Give President Free Rein to Fire Consumer Board Chief, Justice Dept. Argues

Ari Karen quoted in The New York Times, March 18, 2017

“The Justice Department on Friday took the rare step of opposing another federal agency, the Consumer Financial Protection Bureau, in court, arguing that the bureau’s structure is unconstitutional and should be changed.

But the department’s argument, laid out in a brief filed in a lawsuit brought against the consumer agency, stopped short of endorsing the solution urged by the plaintiff in the case: shutting the bureau down entirely.

Giving the president the ability to remove at will the consumer bureau’s director — currently Richard Cordray, who was appointed by President Barack Obama — would be a sufficient remedy, Justice Department lawyers wrote in an amicus brief.

The brief, highly anticipated by consumer advocates and financial services companies, opens a window into the Trump administration’s view of the consumer bureau. Created in the aftermath of the 2008 financial crisis, the agency is a frequent target of the wrath of some Republican lawmakers, who would like to see the bureau curtailed or abolished altogether.”

The Justice Department brief was filed as part of continuing litigation between the PHH Corporation, a mortgage lender, and the consumer bureau, which in 2015 levied a $109 million fine against the company over what the agency said were illegal kickbacks. PHH filed an appeal, challenging the bureau’s statutory authority to impose the penalty.

President Trump is not a fan of the bureau, and he has vowed to dismantle the law that created it, the Dodd-Frank Act. But he has largely left the agency alone since taking office, focusing instead on other priorities while the court battle over the agency’s leadership structure plays out.

When Congress created the bureau, it gave its director an unusual degree of independence. Once nominated by the president and confirmed by the Senate, the director, who serves a five-year term, can be removed only for cause, defined as “inefficiency, neglect of duty or malfeasance.” Mr. Cordray’s term is scheduled to end in July 2018.

In October, a three-judge panel from the United States Court of Appeals for the District of Columbia Circuit ruled that Congress had overstepped its authority in how it set up the agency, and that the president should be able to remove the director at will. That ruling was vacated last month, when the court granted the consumer bureau’s request for a rehearing.

In May, the court’s full slate of active judges — which includes Judge Merrick B. Garland, whose nomination to the Supreme Court was thwarted by Republicans in Congress — will hear oral arguments in the case.

In the Obama administration’s waning days, the Justice Department filed a brief supporting the consumer bureau. Under Mr. Trump, the Justice Department was widely expected to reverse that position and support the case’s plaintiff, which it did, though in a more muted way than some consumer advocates had feared.

PHH argued in a brief last week that the only way to fix the agency’s structural flaws would be to abolish it entirely. The more mild remedy of simply allowing the president to fire the director would transform the bureau “into an entity that Congress never intended,” the company argued.

In its filing on Friday, the Justice Department disagreed.

“There is no evidence that Congress would have preferred no bureau at all to a bureau whose director was removable at will,” Justice Department lawyers wrote in the brief.

But the department strongly backed the court’s decision that the president should have free rein to remove the bureau’s director. The restrictions that Congress put in place are “an unwarranted limitation on the president’s executive power,” the brief says.

Ari Karen, a lawyer who represents financial companies, said the Justice Department’s move to support PHH “is a sign of bigger things to come.” If the court granted the president the power to fire Mr. Cordray at will, he and others expected that Mr. Trump would do so immediately.

To read the original article on NY Times, click here.