Richard Cordray, the first Director of the Consumer Financial Protection Bureau from 2012-2017, and Ilya Shapiro, the co-author of an amicus brief in support of Seila Law, joined host Jeffrey Rosen to discuss the Seila Law LLC v. Consumer Financial Protection Bureau case. This case, which the Supreme Court heard oral arguments in on Tuesday, is a challenge to the constitutionality of the leadership structure of the CFPB, and its outcome could affect the future of the agency as a whole.
The CFPB is a regulatory agency responsible for consumer protection in the financial sector. Currently, the president can only fire the CFPB director “for cause,” i.e. only for wrongdoing, not for a policy disagreement. This lawsuit asks whether that restriction violates presidential power and the separation of powers, and, if it does, can it be struck down without invalidating the entire Dodd-Frank Act, which created the CFPB? This episode explores those questions and more.
FULL PODCAST
PARTICIPANTS
Richard Cordray was the first Director of the CFPB from 2012 to 2017. His new book is Watchdog: How Protecting Consumers Can Save Our Families, Our Economy, and Our Democracy. Cordray previously served as Ohio’s Attorney General, Solicitor General, and Treasurer, and has been a law professor and a lawyer in private practice.
Ilya Shapiro is the director of the Robert A. Levy Center for Constitutional Studies at the Cato Institute and publisher of the Cato Supreme Court Review. He co-authored an amicus brief supporting the petitioner in this case on behalf of the Cato Institute, Center for Individual Rights, and Americans for Prosperity Foundation.
Jeffrey Rosen is the president and CEO of the National Constitution Center, a nonpartisan nonprofit organization devoted to educating the public about the U.S. Constitution. Rosen is also professor of law at The George Washington University Law School and a contributing editor of The Atlantic.
Additional Resources
- Seila Law LLC v. Consumer Financial Protection Bureau oral argument transcript
- Watchdog: How Protecting Consumers Can Save Our Families, Our Economy, and Our Democracy by Richard Cordray
- Ilya Shapiro, Counsel of Record – Brief for the Cato Institute, Center for Individual Rights, and Americans for Prosperity Foundation as Amici Curae Supporting Petitioner Seila Law, LLC
- Humphrey’s Executor v. United States (1935)
- Myers v. United States (1926)
- Murphy v. NCAA (2018)
- PHH Corp. v. CFPB (D.C. Cir. 2018)
This episode was engineered by Greg Scheckler, and produced by Jackie McDermott. Research was provided by Anne Corbett and Lana Ulrich.
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TRANSCRIPT
This transcript may not be in its final form, accuarcy may vary, and it may be updated or revised in the future.
Jeffrey Rosen: [00:00:00] I'm Jeffrey Rosen, President and CEO of the National Constitution Center and welcome to, We The People. A weekly show of constitutional debate. The National Constitution Center is a non-partisan non-profit, chartered by Congress to increase awareness and understanding of the Constitution among the American people.
On Tuesday, the Supreme Court heard oral arguments in Seila Law versus Consumer Financial Protection Bureau. That's a challenge to the constitutionality of the leadership structure of the CFPB, the Consumer Financial Protection Bureau, which is a regulatory agency responsible for consumer protection in the financial sector. Right now, the President can only fire the head of the agency for cause and the case asks whether that structure violates the constitutional separation of powers. Joining us to discuss this case, are two experts on the CFPB and the Constitution, great friends of We The People, a veritable dream team to discuss this very important case. Richard Cordray was the first director of the CFPB from 2012 to 2017. His new book is Watchdog: How Protecting Consumers Can Save Our Families, Our Economy, and Our Democracy. He previously served as Ohio's attorney general, solicitor general and treasurer, he's been a law professor and a lawyer and is a former law clerk for US Supreme Court Justices, Byron White and Anthony Kennedy.
Richard, thank you so much for joining.
Richard Cordray: [00:01:34] My pleasure, Jeff.
Jeffrey Rosen: [00:01:35] And Ilya Shapiro is director of the Robert A. Levy Center for Constitutional Studies at the Cato Institute, and publisher of the Cato Supreme Court Review. He co-authored an amicus brief, supporting the petitioner in this case, on behalf of the Cato Institute, The Center for Individual Rights, and Americans for Prosperity Foundation. Ilya, it is always wonderful to have you back on the show.
Ilya Shapiro: [00:01:56] Good to be back, Jeff.
Jeffrey Rosen: [00:01:58] Richard you served as the first director of the CFPB, you've written this book, Watchdog: How Protecting Consumers Can Save Our Families, Our Economy, and Our Democracy. Why is this case important, and why should our great, We The People listeners care about it?
Richard Cordray: [00:02:13] Well, Jeff, as I say in my book, uh, and describe at some length, there was a cloud hanging over the new agency from the very beginning when it was created in 2010. Uh, questions about its constitutionality, questions about the structure of the agency. They were first raised by Republican senators, who sought to block my con- confirmation as the first director, a battle that ultimately was prolonged for almost two years.
