By Ryan Rainey
May 24, 2017 at 4:04 pm ET
Several federal judges hearing a constitutional challenge to the Consumer Financial Protection Bureau’s structure Wednesday called into question whether the agency’s critics are right in their argument that it has inflated powers that unfairly limit presidential authority.
The “en banc” hearing of the case, PHH v. CFPB, provided the rare opportunity of seeing two federal government agencies face off in federal court. A panel of 11 judges on the U.S. Court of Appeals for the District of Columbia Circuit heard the case to decide whether they should uphold a separate panel’s 2016 decision authored by one of their colleagues, Judge Brett Kavanaugh, which faulted the agency’s single-director structure.
Kavanaugh, a member of the en banc panel, openly promoted that decision at Wednesday’s hearing, and provided rhetorical backup for critics who charge that the CFPB’s structure make it uniquely unaccountable. Under the 2010 Dodd-Frank Act, the president can only fire the CFPB’s director for cause before the position’s five-year term ends.
Kavanaugh noted this means that turnover in leadership does not occur at the CFPB when presidential administrations change, in contrast to agencies like the Federal Communications Commission or the Securities and Exchange Commission, whose chairs were replaced at the beginning of President Donald Trump’s term. He also pointed out that existing judicial precedent on independent agencies has assumed that the agencies must have “deliberative” functions characteristic of legislatures or appellate courts, which cannot be executed by one single leader.
Other judges, however, were more critical of the argument advanced by Theodore Olson, a prominent Republican lawyer representing the mortgage servicer PHH, which originally brought the legal challenge. Hashim Mooppan, an attorney for the Justice Department, tag-teamed with Olson as a “friend of the court.”
Olson argued that no other agency in U.S. history has been granted such wide power as the CFPB. This has limited the president’s authority, he said, and therefore created a “plurality” in the executive branch that the Constitution’s framers never intended. That could threaten the authority of the president and executive agencies under his direct control to the point where the entire branch could be “swallowed up” by agencies like the CFPB.
“What we have in the CFPB is a plurality of the executive, and there’s no stopping point,” Olson said.
But several judges questioned the extent to which the CFPB’s statutory responsibilities — and the director’s power to fulfill those duties — limit the president’s authority compared to other independent agencies whose operations have been deemed constitutional through previous legal challenges.
Judge Patricia Millett pointed out that financial regulatory agencies like the SEC and the Federal Reserve generally have more independence compared to other federal bodies. She and Judge Thomas B. Griffith both asked whether the CFPB’s single-director structure might actually defer more power to the president than the structures of other federal agencies. In some cases, they noted, the president is limited in his ability to appoint members of his own party to multi-member independent commissions.
Mooppan, the DOJ’s attorney, also faced questions over his argument that the CFPB in essence has the same responsibilities as Cabinet agencies, whose leaders the president may fire at will. If the court decides that the current CFPB structure may remain in place, Mooppan said, future litigants could argue that Congress can place for-cause dismissal stipulations on executive officials like the heads of the Labor and Treasury departments.
Millett suggested that the situation is more complicated. As an example, she pointed to the position of postmaster general, which was originally part of the president’s Cabinet before an act of Congress converted it into the sole head of an independent agency who could only be fired for cause. A few judges also questioned whether the CFPB is more powerful than an independent counsel with prosecutorial authority, an entity whose constitutionality the Supreme Court upheld in the 1980s.
Lawrence DeMille-Wagman, the CFPB’s counsel, pointed to another parallel elsewhere in the federal government. He said an entire presidential term might pass without the president being able to appoint a majority on the Federal Reserve Board of Governors, because of each governor’s 14-year-long, staggered terms.
Ryan Rainey previously worked at Morning Consult as a reporter covering finance.