Commentary Magazine


Topic: Consumer Financial Protection Bureau

What Congress?

I’ve written in recent months about the antidemocratic trend of the government “legislating” not through the Congress but through unelected, unaccountable bureaucrats. To be sure, federal agencies often have the appropriate delegated authority to set regulations, but it has become far too common for the executive branch to empower bureaucrats specifically to get around the fact that their objectives would be or have been rejected through the democratic process.

Because liberals are far more enamored of the regulatory state than conservatives are, and because we currently have divided government, the temptation to do this has been especially great for President Obama. As I argued in July, this was key to understanding why Democratic Senate Majority Leader Harry Reid was threatening to “go nuclear” and change Senate rules on the fly to eliminate the filibuster for certain executive branch nominees–not over judicial nominees or legislation. Today, the Hill provides us with a story that confirms this:

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I’ve written in recent months about the antidemocratic trend of the government “legislating” not through the Congress but through unelected, unaccountable bureaucrats. To be sure, federal agencies often have the appropriate delegated authority to set regulations, but it has become far too common for the executive branch to empower bureaucrats specifically to get around the fact that their objectives would be or have been rejected through the democratic process.

Because liberals are far more enamored of the regulatory state than conservatives are, and because we currently have divided government, the temptation to do this has been especially great for President Obama. As I argued in July, this was key to understanding why Democratic Senate Majority Leader Harry Reid was threatening to “go nuclear” and change Senate rules on the fly to eliminate the filibuster for certain executive branch nominees–not over judicial nominees or legislation. Today, the Hill provides us with a story that confirms this:

President Obama has assembled a new cadre of lieutenants to enact policy shifts through regulation during his second term.

Many of the agency heads and top-ranking officials will be tasked with implementing scores of federal rules that will help shape Obama’s legacy. 

“In general, in a political environment in which passing new legislation is very difficult, most of the policy action is likely to come through actions taken within the executive branch,” said Philip Wallach, a fellow at the Brookings Institution. “Much of that is going to be regulation.”

The “centerpiece” of this regulatory onslaught, the Hill tells us, will be new carbon emissions rules designed to address global warming. This was so unpopular and politically untenable that Obama couldn’t get cap-and-trade legislation passed early in his first term when Democrats controlled both houses of Congress. After former Environmental Protection Agency director Lisa Jackson left her post for a job with Apple, I wrote about her history of authoritarian regulation, which no doubt put her on the administration’s radar years ago. I quoted Joseph Rago’s characterization of her as “an especially abusive and willful regulator, even for the Obama administration, and her epic rule-making bender continues to drag on economic growth.”

So it’s no surprise that the EPA figures so strongly into Obama’s plans to replace Congress with his unaccountable apparatchiks at the agency. More interesting, and more controversial, is another agency the Hill claims will be involved in this:

In the span of three days in mid-July, the Senate confirmed Labor Secretary Thomas Perez, Consumer Financial Protection Bureau (CFPB) Director Richard Cordray and Environmental Protection Agency (EPA) Administrator Gina McCarthy.
 
All three oversee agencies with significant rulemaking authority, and are seen as likely to regulate with gusto….

Observers expect the two-year-old CFPB to remain on the offensive as officials tackle new regulations for prepaid cards, debt services and payday loans.
 
“I don’t think its going to be like this forever but I think in the near term, while Cordray is in office, I can’t imagine that he’s going to take his foot off the accelerator,” said Alan Kaplinsky, a partner at the law firm of Ballard Spahr.

Now why would Cordray work so feverishly to cement his vision of the regulatory state? Because, as the Hill reminds us, Cordray was appointed “in controversial fashion.” Republicans were opposed to confirming Cordray, so Obama declared the Senate to be in “recess” when it unquestionably was not and then made a recess appointment. As Adam White explained, and as his headline blared, this was “An Unconstitutional Appointment to an Unconstitutional Office.” Yes, per the Hill, it was a “controversial” appointment, but it was also a delusional exercise of nonexistent power by a supposed constitutional law expert.

Cordray’s appointment was made on the same day as other magical “recess” appointments that the courts have rightly ruled unconstitutional, and on which the Supreme Court will eventually rule. That casts doubt on whether Cordray’s appointment will escape judicial oversight. In the meantime, he is going full speed ahead so that if his appointment is invalidated his unconstitutional power grab will be difficult to untangle.

And although President Obama’s obsession with control would suggest that these regulations are getting his careful consideration, the Hill story indicates otherwise. When the president was approached by a Republican senator recently about various regulations, he was told to talk instead to Denis McDonough, the chief of staff, who “has emerged as a major player in regulatory decisions.”

