Commentary: Unaccountable Consumer Financial Protection Bureau Exercises Illegitimate Power

Published March 12, 2020

Established in 2011 as part of a series of laws responding to the financial crisis, the Consumer Financial Protection Bureau (CFPB) will soon be at the center of a Supreme Court battle over the fundamental nature of the Constitution’s separation of powers.

Government agencies such as the CFPB exist in a nebulous fourth dimension, outside of and free from ordinary constitutional constraints, empowered to act sometimes like a legislative body, sometimes like a judicial one, and sometimes like an executive enforcement agency.

Concentrated power of this kind is just what the three-branch structure of the Constitution was designed to preclude. Its authors believed government bodies exercising all three of these kinds of power were bound to act tyrannically, lacking any real incentive for self-restraint.

Usurps President, Congress

The CFPB is unique even among such agencies in that its current structure prevents the president from firing its director except in cases of “inefficiency, neglect of duty, or malfeasance in office.” The Constitution, on the other hand, empowers the president to dismiss any officer of the executive branch at any time, for any reason.

The current law not only insulates the CFPB’s director from democratic accountability by neutering one of the president’s constitutional powers, it establishes a funding stream for the bureau that exists outside of Congress’ normal appropriations process.

The CFPB and its proponents have hailed this funding approach as ensuring the CFPB is truly independent of Congress, meaning the bureau somehow exists as a thing apart from both political branches. Like other such agencies, it amounts to a de facto annulment of the Constitution’s three-branch system and, in principle, a disavowal of the rule of law. Should this provision of the law that created the bureau be found unconstitutional, the question remains whether the Court can separate it from the rest of the statute—that is, whether the rest of the law, and thus the bureau itself, can be salvaged.

Progressive, Not Liberal

Brief and drafted in general (and frequently vague) terms, the Constitution is America’s political Rorschach test, apparently able to accommodate the full spectrum of mainstream political positions, with everyone sure her political positions are consistent with the legal requirements set out in its text. Without a philosophical mooring—that is, a principled appreciation of the idea of the separation of powers itself—it is easy enough to square just about any political system with the Constitution. The fight over the CFPB represents a much older one about exactly what kind of government Americans should have.

As political scientist Joseph Postell observes, the Progressive Era was a fundamental rebuke of “the theory of government by consent through elected representatives,” regarded “by progressive reformers as undemocratic and outmoded” and as “antithetical to an administrative state that rested on expertise rather than political accountability.”

It is unfortunately necessary to point out here that this style of administrative government, based on the arbitrary prerogative power of unelected officials, is not at all liberal but is a conscious repudiation of liberalism, which stands for the rule of law as opposed to the rule of experts.

The counterrevolution of Progressivism wanted a new kind of government in which trained, credentialed experts would act as the independent administrators of social and economic relations. Thomas C. Leonard explains: “The state expert does not merely police unfair and inefficient trade practices; the state expert administers trade, in the same way that the business expert—the scientific manager—administers a large business organization, via planning, management, and centralized direction.”

Independent Means Unaccountable

The problem is that, in the government context, “independent” just means not in any way accountable to the people, not responsive to the democratic process. Predicated on the fundamentally undemocratic idea that experts in government simply know better than either the people or our representatives, progressivism would have an “independent” expert body charged with solving every perceived social ill.

Government bodies should never act independently, at least not in the sense that progressives favor. Such bodies and their actions are legitimate only insofar as they represent the will of the people and are consistent with the rights of free and sovereign individuals.

To the extent that independence means anything in the case of the CFPB, it means a relative handful of bureaucrats, accountable to no one, have the power to make rules—really laws—that all must follow. If the political term for this is “independence,” the more straightforward term is “illegitimate exercise of power.”

Government As Service Provider

Anything approximating a good government, if such an idea can be invoked with any seriousness today, would be a mere service provider, offering, like a market actor, a needed service (protection) for a reasonable price. Today’s U.S. government has no incentive whatever either to confine itself in such a way or to charge a fair price. It acts only as we should expect it to under the current circumstances—its independence from the will of the people and from the constraints provided by individual rights. The government takes what it wants and does what it wants, quite without thought to that will or those constraints.

A more effective check on the power of financial institutions would be for Americans to develop the sense that it is they, not federal government agencies, who should be independent. But don’t hold your breath.

David S. D’Amato ([email protected]) is an attorney, adjunct law professor, and member of the Board of Policy Advisors of The Heartland Institute. This column was originally published by and is reprinted with permission.