George F. Will: Consumer Financial Protection Bureau needs a day in court

Oklahoman Published: November 18, 2012
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There can be unseemly exposure of the mind as well as of the body, as the progressive mind is exposed in the Consumer Financial Protection Bureau, a creature of the labyrinthine Dodd-Frank legislation. Judicial dismantling of the CFPB would affirm the rule of law and Congress' constitutional role.

The CFPB's director, Richard Cordray, was installed by one of Barack Obama's spurious recess appointments made when the Senate was not in recess. Vitiating the Senate's power to advise and consent to presidential appointments is congruent with the CFPB's general lawlessness.

The CFPB nullifies Congress' power to use the power of the purse to control bureaucracies because its funding — “determined by the director” — comes not from congressional appropriations but from the Federal Reserve. Untethered from all three branches of government, unlike anything created since 1789, the CFPB is uniquely sovereign: The president appoints the director for a five-year term — he can stay indefinitely, if no successor is confirmed — and the director can be removed, but not for policy reasons.

One CFPB request for $94 million in Federal Reserve funds was made on a single sheet of paper. Its 2012 budget estimated $130 million for — this is the full explanation — “other services.” So it has been hiring promiscuously and paying its hires lavishly: As of three months ago, approximately 60 percent of its then 958 employees were making more than $100,000 a year. Five percent were making $200,000 or more. (A Cabinet secretary makes $199,700.)

The CFPB's mission is to prevent practices it is empowered to “declare” are “unfair, deceptive, or abusive.” Law is supposed to give people due notice of what is proscribed or prescribed, and developed law does so concerning “unfair” and “deceptive” practices. Not so, “abusive.”

The term, Cordray concedes, is “a little bit of a puzzle.” An “abusive” practice may not be unfair or deceptive yet nonetheless may be illegal. It is illegal, the law says, if it “interferes with” a consumer's ability to “understand” a financial product, or takes “unreasonable” advantage of a consumer's lack of understanding, or exploits “the inability of the consumer to protect” his or her interests regarding a financial product. This fog of indeterminate liabilities is causing some banks to exit the consumer mortgage business.

C. Boyden Gray and Adam J. White, lawyers representing a community bank challenging the constitutionality of the CFPB's “formation and operation,” note in The Weekly Standard: “By writing new law through case-by-case enforcement, and by asserting ‘exception authority' to effectively rewrite statutes, the CFPB is substantially increasing bankers' compliance costs. The absence of clear, simple, up-front rules will force banks to hire ever more lawyers and regulatory compliance officers to keep up with changing laws — an outcome that inherently favors big banks over smaller ones.” This exacerbates the favoritism inherent in the substantial implicit subsidy Dodd-Frank confers on some banks by designating “systemically important financial institutions” that are “too big to fail.”