The Consumer Financial Protection Bureau, a quasi-federal agency, was born from the Great Recession. Since its founding, it helped reduce deceptive trade practices, increased financial literacy, and studied the pain points of consumer lending. To keep the organization independent, its structure was set up differently than many other programs, until yesterday’s Supreme Court decision. NPR Reports:
- The U.S. Supreme Court ruled Monday that the President can fire at will the head of the Consumer Financial Protection Bureau but left intact the rest of the statute that created the agency. Congress created the independent agency in 2010 to protect consumers from abuses in the banking and financial services industry that led to the 2008 financial meltdown.
- To ensure the CFPB’s independence, the law creating the agency called for it to be headed by a single director, confirmed by the Senate, who would serve a five-year term and who could only be fired for malfeasance, inefficiency or neglect of duty.
- The decision was a victory for President Trump and for forces in the business community that has long sought to trim the sails of independent regulatory agencies, from the CFPB to multimember-led agencies, among them the Securities and Exchange Commission, the Federal Reserve Board, the Federal Communications Commission and many more.
The good news is that the President has the power to terminate the Director of the CFPB, but not the department, as Forbes states.
- The U.S. Supreme Court this week ruled the President can fire the head of the Consumer Financial Protection Bureau (CFPB) at will, but it otherwise left the bureau intact. The outcome could have been much different.
- The ruling comes as a victory for the Trump administration, which has long argued the CFPB—a watchdog agency created under the Obama administration to guard against abuses in the banking and financial services industries—is too powerful. While the court said restrictions on when the President can remove the Director were unconstitutional, it found the independent agency itself should continue to operate.
- “The agency may … continue to operate, but its Director, in light of our decision, must be removable by the President at will,” Chief Justice John Roberts wrote in his majority decision.
- The CFPB, unlike other independent agencies, has a single director who is nominated by the President and then confirmed by Congress, and serves a five-year term. There has long been debate over whether the CFPB director therefore has too much power and goes against the constitution.
There are bigger fish to fry than controlling the destiny of a political appointee who has done a fine job since replacing Richard Cordray.
The recession is here, stress tests are at risk, and credit quality is an issue!
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group
