WASHINGTON — If the firing of FBI Director James Comey has taught the country anything, it’s that a president has broad constitutional powers to dismiss the head of just about any federal agency he’d like.
One independent agency that’s bucking the trend is the Consumer Financial Protection Bureau, long championed by Sen. Elizabeth Warren (D-Mass.) before it was created by Congress in the wake of the 2008 financial crisis to rein in abusive Wall Street practices. Since President Donald Trump took office, its director, Richard Cordray, has kept doing his job as if Trump didn’t exist.
And if the bureau and its defenders get their way, the full U.S. Court of Appeals for the D.C. Circuit may agree that, under the Dodd-Frank Wall Street Reform and Consumer Protection Act, there’s little Trump can do to get rid of him — other than just wait until his five-year term expires in July 2018.
The appeals court on Wednesday reconsidered a high-stakes challenge to the consumer watchdog’s constitutional structure, which vests its director with significant enforcement power and largely insulates him from the White House. Under the law, the president may fire the CFPB director only “for cause,” which means Trump can’t just make up a pretext and fire Cordray.
Theodore Olson, a high-powered attorney representing PHH Corp., a company targeted by the CFPB that is leading the charge against it, told the court that the agency’s structure is “manifestly unconstitutional.”
“This wolf comes as a wolf,” Olson said, quoting from a widely cited dissent by the late Justice Antonin Scalia warning against violating the separation of powers.
Last year, a three-judge panel of the D.C. Circuit issued a divided ruling that concluded that the for-cause removal provision of Dodd-Frank is unconstitutional. Days after the election but before Trump was sworn in, the CFPB implored the appeals court to rehear the case — perhaps an acknowledgment that Cordray was now at Trump’s mercy.
Maybe not for long. During a hearing Wednesday, 11 judges on the D.C. Circuit, the majority Democratic appointees, leaned heavily in favor of the CFPB. There was skepticism from some members of the court that the agency’s single-director setup somehow weakens the presidency and empowers an unaccountable bureaucracy.
“What’s the power of the presidency that’s uniquely diminished in this instance?” asked U.S. Circuit Judge Thomas Griffith, who repeatedly pointed to a 1939 Supreme Court precedent that upheld a virtually identical for-cause provision shielding members of the Federal Trade Commission. Under that provision, commission members could only be fired by the president for “inefficiency, neglect of duty, or malfeasance in office.”
That case and another one the Supreme Court decided in 1988 — which upheld an independent counsel statute allowing the Department of Justice to prosecute high-ranking federal officials — were cited in court as though the case against the CFPB and Cordray were open and shut.
The independent counsel law “was much more threatening to the president of the United States than the bureau,” said U.S. Circuit Judge David Tatel, who added that the D.C. Circuit was bound by these prior precedents and didn’t have much room to go beyond them.
“I don’t see where this court gets that flexibility,” Tatel said.
“This wolf comes as a wolf.”
Other judges likewise appeared to reject the argument that the existence of one person with vast enforcement powers over the financial industry and strong job protections was an affront to the office of the president. (PHH Corp., the company fighting the CFPB in the case, is on the hook for more than $100 million in fines over a mortgage kickback scheme if it loses its appeal.)
U.S. Circuit Judge Patricia Millet noted that the Social Security Administration is led by a single person who oversees 25 percent of the federal budget. That alone doesn’t make the position of the CFPB head “less accountable, less removable, less appointable,” she suggested.
Fellow Barack Obama appointee Nina Pillard observed that the CFPB, like other financial regulators that must remain above partisan politics, was set up in an attempt “to avoid cronyism in favor of faithful execution of the laws.”
“No two agencies are exactly alike,” said Lawrence DeMille-Wagman, a veteran government lawyer who argued on behalf of the CFPB. He noted, for example, that the chairman of the Federal Reserve, which oversees the entire economy, is not subject to politics and that members of the Fed’s board of governors are also selected based on nonpartisan considerations.
Perhaps the biggest booster of nixing the CFPB’s current structure was U.S. Circuit Judge Brett Kavanaugh, a conservative who wrote the original ruling that found the director usurps authority that belongs to the president.
In a moment of candor, Kavanaugh posed a curious scenario: What if “the person that created the consumer protection agency” — a reference to Warren — ran for president on a pro-CFPB platform and won?
If the D.C. Circuit were to rule that the law protects Cordray, then when his term is up, Trump would get to appoint his replacement, who would then serve until 2023 — well into President Warren’s first term. Kavanaugh called that a “bizarre situation.”
“I look at that reality and say, ‘That’s crazy,’” Kavanaugh said.
There’s no telling if the D.C. Circuit will rule before the end of Cordray’s term. But the case is almost certain to land before the Supreme Court.