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A Case Ripe for the Supreme Court
The D.C. Circuit tees up the CFPB for constitutional review.
Richard Cordray speaks during a news conference, Cincinnati, Jan. 30. PHOTO: JOHN MINCHILLO/ASSOCIATED PRESS
By
The Editorial Board
Jan. 31, 2018 6:59 p.m. ET
210 COMMENTS
The D.C. Circuit Court of Appeals on Wednesday repudiated the Consumer Financial Protection Bureau’s lawlessness while upholding its constitutionality. But the diverse opinions from the circuit offer the Supreme Court an opening to issue a landmark ruling on how the bureau violates the Constitution’s separation of powers.
PHH Corp. v. CFPB stemmed at root from the bureau’s absolute lack of accountability. Former Director Richard Cordray overruled an agency administrative law judge and broadly reinterpreted the Real Estate Settlement Procedures Act of 1974 to fine PHH $109 million. Mr. Cordray also claimed the law’s three-year statute of limitations didn’t apply to him.
PHH challenged the fine’s legality and the CFPB’s constitutionality as an independent agency led by a single director who can’t be removed by the President except “for cause”—that is, “inefficiency, neglect of duty, or malfeasance in office.” Yet Article II of the Constitution holds that “the executive Power shall be vested in a President of the United States of America.”
A unanimous three-judge panel of the D.C. Circuit ruled in PHH’s favor in 2016 and two said the President’s inability to fire the director for policy disagreements is unconstitutional. The full circuit agreed on the statutory question, but a 6-3 majority held that the bureau’s structure is constitutional.
The majority bobs and weaves through Supreme Court precedents like a gardener dodging thorny bushes to find the CFPB constitutional. “The dissenters seek to cast aspersions on Humphrey’s Executor, painting it as an outlier in the Court’s separation-of powers,” the majority writes of one precedent. “Perhaps all that need be said in response is that the case binds us, as an inferior court.”
You almost have to admire the faux judicial modesty. As Judge Karen Henderson points out in her excellent dissent, Humphrey’s Executor (1935) differs notably from PHH. That case concerned limits on a President’s ability to remove Federal Trade Commission members, but the FTC is a bipartisan five-member commission subject to Congressional appropriations.
The CFPB obtains its funding on demand from the Federal Reserve. As Judge Henderson notes, its sole director whose five-year tenure outlasts the President needn’t “bother with the give and take required of a bipartisan multimember body.” Even the White House budget office lacks “any jurisdiction or oversight over the affairs or operations of the Bureau.” In Myers v. U.S. (1926) the Supreme Court said the President must have “unrestricted power” to remove executive officers to faithfully execute the law.
The CFPB gives one person limitless power to supervise nearly a quarter of the U.S. economy—or more since Mr. Cordray stretched his authority beyond the bounds of the Dodd-Frank Act. If the CFPB is legal, then Congress could distribute other chunks of presidential power in the same way. Why not a one-man National Labor Relations Board?
Acting CFPB head Mick Mulvaney is likely to drop PHH’s fine on remand. But PHH should still ask the Supreme Court to hear the constitutional issues. The Trump Justice Department took a narrower position supporting the President’s ability to remove the director at will. This may have been strategic since the White House wants a whip hand to undo Mr. Cordray’s many lawless actions. But it is also myopic since President Trump’s successor could appoint an equally uninhibited director.
Judge Henderson would have invalidated the bureau in its entirety and “let the Congress decide whether to resuscitate—and, if so, how to restructure—the CFPB.” This would be genuine judicial restraint since “excising only the for-cause removal provision would leave behind a one-legged agency that, by all indications, the Congress would not have created.” PHH should give the Justices a chance to make Congress fix its shoddy work and discipline a runaway administrative state.
Appeared in the February 1, 2018, print edition.
A Case Ripe for the Supreme Court
The D.C. Circuit tees up the CFPB for constitutional review.
Richard Cordray speaks during a news conference, Cincinnati, Jan. 30. PHOTO: JOHN MINCHILLO/ASSOCIATED PRESS
By
The Editorial Board
Jan. 31, 2018 6:59 p.m. ET
210 COMMENTS
The D.C. Circuit Court of Appeals on Wednesday repudiated the Consumer Financial Protection Bureau’s lawlessness while upholding its constitutionality. But the diverse opinions from the circuit offer the Supreme Court an opening to issue a landmark ruling on how the bureau violates the Constitution’s separation of powers.
PHH Corp. v. CFPB stemmed at root from the bureau’s absolute lack of accountability. Former Director Richard Cordray overruled an agency administrative law judge and broadly reinterpreted the Real Estate Settlement Procedures Act of 1974 to fine PHH $109 million. Mr. Cordray also claimed the law’s three-year statute of limitations didn’t apply to him.
PHH challenged the fine’s legality and the CFPB’s constitutionality as an independent agency led by a single director who can’t be removed by the President except “for cause”—that is, “inefficiency, neglect of duty, or malfeasance in office.” Yet Article II of the Constitution holds that “the executive Power shall be vested in a President of the United States of America.”
A unanimous three-judge panel of the D.C. Circuit ruled in PHH’s favor in 2016 and two said the President’s inability to fire the director for policy disagreements is unconstitutional. The full circuit agreed on the statutory question, but a 6-3 majority held that the bureau’s structure is constitutional.
The majority bobs and weaves through Supreme Court precedents like a gardener dodging thorny bushes to find the CFPB constitutional. “The dissenters seek to cast aspersions on Humphrey’s Executor, painting it as an outlier in the Court’s separation-of powers,” the majority writes of one precedent. “Perhaps all that need be said in response is that the case binds us, as an inferior court.”
You almost have to admire the faux judicial modesty. As Judge Karen Henderson points out in her excellent dissent, Humphrey’s Executor (1935) differs notably from PHH. That case concerned limits on a President’s ability to remove Federal Trade Commission members, but the FTC is a bipartisan five-member commission subject to Congressional appropriations.
The CFPB obtains its funding on demand from the Federal Reserve. As Judge Henderson notes, its sole director whose five-year tenure outlasts the President needn’t “bother with the give and take required of a bipartisan multimember body.” Even the White House budget office lacks “any jurisdiction or oversight over the affairs or operations of the Bureau.” In Myers v. U.S. (1926) the Supreme Court said the President must have “unrestricted power” to remove executive officers to faithfully execute the law.
The CFPB gives one person limitless power to supervise nearly a quarter of the U.S. economy—or more since Mr. Cordray stretched his authority beyond the bounds of the Dodd-Frank Act. If the CFPB is legal, then Congress could distribute other chunks of presidential power in the same way. Why not a one-man National Labor Relations Board?
Acting CFPB head Mick Mulvaney is likely to drop PHH’s fine on remand. But PHH should still ask the Supreme Court to hear the constitutional issues. The Trump Justice Department took a narrower position supporting the President’s ability to remove the director at will. This may have been strategic since the White House wants a whip hand to undo Mr. Cordray’s many lawless actions. But it is also myopic since President Trump’s successor could appoint an equally uninhibited director.
Judge Henderson would have invalidated the bureau in its entirety and “let the Congress decide whether to resuscitate—and, if so, how to restructure—the CFPB.” This would be genuine judicial restraint since “excising only the for-cause removal provision would leave behind a one-legged agency that, by all indications, the Congress would not have created.” PHH should give the Justices a chance to make Congress fix its shoddy work and discipline a runaway administrative state.
Appeared in the February 1, 2018, print edition.