Should the American people be worried that McDonough has only been chief of staff since January, and is thus not terribly experienced in this regard? Not at all–the Hill tells us that before coming to the White House, McDonough worked at the liberal Center for American Progress as a global warming advocate. Were the senator’s concerns even addressed by McDonough? Apparently the senator followed up but “there has been no response from the White House.” That, I suppose, is to be expected; in this regulatory strategy, the existence of Congress is irrelevant. It follows that the concerns of a member of Congress would be treated as such.

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The CFPB Pays Itself—and Very Well Too

One of the reasons the compensation of CEOs has been rising so quickly in recent decades—much to the distress of the left—is that very often they get to determine for themselves what their compensation will be. To be sure, it is the board that actually sets the figure, but corporate boards are, all too often, effectively controlled by top management, not the other way around. And even in companies where the boards rule, the fact that other companies are paying their top executives more puts pressure on them to keep pace.

That doesn’t happen in the federal government, where the salaries and perks of the vast bureaucracy are set by act of Congress.

Except, of course, for the Consumer Financial Protection Bureau established by Dodd-Frank. The CFPB is not an agency of the executive branch of the government, but rather a part of the Federal Reserve, although not subject to any oversight by the Fed. Indeed, effectively it is not subject to any oversight at all, an open invitation to abuse its power. As the Founding Fathers understood, those sorts of invitations are always, sooner or later, accepted.

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One of the reasons the compensation of CEOs has been rising so quickly in recent decades—much to the distress of the left—is that very often they get to determine for themselves what their compensation will be. To be sure, it is the board that actually sets the figure, but corporate boards are, all too often, effectively controlled by top management, not the other way around. And even in companies where the boards rule, the fact that other companies are paying their top executives more puts pressure on them to keep pace.

That doesn’t happen in the federal government, where the salaries and perks of the vast bureaucracy are set by act of Congress.

Except, of course, for the Consumer Financial Protection Bureau established by Dodd-Frank. The CFPB is not an agency of the executive branch of the government, but rather a part of the Federal Reserve, although not subject to any oversight by the Fed. Indeed, effectively it is not subject to any oversight at all, an open invitation to abuse its power. As the Founding Fathers understood, those sorts of invitations are always, sooner or later, accepted.

Nor is it funded by congressional appropriation. It simply tells the Federal Reserve how much money it needs and the Fed sends over a check.

And its employees’ compensation is not determined by congressional act. It is set by the CFPB.

So guess what. Just as with many CEOs, it pays its employees very well indeed. According to the Washington Examiner, there are no fewer than 56 CFPB employees who earn more than the $199,700 salary earned by Fed Chairman Ben Bernanke.  The average salary at the CFPB is $118,000, and fully 61 percent of the employees earn more than $100,000. The Examiner reports that, “The top grossing CFPB employee is Gail K. Hillebrand who receives $251,288. She is assistant director for consumer education and engagement. Previously, Hillebrand was a marketing manager at Consumers Union.”

The top-paid bureaucrats in the executive branch—GS-15, step 10—who are based in Washington earn $155,500 in salary.

The Nancy Pelosi 111th Congress abandoned its most potent constitutional powers, the power of the purse and the power of oversight, in creating this constitutional outrage. We’ll probably have to wait until at least 2017 to undo it.

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Flotsam and Jetsam

“Recovery” means something other than a steady, predictable improvement in the economy: “The Dow Jones industrial average plunged nearly 1,000 points in afternoon trading before recovering significantly Thursday — but it was enough to sow chaos on Wall Street as traders blamed everything from a technical glitch to chaos in the Greek economy. In Washington, the sudden drop — the biggest within a single trading day in Dow history — underscored just how fragile the nascent recovery could be, as the White House tries to convince the public that signs of growth mean the economy has begun to turn the corner.”

“Transparent” means you have to be taken to court to disclose documents to congressional investigators: “Senate Homeland Security Committee Chairman Joe Lieberman (I-Conn.) and ranking Republican Susan Collins (Maine) on Thursday said they are poised to press their subpoena fight with the Obama administration into court. Lieberman and Collins, speaking separately, both said the Justice and Defense departments have been uncooperative with their efforts to obtain more information about the November 2009 shootings at Fort Hood, Texas, that killed 13 people.”

Reset” means all is forgiven: “President Obama is preparing to revive a civilian nuclear cooperation agreement with Moscow that his predecessor shelved two years ago in protest of Russia’s war on its tiny neighbor, Georgia, administration officials said Thursday. Renewing the agreement would be the latest step in Mr. Obama’s drive to repair relations between the two powers, at a time when he is seeking Moscow’s support for tough new sanctions against Iran. But word of the move has generated consternation in Congress, where some lawmakers were already skeptical of the agreement and now worry that Mr. Obama is giving Russia too much.”

