The CFPB and the swamp

FIRST PRINCIPLES

Richard Cordray, the director of the Consumer Finance Protection Bureau whose tenure was marked by one constitutional controversy after another, handed the courts a new constitutional controversy on his way out the door the Friday after Thanksgiving. He hand-picked his own successor, named her acting deputy director on his last day in office. This allowed her to claim that she is the acting director now that Cordray has vacated the office, further immunizing this patently unconstitutional agency from executive oversight and political accountability.

The bureau -- or CFPB, in Washington-speak -- was created in 2010 as part of the massive Dodd-Frank Wall Street Reform and Consumer Protection Act, which passed the Democrat-controlled Congress on a largely partisan vote. It was the brainchild of then-Harvard law professor (now Senator) Elizabeth Warren, whom President Barack Obama appointed as a special advisory to the secretary of the Treasury shortly after the act was signed into law to set up the new agency. But strong Republican opposition both to Warren and to the constitutionality of the agency led Obama to bypass Warren in favor of nominating Richard Cordray, then-treasurer of Ohio, as the agency's first director. Republican opposition to the agency remained, however, and Cordray's confirmation was filibustered as leverage to force changes that would address the agency's constitutional infirmities, including: restrictions on the president's ability to remove the director (arguably in violation of the president's authority as head of the executive branch); the agency's perpetual, self-funding mechanisms (in violation of the Constitution's requirements that taxes must be imposed by Congress and must originate in the House of Representatives, and that all expenditures can be made but by appropriations made by law); and the director's ability to appoint inferior officers in the agency (in violation of the appointments clause of the Constitution, which limits such appointment authority to "heads of departments").

President Obama then appointed Cordray as director, bypassing the Senate confirmation process by utilizing the "recess appointments clause," despite the fact that the Senate was not in recess. That move was unanimously held by the U.S. Supreme Court to be unconstitutional, in a parallel case involving the National Labor Relations Board, but Cordray was then subsequently confirmed by the Senate in July 2013 to a five-year term set to expire in the summer of 2018.

His replacement would then be chosen by a president hostile to the regulatory morass that the agency has become, and confirmed by a Senate under the control of that president's party. That would apparently not do for Cordray, who concocted a scheme to appoint his own successor. Relying on language in the statute that allows the deputy director (whom he himself appoints) to serve as director "in the absence or unavailability of the director," Cordray appointed his chief of staff, Leandra English, as the deputy director on the day he resigned his office. She then laid claim to the director position because of Cordray's "absence."

That is a misinterpretation of the statutory language. Numerous other federal agencies have similar language in their statutory charters, but that language has uniformly been interpreted as allowing a deputy director to perform the duties of the agency when the director is temporarily unavailable, not when the office itself is vacant. For vacancies, these statutes have different language. The National Bank Act, for example, provides: "During a vacancy in the office or during the absence or disability of the Comptroller, each Deputy Comptroller shall possess the power and perform the duties ... of the Comptroller." 12 U.S.C. Section 4. Similarly, the deputy director of the Office of Management and Budget is authorized to serve as the director when the director is "absent or unable to serve or when the office of the Director is vacant." 31 U.S.C. Section 502(b). And the deputy administrator of the Federal Aviation Administration acts for the administrator when the administrator is "absent or unable to serve, or when the office of the Administrator is vacant." 49 U.S.C. Section 106(i). Without such language in the CFPB's authorizing statute, the relevant statute for dealing with the filling of vacancies is the Federal Vacancies Reform Act of 1998, which unambiguously gives the president the authority to name an acting director.

Cordray's ability even to appoint the deputy director is also constitutionally suspect. All agree that the deputy director is an inferior officer, not a mere employee, so the appointments clause applies. Appointment of inferior officers can be vested in the president alone or in the "Heads of Departments," if the statute so provides. This statute does so provide, so the issue is whether the CFPB, a sub-agency housed in the Federal Reserve System, qualifies as a "Department." Existing case law strongly suggests that it does not, in which case, Cordray had no constitutional authority even to appoint Leandra English has his deputy director, and she would therefore have no constitutional authority to step in as successor in his "absence or unavailability," even if that statutory phrase could be stretched to cover "vacancies."

What is really at issue here is a long-standing goal of the progressive movement to create governing agencies that are not accountable to elected officials. CFPB was a progressive nirvana on that score. A single director who, once appointed, could be removed only for cause (and who could therefore operate largely free of supervision from the elected president), and who, through fines he himself imposed, could even operate free of congressional oversight that comes via the annual appropriation process that every other agency must go through. That is the swamp on steroids, and Cordray's bald move to make it a self-perpetuating swamp makes it even worse. This swamp should be drained, and the swamp monster exposed for what it is -- government without consent.