Monthly Archives: May 2017

Appeals court majority is skeptical of PHH case against CFPB

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Last Wednesday, a majority of judges expressed skepticism of PHH’s arguments that the CFPB’s structure is unconstitutional during oral arguments at the U.S. Court of Appeals for the D.C. Circuit in PHH Corporation vs. CFPB.

The consensus coming out of the argument is that the CFPB is the favorite to win:

Wall Street Journal: “Federal appeals court appears hesitant to rule CFPB’s structure is unconstitutional . . . . [S]ix of the 11 judges on Wednesday’s case were appointed by Democratic presidents. None of them showed signs that they were eager or willing to strike down the CFPB’s structure, and at least one of the Republican appointees, Judge Thomas Griffith, also expressed some reservations about upending the bureau. He and other judges cited past Supreme Court rulings they said were problematic for PHH’s challenge, including one from 1935 that said the president didn’t have a free hand to remove a member of the Federal Trade Commission.”

Reuters: “U.S. regulator may have edge in court arguments on its structure: A divided U.S. appeals court on Wednesday appeared to tilt slightly in favor of the Consumer Financial Protection Bureau’s arguments that its structure does not violate the Constitution . . . .”

Daily Caller: “The U.S. Court of Appeals for the D.C. Circuit seemed poised Wednesday to side with the Consumer Financial Protection Bureau (CFPB), a regulatory agency championed by Sen. Elizabeth Warren and former President Barack Obama, in a dispute over the constitutionality of the agency’s leadership structure.”

Here is what the appellate judges said …  

On the single-director structure being more accountable than a Commission:

  • Judge Millett: “Chief Justice Roberts said in Free Enterprise that the diffusion of power diffuses accountability, so having one person is more accountable than having three or five.” (Listen – 8:00)
  • Judge Griffith: “That seems to strengthen the President’s power–if you only need to get rid of one person, that seems to be strengthening the President’s power.” (Listen – 4:48)

On the importance of the CFPB’s independence:

  • Judge Pillard: “There is a pattern in the financial regulatory agencies of actually wanting to have some amount of separation, and, as I take it, it’s consistent with the Constitution and with the Executive’s authority to take care that the laws be faithfully executed–to have those people removable for inefficiency, for malfeasance in office, neglect of duty, but not have them removable because the President disagrees as a policy matter . . . [to] avoid financial cronyism in favor of faithful execution of the laws, and you’re saying that’s out of bounds?” (Listen – 22:25)

On Supreme Court precedent:

  • Judge Tatel: “But we’re an appeals court. We’re bound by Supreme Court precedent, including Morrison v. Olson…. I have not seen an argument in your brief, even if I agreed with you that there is a serious risk from the “for cause” removal provision for this director…, I don’t see how as a judge on an appeals court, bound by Morrison and Humphrey’s that I can go there… I don’t see where this court gets that flexibility… I have not heard an argument from you yet that we’re not bound by that.” (Listen – 13:23)

— Brian Simmonds Marshall

Sham Poll Tells Lobbyists What They Want to Hear

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In its relatively short life, the Consumer Financial Protection Bureau has brought basic rules of fairness and transparency to credit markets, while holding predatory lenders and financial wrongdoers like Wells Fargo accountable. It has also delivered – so far – nearly $12 billion in relief to more than 29 million consumers cheated by financial companies of one kind or another.

Across party lines, poll after poll shows overwhelming support for the actual work the CFPB has been doing, and for more, not less, Wall Street regulation in general. Even most Trump voters, according to one recent survey, oppose efforts to weaken or eliminate the Consumer Bureau, and would rather see the Dodd Frank financial reforms (which created the CFPB) maintained or expanded than scaled back or repealed.

Misleading Industry-Funded Poll

So what should we make of a new industry-funded poll that supposedly demonstrates wide backing, in eight battleground states, for a move to turn the Consumer Bureau into a “bipartisan commission”?

“This poll is a quintessential example of a survey that has been designed to produce a specific result — one that is at odds with everything else we know about public opinion on consumer protection and Wall Street reform,” according to Celinda Lake and Daniel Gotoff of Lake Research Partners.

Here’s something it proves beyond any doubt: if you write a poll question artfully, you’ll get the answer you’re after. Put the label “bipartisan” on just about anything, for example, and people will say they’re for it.

Wall Street Wants Gridlock Not Bipartisanship

“This poll is built on leading language in support of what is framed as the ‘bipartisan’ option for the CFPB, and offers no alternative scenario,” Lake and Gotoff say. “In essence, it tells us that voters have a favorable disposition to the term ‘bipartisan,’ but reveals very little about how people feel about the CFPB.”

But the warm and fuzzy picture that word conjures up – of political independence, cooperation, and roll-up-your sleeves pragmatism – is a very far cry from the reality of the “bipartisan commission” sought by the lobbyists who commissioned this survey. Gridlock would be the far more likely outcome.

A truly telling survey would provide voters with information about the entities that the CFPB regulates, highlight the importance of independence — non-partisan action — in this position, according to Lake and Gotoff.

Public Backs Strong Enforcement Agencies

Polling and focus groups with transparent professional methodologies show that large majorities of voters from every demographic favor giving federal agencies the tools they need to enforce the law on the financial services industry.

Just consider the record of the various commissions charged with regulating the financial industry in the years leading up to the 2008 financial and economic meltdown. Two of them, the Federal Reserve and the Securities and Exchange Commission, could have done a lot to prevent that disaster. Neither did much of anything.

That’s the historical pattern, and that’s why the industry is so fond of this regulatory structure. The impetus for making the CFPB a commission isn’t coming from voters or consumers; it’s coming financial industry executives and lobbyists like the ones who paid for this poll – and from the far too many elected officials who seem to be prepared to do their bidding with little regard for the wishes or interests of their constituents.

— Jim Lardner