“Awareness of the potential political consequences of the actions” means holy cow — the Democrats are going to get wiped out! Ohio Gov. Ted Strickland: “I think we need to proceed with some awareness of the potential political consequences of the actions that are undertaken here in Washington.”

Civility” means his critics should shut up. “Less than a week after promoting the need to treat others ‘with courtesy and respect,’ the unhappy warrior was at it again yesterday with a misleading attack on the motives of an opponent. Responding to an amendment offered by Senator Richard Shelby to limit the scope of the proposed Consumer Financial Protection Bureau, Mr. Obama said, ‘I will not allow amendments like this one written by Wall Street’s lobbyists to pass for reform.’ Mr. Civility was insulting the gentleman from Alabama, but even if delivered in dignified language, the attack was false.”

ObamaCare” means you’re not going to keep your health-care plan. Yuval Levin explains that “it turns out that several major corporations are drawing up plans to end their employee health benefits once Obamacare gets up and running. They’ve done the math and figured out that the penalty they would have to pay for dropping their workers would be much lower than the costs of continuing to insure them, and now there will be a new taxpayer-subsidized option for those workers to turn to in state exchanges, so why not cut them off?”

For the New York Times,a pragmatist” means a law-school dean (Elena Kagan) who signs an amicus brief arguing that military recruiters can be banned from campuses despite a contrary federal law. “She repeatedly criticized ‘don’t ask, don’t tell,’ the policy that bars gay men and lesbians from openly serving in the military. At one point she called it ‘a moral injustice of the first order.’  She also joined a legal brief urging the Supreme Court to overturn the law that denied federal funds to colleges and universities that barred military recruiters.”

“Recovery” means something other than a steady, predictable improvement in the economy: “The Dow Jones industrial average plunged nearly 1,000 points in afternoon trading before recovering significantly Thursday — but it was enough to sow chaos on Wall Street as traders blamed everything from a technical glitch to chaos in the Greek economy. In Washington, the sudden drop — the biggest within a single trading day in Dow history — underscored just how fragile the nascent recovery could be, as the White House tries to convince the public that signs of growth mean the economy has begun to turn the corner.”

“Transparent” means you have to be taken to court to disclose documents to congressional investigators: “Senate Homeland Security Committee Chairman Joe Lieberman (I-Conn.) and ranking Republican Susan Collins (Maine) on Thursday said they are poised to press their subpoena fight with the Obama administration into court. Lieberman and Collins, speaking separately, both said the Justice and Defense departments have been uncooperative with their efforts to obtain more information about the November 2009 shootings at Fort Hood, Texas, that killed 13 people.”

Reset” means all is forgiven: “President Obama is preparing to revive a civilian nuclear cooperation agreement with Moscow that his predecessor shelved two years ago in protest of Russia’s war on its tiny neighbor, Georgia, administration officials said Thursday. Renewing the agreement would be the latest step in Mr. Obama’s drive to repair relations between the two powers, at a time when he is seeking Moscow’s support for tough new sanctions against Iran. But word of the move has generated consternation in Congress, where some lawmakers were already skeptical of the agreement and now worry that Mr. Obama is giving Russia too much.”

“Awareness of the potential political consequences of the actions” means holy cow — the Democrats are going to get wiped out! Ohio Gov. Ted Strickland: “I think we need to proceed with some awareness of the potential political consequences of the actions that are undertaken here in Washington.”

Civility” means his critics should shut up. “Less than a week after promoting the need to treat others ‘with courtesy and respect,’ the unhappy warrior was at it again yesterday with a misleading attack on the motives of an opponent. Responding to an amendment offered by Senator Richard Shelby to limit the scope of the proposed Consumer Financial Protection Bureau, Mr. Obama said, ‘I will not allow amendments like this one written by Wall Street’s lobbyists to pass for reform.’ Mr. Civility was insulting the gentleman from Alabama, but even if delivered in dignified language, the attack was false.”

ObamaCare” means you’re not going to keep your health-care plan. Yuval Levin explains that “it turns out that several major corporations are drawing up plans to end their employee health benefits once Obamacare gets up and running. They’ve done the math and figured out that the penalty they would have to pay for dropping their workers would be much lower than the costs of continuing to insure them, and now there will be a new taxpayer-subsidized option for those workers to turn to in state exchanges, so why not cut them off?”

For the New York Times,a pragmatist” means a law-school dean (Elena Kagan) who signs an amicus brief arguing that military recruiters can be banned from campuses despite a contrary federal law. “She repeatedly criticized ‘don’t ask, don’t tell,’ the policy that bars gay men and lesbians from openly serving in the military. At one point she called it ‘a moral injustice of the first order.’  She also joined a legal brief urging the Supreme Court to overturn the law that denied federal funds to colleges and universities that barred military recruiters.”

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