House rolls back a regulatory Dodd-Frank bill
Quietly and under the radar, House Speaker Paul Ryan has scored a major victory on June 8 with the House’s passage legislation designed to repeal the Dodd-Frank financial services bill from the great recession.
Passed by the Democratic-majority Congress and signed into law by President Obama in 2010, Dodd-Frank has been both constitutional and policy infirmities. The centerpiece of the bill was the creation of a new independent agency, the Consumer Financial Protection Bureau.
But unlike prior independent agencies, the CFPB is funded by and answerable to the Federal Reserve. In other words, its budget does not come from the normal, and constitutionally-mandated process, of legislative appropriation. Further, its director is not removable by the president, setting up a constitutional conflict with the powers of both the executive and legislative branches.
Independent agencies have been allowed for in the past when they are governed by some kind of board or committee with multiple members. In those cases, such as familiar ones like the Securities and Exchange Commission or the Federal Trade Commission, board members may only be removed by the president “for cause.” This is a departure from the general constitutional norm, that all executive branch officers can be fired by the President at his pleasure – i.e., former FBI Director James Comey. But such circumvention has been permitted so long as certain conditions are met.
The CFPB: A lawless and pointless financial regulator
The CFPB did not meet those conditions. Instead, for the first time, Congress attempted to create an independent agency with powers vested in a single person, and who is also not accountable to the budget-setting powers of Congress. The first point proved fatal to the agency in a case decided last year by the D.C. Circuit Court of Appeals. The court struck down the part of the law forbidding the president from firing the director. Other lawsuits against the agency’s funding structure are pending.
It’s understandable that Dodd-Frank has united free-market anti-regulation economics with constitutionalists concerned for the rule of law. It is a deeply unpopular bill on the right. ”Doing a big number” on the CFPB was one of Donald Trump’s frequent campaign pledges. Yet CFPB is beloved by Sen. Elizabeth Warren-style progressives, making it one of the most partisan agencies in government.
The contrast between how the CFPB repeal bill was passed – quietly, quickly, and with public attention focused elsewhere on Comey’s testimony — is an example of House Speaker Paul Ryan, learning a valuable lesson from the healthcare snafu.
It also presents a model for the future: Get Trump administration scandals to provide a cover and a distraction while the House quietly passes substantive legislation. It also provides helps burnish Ryan’s policy-wonk reputation. It’s may not be how he wanted, but Speaker Ryan is beginning to learn how to “work together” with President Trump.