Washington Post: The Finance 202: CFPB further under fire with Kavanaugh pick for Supreme Court

The Washington Post, July 11, 2018: The Finance 202: CFPB further under fire with Kavanaugh pick for Supreme Court

There’s a plausible scenario by which Brett Kavanaugh’s confirmation to the Supreme Court leads to the hobbling, if not wholesale dismantling, of the Consumer Financial Protection Bureau. 

Kavanaugh has made no secret of his view that the consumer watchdog — the brainchild of Sen. Elizabeth Warren (D-Mass.) and the most prized liberal achievement of the Dodd-Frank Act — is unconstitutional. He spelled out his thinking in a 101-page opinion he wrote in 2016. “Within his jurisdiction, the Director of the CFPB is even more powerful than the President,” Kavanaugh wrote in a finding for the Court of Appeals for the District of Columbia Circuit that was overturned in January by the full D.C. Circuit.

Thanks to the agency’s structure, he argued, its director wields more relative authority than the Federal Reserve chairman, the Supreme Court’s chief justice, the defense secretary and the Senate majority leader. And that concentration of power “poses a far greater risk of arbitrary decision-making and abuse of power, and a far greater threat to individual liberty, than does a multi-member independent agency.”

Although Kavanaugh ended up on the losing side of that case, the question it turned on remains a live one before the courts. Both the 5th and 9th circuits have agreed to take up similar challenges to the CFPB’s structure, and yet another could be headed to the 2nd Circuit. Any ruling at odds with that of the D.C. Circuit increases the likelihood the Supreme Court decides to weigh in — and if Kavanaugh is on the bench by then, he’d probably join the other four conservative justices in ruling the agency’s structure illegal.

What happens next is already a matter of debate among those who obsessively track financial regulation. But Capital Alpha president Charles Gabriel, who has studied the space for more than three decades, argues it would spell doom for the CFPB. “If the [Dodd-Frank] title creating the Bureau is struck down, the Bureau itself will lose its legitimacy,” he writes in an email. He continues:

“It would create an elegant solution, and perhaps fitting end, to the storied saga of the CFPB, which passed on a strictly partisan basis in Congress and was run arrogantly by its first permanent director … in defiance (after 2014) of the will of the Republican majority in Congress. Republicans, in particular, might love to see the death of this bureaucracy they so hate without their fingerprints on the political corpse. But of course to true believers in the bureau’s cause, and there are many, it will be a crushing defeat.”

Or not. Others argue that lawmakers would step in to forge a compromise that salvages the agency by rejiggering its leadership. Isaac Boltansky, director of policy research at Compass Point, says he doesn’t think a Supreme Court ruling against the CFPB’s leadership structure would represent a death blow to the agency. “The complaint from Republicans has been that there’s no oversight,” he says. So, assuming Republicans are still in control of at least one chamber of Congress by the time of the decision, he predicts GOP lawmakers would insist on tying new strings to the bureau’s leadership: “You either make it a commission, or you say the director can be fired by the president.”

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