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CFPB Could Survive by Understanding How Business, Economy Work

CFPB Could Survive by Understanding How Business, Economy Work
On July 18, 2011, President Barack Obama and presidential nominee to serve as the first director of the Consumer Financial Protection Bureau (CFPB), former Ohio Attorney General Richard Cordray are seen in the Rose Garden of the White House in Washington, D.C. (Manuel Balce Ceneta/AP)

By Monday, 27 November 2017 02:25 PM Current | Bio | Archive

The next struggle of the Trump administration may be over the Consumer Financial Protection Bureau (CFPB ), from which controversial Director Richard Cordray recently resigned. Cordray, an Obama administration appointee, and a protégé of Sen. Elizabeth Warren, D-Mass., has been extremely aggressive in using the agency to take control of the financial services industry. Now he wants his designated successor to continue to run that department.

The legislation creating the agency, the 2010 Dodd-Frank Act, was passed just before the 2010 Congressional election, when the Democrats saw the handwriting on the wall. They knew they’d lose the election, and they set up the CFPB to be as independent of Congress as possible, with its funding coming from the Federal Reserve and not from congressional appropriations.

Dodd-Frank also gives the CFPB director a five-year term, restricting the president from removing the director except for "inefficiency, neglect of duty, or malfeasance in office." Which meant that, after Trump won the White House, he was stuck with Cordray until he resigned. So now the question is whether the CFPB is to be a left-wing bailiwick forever, if one ultraliberal director succeeds another to the end of time, in the face of Republican presidents who were elected to change things around.

Cordray argues that Dodd-Frank provides that the deputy director of the CFPB serves "as acting director in the absence or unavailability of the director."  That means, says Cordray, that the president doesn’t get to pick the successor when a director resigns. That obviously doesn’t sit well with Mr. Trump. He has tweeted that the agency "has been a total disaster," and that "financial institutions have been devastated and unable to properly serve the public." Accordingly, Mr. Trump has named an acting director of the CFPB  — Budget Director Mick Mulvaney.

Another federal statute, the Vacancies Reform Act of 1998, gives the president the power to appoint an acting director of an executive agency when vacancies occur, with a permanent appointment to be made later, and subject to Senate approval. The Office of Legal Counsel has written an 8-page defense of the president’s appointment of Mr. Mulvaney, but Senator Warren has threatened a court fight.

The president will likely emerge as a victor in any such battle, since Dodd-Frank did not explicitly carve out an exception to the general rule that prevails in the Vacancies Reform Act, and since the alternative of a left wing agency wholly removed from politics to the end of time is absurd. Or might seem absurd, except that predicting what a lower federal court would do these days is a risky business.

The fight is interesting for two reasons. First, it shows how the left thinks that it can undo the effect of last year’s election by enlisting judges to nullify presidential authority. That’s what’s been happening with the executive orders on refugees, and the CFPB battle will simply be round two.

Second, the struggle tells us something about the Trump administration’s attitude toward the economy. Back in 2012, Mitt Romney protested the habitual Democratic demonization of corporations, remarking that "Corporations are people, too!"

What he meant was that, while corporations are artificial entities, those behind them, the employees and shareholders, are all people. Anyone who has a portfolio with a brokerage, anyone owning a mutual fund, anyone who has an interest in a union pension fund, or anyone attending an endowed university, has a stake in America’s corporations. Which means we are all affected by punitive measures or hostile moves against publicly-held corporations.

Ms. Warren, then running for the U.S. Senate, ridiculed Romney at the 2012 Democratic convention, and declared that corporations were not people, because "People have hearts, they have kids, they get jobs, they get sick, they cry, they dance. They live, they love, and they die." Warren further explained, "[W]e don’t run this country for corporations," adding, "we run it for people. And that’s why we need Barack Obama." Just as Mr. Obama attacked corporations when he ran for president first in 2008, we can expect Warren to accuse the president of favoring corporations over people.

That’s not what’s going on. The questions, rather, are whether federal courts will be complicit in an effort to undo the 2016 election, and who best understands the way our economy operates, and who, really, suffers when punitive anti-corporate measures are taken.

Stephen B. Presser is the Raoul Berger Professor of Legal History Emeritus at Northwestern’s Pritzker School of Law, the Legal Affairs Editor of Chronicles: A Magazine of American Culture, and a contributor to The University Bookman. He graduated from Harvard College and Harvard Law School, and has taught at Rutgers University, the University of Virginia, and University College, London. He has often testified on constitutional issues before committees of the United States Congress, and is the author of "Recapturing the Constitution: Race, Religion, and Abortion Reconsidered" (Regnery, 1994) and "Law Professsors: Three Centuries of Shaping American Law" (West Academic, 2017). To read more of his reports — Click Here Now.

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We are all affected by punitive measures or hostile moves against publicly-held corporations. Who best understands the way our economy operates, and who really suffers when punitive anti-corporate measures are taken?
cordray, dodd-frank, warren
Monday, 27 November 2017 02:25 PM
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