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Supreme Court Should do What Congress Won't: Rein in the Bureau of Consumer Financial Protection

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Co-authored by C. Boyden Gray

This April, something remarkable happened in Washington D.C. The acting head of a federal agency told Congress that the agency he directs “is far too powerful,” has “precious little oversight of its activities,” and is “primed to ignore due process and abandon the rule of law in favor of bureaucratic fiat.” The official carrying out this uncommon act of bureaucratic self-abnegation was Mick Mulvaney, and the agency he led was known as the Consumer Financial Protection Bureau, until he restored the name given by Congress — the Bureau of Consumer Financial Protection. Mulvaney’s project of restoring the rule of law at the Bureau now falls to Director Kathleen Kraninger, whom the Senate confirmed by a party-line vote last week.

But real reform must come from outside the Bureau, not just within it. The Supreme Court should heed Acting Director Mulvaney’s warning that “the structure and powers of this agency are not something the Founders and Framers would recognize.” At the first opportunity, the Supreme Court should strike down this unaccountable Leviathan.

The Bureau’s director is one of the most powerful officials in the Government, because she is a government unto herself.

Cloaked with the authority of a “one-man legislature,” an unlimited executive, and an appellate judge, Mulvaney acknowledged that “the power he wield[ed]” as Acting Director “could all too easily be used to harm consumers, destroy businesses, or arbitrarily remake American financial markets.” Ms. Kraninger now administers 18 laws dealing with almost every consumer credit product, including mortgages, student loans, and credit cards. She has unprecedented authority to ban financial practices she deems “abusive,” a wrecking ball she could use to wipe out entire industries.

And yet, the Director is, by design, completely unaccountable to elected officials — totally unmoored from the separation of powers that characterizes the Constitution of the framers.

The Bureau need not answer to Congress, because it is exempt from the appropriations process, Congress’ primary check on the executive branch. The Bureau’s Director sets its budget by fiat, and funds it by demanding up to about $700 million annually from the Federal Reserve — no questions asked. Congressional budget committees cannot even review the Director’s budgetary decisions. And although the Director must appear before Congress, she has no duty to testify. As Acting Director Mulvaney reminded members of a congressional committee at an April hearing, “It is my statutory right to sit here and twiddle my thumbs for the next four hours while y’all ask questions.”

Like Congress, the President also has no say in the Bureau’s actions. The Director sets her own priorities, writes her own rules, and enforces them herself, without any need for White House approval. The President cannot fire the Director except for cause. And her statutory term is five years, longer than the President’s four-year term.

The Bureau’s Director does not even have to coordinate with the rest of the financial regulatory apparatus. In the case of conflict with another agency, the Director’s view of the law prevails — meaning that even where the President has personally set policy for one of the Bureau’s seven predecessor agencies, the Bureau can overrule him.

The Bureau’s lack of checks and balances was no accident. The Dodd-Frank Act’s Senate Report declared the Bureau’s independence from the elected branches to be “absolutely essential.”

The Bureau’s short history has revealed time and again that such independence is a recipe for abuse. When a member of Congress asked Richard Cordray, the Bureau’s prior Director, about an extravagant $216 million renovation of the agency’s rented building in Washington, D.C., Cordray infuriated Republicans in Congress with the retort, “Why does that matter to you?

Mr. Mulvaney, who served as Acting Director following Cordray’s voluntarily resignation, promptly started infuriating Democrats. Senator Elizabeth Warren (D-MA), one of key architects of the Bureau, reaped what she sowed. In the nine letters Warren has sent to Mr. Mulvaney during his time as Acting Director, she demanded answers to 105 written interrogatories, complained about his actions, and protested his unresponsiveness and lack of transparency.

Mr. Mulvaney ignored Senator Warren’s entreaties and invited her to “consider the possibility that the frustration you are experiencing . . . [is the] inevitable consequence of the fact that [the law] insulates the Bureau from virtually any accountability to the American people through their elected representatives.”

Acting Director Mulvaney recommend reforms that would make the office less powerful and more accountable to elected representatives. The proposal was commendable, but nothing came of it.

Unfortunately, our gridlocked Congress is unlikely to do much at all to reform the Bureau.

But in our tripartite system, the legislative branch is not the only defender of checks and balances. Several cases challenging the Bureau’s unconstitutional structure are making their way through the courts, and one case — our own — is now ripe for Supreme Court review.

Ultimately the Supreme Court will have to decide whether a law that cloaks a single unelected bureaucrat with enormous powers, and insulates her from congressional and presidential control, can be squared with the Constitution of a free people. We think the question answers itself.

Originally published at The Hill.