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An Unconstitutional Appointment to an Unconstitutional Office

12:35 PM, Jan 5, 2012 • By ADAM J. WHITE
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The White House's emphasis on the “effective” recess was not its only subtle admission of the constitutional problems with its position. In defending the Cordray appointment, press secretary Jay Carney said that the appointment's constitutionality was vetted by the White House counsel—not the Justice Department's office of legal counsel, the DOJ office traditionally charged with vetting tough constitutional issues. (The administration has circumvented OLC review in other constitutionally dubious circumstances.) While it remains to be seen whether the Justice Department will produce an OLC memo supporting this action, it may well be the case that the administration simply decided not to bother with an OLC memo, knowing that such a memo would have to grapple with the well-established three-day rule for recess appointments.

In any event, the president's reliance upon unconstitutional means to “appoint” Cordray was ironically appropriate, because Cordray will in turn carry out unconstitutional duties.  

When the president and Congress created the Consumer Financial Protection Bureau (“CFPB”) in the Dodd-Frank legislation, they granted the agency unconstitutionally broad powers: By the terms of its statute, it may regulate or, even without regulations, litigate against whatever it deems to be an “unfair, deceptive, or abusive” lending practice, or a violation of the “purposes and objectives” of myriad pre-existing consumer financial protection laws. But the statute does not define what an “unfair” or “deceptive” practice is, or what the “purposes” or “objectives” of the financial laws are. According to the Supreme Court, the Constitution requires Congress to set an “intelligible principle” to guide and limit agency discretion; CFPB's mandate falls far short of that requirement.

The agency's orientation toward “regulation-by-litigation”—signified especially by the appointment of a litigation prone former Ohio attorney general to lead it—makes this constitutional flaw particularly pernicious. Even the CFPB's original proponent, Elizabeth Warren, warned in the run-up to Dodd-Frank that regulation-by-litigation was “too blunt” a “tool” for proper regulation of consumer credit.  

And the constitutional problems underlying CFPB's mandate are compounded by a no less dangerous constitutional flaw: the elimination of every effective check and balance on the agency's exercise of that power. Other agencies—even other “independent” agencies—wielding broad powers face a number of checks and balances. But in Dodd-Frank Congress intentionally eliminated the most important checks and balances:

First, Congress renounced its most important power—“the power of the purse,” in James Madison's words—by putting CFPB outside of the appropriations process. CFPB can simply write itself a check out of the Federal Reserve's operating costs, up to 12 percent of the Fed's costs (roughly $400 million).

And second, Dodd-Frank limited White House control of the CFPB, prohibiting the president from removing the CFPB's director except under a limited set of circumstances. This form of removal protection is constitutional in certain cases, but not without limits. When the Supreme Court approved such protections for the independent counsel in 1990, it stressed that “the independent counsel is an inferior officer under the Appointments Clause, with limited jurisdiction and tenure and lacking policymaking or significant administrative authority.” The CFPB director, by contrast, has effectively unlimited policymaking authority.

Finally, Dodd-Frank did not even use the type of intra-agency check most common for "independent" agencies: iInstead of creating CFPB as a multi-member, bipartisan commission where the commissioners push against each other, CFPB is controlled by the single director. Even Elizabeth Warren originally envisioned the CFPB as a multi-member commission.

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