U.S. Ruled by Executive, Legislative, Judicial Branches… and Richard Cordray
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Could Congress create a fourth branch of government?

Maybe break off a piece of what the executive branch handles now — commerce, say, or agriculture, or maybe even defense — and create a new office supported by its own dedicated tax stream and the authority to levy penalties? The president could still appoint this officer — I think prince-bishop has a nice ring to it — but wouldn’t be able to remove His Excellency absent extraordinary factual circumstances.

Maybe we could expect the prince-bishop to decree exile for certain troublemakers, or to restore forjugement, as our system came to embrace anachronism.

We could have a fifth and a sixth branch. Or why not 20 branches? Actually, Texas already has something like this — an executive branch fractured into tiny independent jurisdictions, and the results are about as exciting as Liechtenstein.

The Consumer Finance Protection Bureau is something like a new branch of government, only former Solicitor General Ted Olson doesn’t call it the fourth branch. He says the administrative commissions invented during the New Deal represent the fourth branch, and that the CFPB is something even further from our original Constitutional order. Something close to the despotisms of old, I’d say.

The CFPB’s defenders also have a point — the bureau isn’t all that different from the administrative commissions, mainly because those commissions already have too much power. The administrative state is not so much a fourth branch as it is a second government laid atop the three Constitutional branches. While the old offices squabble about legislation, their power divided, the bureaucrats have consolidated most of the real power — they write the rules, enforce them, and then adjudicate them in-house, upholding all that they have done. The CFPB has that character, of course, but it goes further.

“The CFPB is the product of cherry-picking some the most democratically unaccountable and power-centralizing features of the federal government’s administrative agencies, and aggregating them into one massive and all-powerful body,” Olson told a Congressional committee.

Worse, it vests all its power in a single director, Richard Cordray, who can only be fired “for cause,” such as malfeasance. Up until now, administrative agencies have either been run by commissions — to diffuse power — or by directors who serve at the president’s pleasure. Before Dodd-Frank, there were just two exceptions to that, for the heads of the Social Security Administration and the Office of Special Counsel.

Last month, Olson made his case to the full D.C. Circuit Court of Appeals that Cordray’s independence undermined the Constitution. A three-judge panel of the court embraced that view last fall, but the issue isn’t yet settled.

It’s an issue the Senate ought to be considering as well as it takes up reform of Dodd-Frank. As Alexander Hamilton wrote in Federalist No. 70, “if any power whatsoever is in its nature Executive, it is the power of appointing, overseeing, and controlling those who execute the laws.” Without that control, independence turns into lawlessness and impunity.

In the case before the court, PHH v. CFPB, Cordray personally fined mortgage lender PHH $109 million for following written guidance from the Department of Housing and Urban Development. His own administrative judge had reached a judgment of $6.4 million, but Cordray decided CFPB was free to arrive at its own interpretation of the law and to disregard statutes of limitation.

The CFPB asserts its authority to intervene in any business it considers to be a “risk” to consumers, or any business engaging in “abusive” practices. In effect, this vague language gives CFPB a license to squeeze any business in America. Does your company offer its sales team incentives? Watch out, says the CFPB, it might be a federal case.

A new report from the Treasury Department accuses the CFPB of creating instability. “(R)ather than seeking to provide clear rules on which regulated parties can rely as they offer credit to consumers and pursue innovation, the CFPB has exercised its authorities in a manner aimed at maximizing its own discretion and power,” the report finds.

In an editorial this week calling on President Trump to fire Cordray, the Wall Street Journal seized on this line from the report: “CFPB has avoided notice-and-comment rulemaking and instead relied to an unusual degree on enforcement actions and guidance documents.” While all the other federal regulators issue rules and guidance as they’re required to, the Journal notes that “Mr. Cordray says ‘facts and circumstances’ guide the bureau’s legal interpretations.”

In other words, companies have no clue they’ve fallen out of Cordray’s favor until they get hit with sanctions, as Capital One found out in 2012, when it was forced to settle for $210 million over alleged deceptive marketing. Capital One — it may not literally be in your wallet.

Even though the CFPB is prohibited by law from regulating car dealers, it has tried to do so by targeting car manufacturers and their related finance companies. In its view, dealer markups are often discriminatory, so it uses legally dubious “disparate impact” studies to “prove” discrimination and force a company to pay up.

A report from Rep. Jeb Hensarling’s House Financial Services Committee illustrates the absurdity of the CFPB’s accusations of racial discrimination against Ally Financial, which provides car loans:

In announcing the Bureau’s settlement with Ally on December 20, 2013, Director Cordray stated that at least 235,000 consumers alleged to have been harmed by Ally would be paid $80 million, even though at the time of the announcement, Director Cordray did not know the race of a single borrower in any vehicle finance contract purchased by Ally.

Congress has given Cordray such vast powers over the economy that it is threatening the rule of law itself. Does that sound like overstatement? Well, the World Justice Project offers a good definition of rule of law:

  1. The government and its officials and agents as well as individuals and private entities are accountable under the law.
  2. The laws are clear, publicized, stable, and just; are applied evenly; and protect fundamental rights, including the security of persons and property and certain core human rights.
  3. The process by which the laws are enacted, administered, and enforced is accessible, fair, and efficient.
  4. Justice is delivered timely by competent, ethical, and independent representatives and neutrals who are of sufficient number, have adequate resources, and reflect the makeup of the communities they serve.

Like a tyrant, Cordray answers to no one.

His rules pop out of nowhere, as companies are hit with enforcement actions for things theretofore considered legal.

The CFPB takes minimal public input on its rulemaking, and its enforcement is no fairer than Cordray finds convenient.

And of course, administrative justice isn’t neutral — that’s by design.

This is the rule of man, a man named Cordray, not the rule of law.

Is that too hasty? We didn’t even ask if this justice displayed competence.

Take the Ally case, and the problem-solving skills Cordray displayed therein.

Cordray didn’t have a single proven case of racial discrimination, but he had $80 million to distribute to the supposed victims. So he did the most hilariously racist thing you can imagine. He started looking for Lakeishas and DeAndres in places like Third Ward and Compton. Literally.

The CFPB actually has a program — Bayesian Improved Surname Geocoding, it’s called — that does just that. It matches names and addresses to come up with a blackness probability. That’s how they decided where to send the checks from the Ally money.

Dontavious Washington from Hiram Clarke? Pay him. Roger Williams from Culver City? A bit iffy, but send the check anyway. So a bunch of white people apparently got checks for the discrimination they hadn’t suffered.

Now we just need the president to exercise his Hamiltonian prerogative and declare… well, you know the catchphrase.

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