Once again the wicked winds of change whistle through Washington, D.C. And threaten to blow away another precious piece of President Barack Obama’s legacy. The United States Supreme Court will soon hear a case challenging his creation of the Consumer Financial Protection Bureau (CFPB), an executive agency that spawned from the Dodd-Frank Wall Street Reform and Protection Act of 2010. This arm of the Federal Reserve System put stiff laws in place for lending institutions. Primarily they proclaim to safe guard the American public, as well as increase accountability in government by consolidating seven different federal agencies into one.
The case in question here being Seila Law LLC v. Consumer Financial Protection Bureau. The CFPB issued a civil investigative demand (CID) to the California-based firm, Seila Law. Seila Law refused to comply with the demand. A CID is often used to gather information prior to a possible investigation for suspected violations of the False Claims Act (FCA). The FCA originally passed in the mid-1860s during Civil War times, made liable for damages any person who knowingly submitted false claims to the government. Seila Law disputes the motion and argues the agency is ultimately unconstitutional by violating a separation of powers clause. More specifically by the vesting of substantial executive authority in an agency led by a single director. If that is the final ruling then how likely may this impact the Dodd-Frank Act?
The CFPB has wide-reaching rule and complete control over that realm. With no real checks or balances other than the requirement to submit a budget for annual approval by the Federal Reserve. This executive office follows a recent trend of independent agencies added within the federal government. Many of these so-called “administrative state” boards are led by committee and appointed by the president. Most of them appear to meet strict judicial standards. Namely in using staggered terms, partisan limitations on commission membership and majority or consensus decision. While no such balances were implemented with the CFPB. Besides all of that no branch of government is able to impose any restrictions on the CFPB.
An important side note: Associate Justice Brett Kavanaugh already has expressed a legal opinion on this matter. That before his confirmation last year coming as an Appeals Court Judge in 2016. In a verdict favoring the PHH Corporation v. CFPB, Kavanaugh wrote “other than the president, the director of the CFPB is the single most powerful official in the entire United States government, at least when measured in terms of unilateral power.” In his opinion Kavanaugh found the CFPB to be unconstitutional, before the “nuclear” D.C. Circuit reversed him en banc. Seila Law lost a previous challenge by the 9th U.S. Circuit Court of Appeals in May. The appeals court would cite an early example set close to 85 years ago favoring the Federal Trade Commission (FTC). An independent agency with a relatively similar makeup to today’s CFPB.
Among a slew of major decisions now pending before the high court, this could potentially have the greatest impact. The court even issued an order Wednesday announcing former Solicitor General Paul Clement’s “invitation” to brief and argue the case acting as amicus curae. This move as the Justice Department dropped their defense of the agency. As Clement prepares to match wits against attorney Kannon Shanmugam, counsel of record in the current filing. Legal eagles are surely watching the trial very intently. An additional wrinkle to watch with Democratic Presidential hopeful and Massachusetts Senator Elizabeth Warren as well. The leading progressive candidate was a driving force behind this landmark action. That leaves a lot at stake for Warren. Will that make a discernible difference in her campaign?
Director of the CFPB has predictably become a pawn caught in the political chess match. Ever since Obama appointee Richard Cordray was replaced by White House Chief of Staff Mick Mulvaney in late 2017. President Donald Trump later nominated Kathy Kraninger to serve as director. As Director Kraninger recently met with some hostilities from Democrats on Capitol Hill. By contrast House Republicans were warm and welcoming to her in mid-October. Curious that Associate Justice Kavanaugh was just victimized and defamed in a virtual Democratic assault on his name. Fair to say that a fiercely partisan fight extends across every patch of turf in D.C. and beyond.
As a chill begins to descend upon our nation’s capital this autumn, Obama supporters must brace for a cold reality of rejection. This present suit only the latest in a long line of potential Obama era policy changes brought about under President Trump. Do the country’s priorities held back in 2010 when rebounding from a debilitating recession still hold true today? To what extent are American consumers liable for their own ill-advised personal choices and financial mistakes? Much to consider as we near the closing round of this contest.