The CFPB is now a part of the White House. That’s illegal.

by Peter Conti-Brown — Thursday, Dec. 21, 2017

Agency independence is a funny thing. Its existential legitimacy is the subject of a searing debate. The Harvard Law Review solicited an essay from Gillian Metzger that dives into the nature of administrative separation and independence (including with a reply essay from our own Aaron Nielson). And the en banc DC Circuit is currently reviewing what I think might be the most important decision on agency independence since Humphrey’s Executor. 

Scholars also love to explore this complex set of questions. What makes an agency “independent”? What are its features? Is it about removability protections? Financial insulation? Board structures? Do outcomes hinge on an agency’s “independence”? Can informal independence, such as at the IRS or CIA, play more of a role than law? I won’t cite all the examples of this debate, as they are legion (and see below for links where I do).

I’ve thought a lot about this question with respect to the independence of central banks, and argue that independence is essentially incoherent. At best, it’s about some kind of policy separation, but what kinds? We just don’t have enough analytical or legal content to form a common conversation, especially given that we don’t agree on what constitutes “independence” in the first place.

If you have read my book on Fed independence, you might be surprised that I have also written an amicus brief (summarized here in an op-ed at Bloomberg, with a regrettable title that I didn’t choose) that argues that the CFPB is now a part of the White House, under the Office of Management and Budget. And that is illegal.

I’ll let readers determine whether the argument holds up, but the gist is this. Although “independence” is not defined by Dodd-Frank, it is required for the CFPB. What, then, must courts enforce to ensure that independence?

Courts and readers can choose their preferred definition. We don’t have to agree on any one of these definitions to agree that the CFPB is no longer independent. The budget is now set by the White House. Policy decisions are determined by the White House. Personnel. Rulemaking. Enforcement actions. This is all under Mick Mulvaney, a senior White House official. Indeed, if we are to accept President Trump’s Twitter feed as indicative of his policy positions, it’s not Mulvaney in charge, but President Trump himself.

Unitary executive types will cheer this result, and if there is no such thing as agency independence–no constitutionally permissible separation between the President’s executive whims and Congress’s institutional designs–then there’s no problem here. But the law still permits legislative design to insulate certain kinds of decisions in certain kinds of ways. If we accept the legality of any arrangement, we must reject the legality of the Mulvaney appointment.

Thus, whatever else one thinks about the Federal Vacancies Reform Act versus Dodd-Frank–and to be clear, I have no informed opinion on these questions, despite the Bloomberg headline–the point is that President Trump defied the law by placing a White House official to lead the CFPB on an interim basis. He has other options, as I note in the brief and Bloomberg piece. He should use them. If he doesn’t, the judges of the DDC and SDNY should rule against him even they conclude that the FVRA controls.

Cite As: Author Name, Title, 36 Yale J. on Reg.: Notice & Comment (date), URL.

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About Peter Conti-Brown

Conti-Brown is an assistant professor at The Wharton School of the University of Pennsylvania. A historian and a legal scholar, Conti-Brown focuses on central banking, financial regulation, and public finance.

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