of the Federal Reserve. How much? Whatever the CFPB director deems “reasonably necessary,” although the amount is capped at a stingy 12% of the Fed’s own prolific spending. This agency has its own source of money, broad powers over the most vital sector of the economy, and is so independent that the Dodd-Frank Act even puts restrictions on the president’s authority to dismiss the director. Congress does get periodic reports and testimony, but naked the power of the purse, all it can do is listen and grouse a bit. The Fed is prohibited from interfering and although the Financial Stability Oversight Council may issue a “stay” to the CFPB, it requires an appealable 2/3 vote. A high hurdle, indeed.
In other words, CFPB wields an absurd amount of power, sets its own budget, and is beholden to no one.
How could this possibly go wrong?
Well, how about this for starters.
- The CFPB feels empowered to collect whatever financial data it judges necessary, including credit card transactions. The US Chamber of Commerce claims the CFPB needs a warrant or National Security Letter to demand account-level data, but the CFPB is proceeding anyway.
- The cost to remodel the CFPB’s new home has soared from $55 million to $145 million—more per square foot than the Trump World Tower, the Bellagio Casino, or the Burj Khalifa in Dubai. Worse, through good planning or bad, one-third of CFPBs employees won’t fit in the lavish digs across from the White House. The CFPB is stonewalling FOIA requests about these overruns from newspapers and political groups.
- Dodd-Frank gave the CFPB subpoena power, but the agency insists that regulatory precedents brush aside the statute of limitations and nondisclosure agreements.
- As if the CFPB didn’t have enough control over the financial sector, the Financial Stability Oversight Council claims that insurance companies also fall under the agency’s purview. MetLife, in its court filing, stated “That conclusion was arbitrary and capricious, conflicts with the council’s statutory obligations under the Dodd-Frank Act and the rules and guidance that the council promulgated for designating nonbank financial companies, and was reached through a procedure that denied MetLife its due process rights and violated the constitutional separation of powers.”
None of this includes the CFPB regulatory dictates that are hampering our economic recovery. Of course, financial service providers may request a review of adverse findings. The reviewing committee is comprised solely of CFPB officials whose conclusion is reviewed by the Associate Director. The decision of the Associate Director is final, and the CFPB will not accept further appeals.
This is a very busy regulator that has startled people with the speed with which it got up and running in just a few short years. Is there hope for Congressional action to corral the most grievous CFPB excesses? If the hearings on the headquarters remodel overruns are an example, the answer would be no. The Consumer Financial Protection Bureau demonstrated its independence by ignoring the huffing and puffing of mere elected representatives.
The consolidation of legislative, executive, and judicial powers in regulatory agencies would have offended the Founders. Our complacency would sadden them.
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