Uh, and eventually, they found their way into the courts and the question has been, uh, whether having a single director for an agency of this kind, that is independent of the President, meaning that you serve for a term and can't be removed except for cause. Not based on mere policy disagreements, but for some showing of- of real, uh, cause, uh, is Constitutional. Or whether the director, should in fact, be removable at will by the President for any reason including that, they would just simply like to have a different director doing different things.
This came to a head when I was r- r- holding over as the director, I was nominated and- and, uh, appointed and then, confirmed by the Senate, by President Barack Obama. After President Donald Trump was elected in November 2016, I held over for almost a year, uh, after that, and was obviously in many respects, out of step with the new administration, because I was continuing to, uh, drive the agency forward to protect consumers, including with some new regulations, and that was not the tenor of the new administration.
And so, it really cast in the stark relief this issue of whether the- an agency of this kind can be independent of the President's direction, or whether that is consistent with the Constitution. In that case, as you- as you were describing here, reached the Supreme Court, uh, just this week. Uh, and will be decided by the end of June and ultimately o- decided one way or the other, but lift that cloud off the agency. Which became an impediment to many of our enforcement actions when it was raised, uh, by parties and cases, and caused courts to go off track, instead of investigating and adjudicating the harmful conduct done financial companies to consumers, they were having to consider constitutional issues that were preliminary to getting to the merits of the cases.
Jeffrey Rosen: [00:04:31] Ilya, Richard has described that there was a cloud over the constitutionality of the CFPB ever since it was created and in your amicus brief in the case, you argue that the limitation of the Presidents ability to remove the head of the bureau violates the separation of powers. And you argue that the Humphrey's Executor case, which was decided by Justice Brandeis in the New Deal Era, should be narrowed only to apply to non-executive officers, bringing it into line with a case called Myers versus United States, decided by Chief Justice Taft. Explain to our, We The People listeners why you think this case is constitutionally important.
Ilya Shapiro: [00:05:13] R- I'm actually surprised how, uh, important, uh, everyone is treating it. I've- I've gotten much more media attention, uh, in this case than I was expecting. Um, compared to other structural or appointments clause cases that I've worked on in the last decade, or so, over other agencies or board, or recess appointments. Um, uh, the- the- the, uh, uh, invitations to write op-eds and- and talk about this case, not just from, uh, you know, legal watchdogs, but, uh, the- the mainstream media. Th- this case, uh, is one of the top lines this, uh, term, in addition to the abortion case and certain others that tend to be, uh, uh, higher profile, or of higher political salience. The second amendment laws, this is a b- blockbuster term, really.
Uh, and that I think, is because people are recognizing, uh, whatever your political persuasion, that, uh, Washington is really powerful. And whether you're using it in the right way or the wrong way, based on, you know, your- your- your view of- of- of good public policy. This is a major agency, and how other agencies are structured is really, really important. Uh, here the CFPB was designed to be very independent. Uh, uh, being independent of the President was a feature. And indeed, it's the most independent of independent agencies with the power to make, uh, the rules, enforce them, adjudicate violations and punish wrongdoers.And in addition, uh, it's funding isn't even beholden to congressional appropriations, instead it makes a request from the Federal Reserve, itself, uh, an independent agency, and- and gets its funding that way.
So, the removal provision or the Presidential control, over the single director is a very important flash point. It's kind of the- the entrée into the- all of the rest of these, uh, uh, constitutional, um... well, unique features, uh, of this agency. So, we get to these old cases, because of course, uh, even though I say that it is the most independent of the independent agencies, it's not the only one that, uh, is in this kind of fourth or fifth branch of government position. And so, in 1926, Myers versus United States, Chief Justice William Taft, uh, said that, uh, the President has to have control over the removal of postmasters. That was considered to be a political plum, as came up in oral argument, uh, uh, in the case, in- in the CFPB case, yesterday.
Uh, on the other hand, Humphrey's Executor, a decade later, the Brandeis opinion, 1935, said that the Federal Trade Commission was okay. It was a multi-member commission, however, uh, with staggered terms, all of these things that, uh, made sure it wasn't completely independent from the President. But at the same time, the President couldn't, uh, appoint and remove at his prerogative, because these were quasi legislative, quasi judicial officials. And courts ever since, in the 80 years since, have struggled to apply, uh, this standard from Humphrey's Executor, what makes a particular independent agency ahead, uh, whether it's multi-member or single-member, uh, uh, uh, quasi legislative, quasi judicial.
And so, we've had debates over, for example, the Morrison v. Olsen case, the special counsel. Where Justice Scalia was the lone dissent, which eventually carried the day, Congress didn't, uh, uh, renew that particular statute, but the- the- this concern about having s- accountability, uh, to the political branches, whether Congress, or the President, uh, uh, uh, runs through this case, and so, I think there's k- kind of a- a lack of guidance to the lower courts about these structural concerns. And that's why I've argued in my brief that Humphrey's Executor either needs to be clarified to make sure that the President does have control over, uh, executive officials, those, uh, uh, exercising any executive power. Uh, or be overturned to go back to kind of a- a Myers clarity, uh, about, uh, the executive control in the executive branch.
