President & Managing Director
Some people just won’t take No for an answer!
The most recent fool’s errand is offered thanks to the irrepressible, litigious
efforts of the State
National Bank of Big Spring, Texas, and two advocacy groups, conservative
think tank Competitive Enterprise Institute and the 60 Plus Association.
In State
National Bank of Big Spring et al. v. Geithner et al. (U.S. District Court, DC,
Case 1:12-cv-01032), the
plaintiff seeks to disabuse the Consumer Financial Protection Bureau (“Bureau”)
of its constitutionality.
Here is one
of the lawsuits that started droning high and mighty soon after the Bureau received
its enumerated authorities in the summer of 2011.
The bank sued
in June 2012, arguing that the Bureau has an inordinate amount of power because
(1) the Bureau’s director can't be removed at will, and (2) the agency's
funding is routed around the congressional appropriations process.
A little over
a year later, in August 2013, the case was booted, only to be resuscitated in
July 2015 by the D.C. Circuit, since the appeals court found the bank has
standing to challenge the Bureau’s constitutionality – based on the fact that
the Bureau regulated the remittance market, which is the bank’s business. That
said, there had been no enforcement action.
Lacking an
enforcement action to protest, maybe the bank just wanted to get out in front
of the problem before it started!
The bank went
forward with a summary judgment challenge in November 2015.
In any event,
about the 2012 suit’s allegation: the claim is that the law creating the Bureau,
Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act, is
unconstitutional. The bank claimed the president's inability to remove the Bureau’s
director without good cause violates the separation of powers doctrine, a claim,
the Bureau argues, that ignores Supreme Court precedent.
This gambit
has been pushed hither and yon for some time. For instance, right from the
start there has been a challenge to the recess appointment of Richard Cordray
to be the Bureau's first director. President Barack Obama used a recess
appointment to put Mr. Cordray in charge of the Bureau, albeit only after mostly
Republican senators refused to vote on his nomination. Their opposition was
based on the structure and congressional oversight of the Bureau, not really at
all based on Mr. Cordray’s credentials.
But Conservatives
have long held that the recess appointment violated the Constitution, engendering
the recess appointment itself by keeping the Congress technically open by holding
a series of pro forma sessions, gaveling
in sessions for minutes or seconds, in order to meet the lowest bar for being
open for business.
So, we’re back in court!
Now, the Bureau has asked a Washington, D.C., federal court for summary judgment.
Filing last Friday, the Bureau asserts that the bank’s challenge to the Bureau's
constitutionality can't get around long-standing precedent supporting
legislators' authority to create independent agencies.
Here’s two of the pivotal quotes:
“SNB’s arguments that Title X violates constitutional separation-of-powers principles rest on policy arguments with no support in the constitutional text or judicial precedent.”
“The challenged provisions of Title X – considered either individually or collectively – are consistent with Articles I and II of the Constitution, as they have been interpreted and applied by the Supreme Court.”
The Bureau
argues that the Supreme Court had ruled in 1935, in Humphrey’s Executor v.
United States, that Congress has the authority to create independent agencies
with overseers appointed by the president who can only be removed for good
cause.
Thus, asserts the Bureau, the authority is
grounded in the establishment of the Federal
Communications Commission, which was at issue in that case, or any of several
other federal agencies, including the Securities
and Exchange Commission, that are
considered to have been created under the same authority.
Given precedent, the Bureau’s view is that, whether
or not the Bureau is headed by a single, appointed director or several commissioners
(or multiple directors or a phalanx of overseers), is entirely irrelevant and
nugatory. In defending the single appointee, the Bureau’s brief states: “If
anything, it should be easier for the president to hold accountable a single
officer than several.”
Furthermore, the Bureau stated that the foregoing
argument didn't appear in the bank's complaint and that it can't raise the
claim now in its own motion for summary judgment filed in early November. Indeed,
it is argued that the bank was not harmed by the rules approved by Director
Cordray, and, in cases where the bank claims it was harmed, invalidating them
would not serve to correct the injuries alleged by the bank.
From a
regulatory perspective, the Bureau is correct with respect to the validity of
rules approved by the Bureau’s director. Even if the court were to consider the
validity of rules approved by Director Cordray during his recess appointment, the
D.C. Circuit has upheld such rules when later ratified by an agency.
I think you
can see how this Hatfields and McCoys battle can get very complicated.
I expect this
species of litigation to find its way into the dustbin of history.
Still, as Alexander Pope said, "Hope springs eternal in the human breast."