Jeffrey Rosen: [00:09:02] Thank you both for setting us up so well, uh, and- and- by the end of the podcast, I want our listeners to understand the holding in Myers and the holding in Humphrey's Executor and make up their own minds about what the constitution compels.
So, Richard, like, Ilya, you were at the oral argument this week, uh, tell us, uh, broadly, how the court seemed to be dividing on the substantive question of whether or not the removal mechanism was consistent with the constitution. Several of the liberal justices said, the only difference between this and Humphrey's Executor is one head versus several. Whereas the conservative justices, some of them seem to be, uh, uh, sympathetic to the idea of narrowing or- or overturning, uh, Humphrey's.
So- so give us your sense of, uh, how the court was breaking down on this fundamental constitutional question.
Richard Cordray: [00:09:47] Sure, and I'd like to start by going back to a couple points that Ilya just made. Uh, he was commenting that he was surprised how high profile this case has seemed to him in terms of these, kind of structural issues. I think a lot of that has to do with the actual mission of the Consumer Bureau, uh, that mission is important to every American, every one of us is a consumer. We all know that we get treated unfairly and cheated in the marketplace from time to time, and it gets frustrating when we feel there's nothing that can be done about it.
And this agency's w- job, w- is and was, for the six years that I was the head of it, uh, to prevent, uh, that kind of abuse and to protect people in the marketplace. And I think there's a lot of concern about the future of this agency among the general public, as they've seen some of the affectiveness of the work. But to get to your question, very specifically, o- one interesting thing is, and- and Ilya said about Humphrey's Executor, that is cut into the prerogative of the President to appoint and remove officials. It actually didn't cut into the President's, uh, prerogative to appoint officials. The President clearly can make the nominations and- and make the appointments and that is specified in the constitution.
The issue of removal of officers though, has always been harder, a harder issue for the court, because the constitution says nothing about the removal of officials. And going back to just after the Civil War, when the- the radical Republicans in Congress of that day, didn't trust the Johnson Administration and were concerned about them dismissing cabinet members that had been appointed, uh, under President Lincoln. Uh, they actually had passed, The Tenure of Office Act, uh, making it such that the President could not remove those officials, without the, uh, acquiescence of the Senate. Uh, and that ultimately was a- a law that was repealed but not until we'd first had a very political battle over impeachment, uh, of- of Andrew Johnson where he was acquitted by a single vote.
In the, uh, Humphrey's Executor and Myers line of cases, there's kind of a line that the court drew that cabinet type officials, uh, of- of certain- of certain, uh, responsibilities, report directly to the President and can be removed by the President at any time. Uh, in Humphrey's Executor, what happened under the New Deal, was that Congress had started and they'd actually started long before that with the Federal Reserve in the 19 teens, with the Interstate Commerce Commission back in the 1880s, creating these independent commissions with a little bit of independence from the President, uh, s- to do regulatory matters.
The Federal Reserve is a prominent example and was a big example that was being thrown around in the court, uh, in the arguments this week, because, uh, people are very concerned about comprising the independence of the Federal Reserve, such that the President can just juice up interest rates before an election. Uh, which they would be tempted to do, to try to goose the economy. And that was an actual exchange that occurred in a courtroom, uh, as a cautionary note to the justices.
But in terms of removal of officers, it's not enti- not at all clear in the Constitution, it says nothing, it's silent on the issue. Uh, and whether there can be, uh, modest or more severe restrictions on the President's removal power for which kinds of officials, whether multi-member or commissions, in certain areas, or even cabinet officials. That was a big hypothetical that was being pushed back, uh, in terms of the constitutionality of the Bureau. If you can insolate the director of the Bureau from removal by the President, could you even insolate cabinet officials, going back to, The Tenure of Office Act. And there was great discomfort about that, at least in the core functions of the President, such as war and foreign relations, and the like.
But those- those were some of the tension points, uh, in the case that the justices were probing and trying to understand, where you can draw a line. Uh, and one of the lines they seem to be thinking about drawing, and it was very much urged by them, by the Justice Department is, draw a line between an agency that is headed by a single official, and an agency that's headed by a multi-member commission, because a multi-member commission is more deliberative and operates by consensus and can have other checks on it. Whereas a single-member agency, as was the case when I was the director of the CFPB, and is still, uh, potentially caries more concentrated power.
I'm not sure that I think that that line ultimately holds, but it was very much being urged on the court and might become the basis of a decision in this case.
Jeffrey Rosen: [00:14:21] Ilya, let's jump into the substantive question of why you believe that Humphrey's Executor should be narrowed to apply only to purely non-executive officers. Uh, really the- the case turns on whether or not the Myers decision was correct. And- and Myers involved a really dramatic debate between two of m- my heroes and two heroes of many listeners of, We The People, uh, Chief Justice Taft, and Louis Brandeis.
So, in Myers, uh, uh, Brandeis, uh, questioned Taft's holding that there's an uncontrollable power of removal in the Chief Executive. In his dissenting opinion, Brandeis said, "The doctrine of the separation of powers was adopted by the Convention of 1787, not to promote efficiency, but to preclude the exercise of arbitrary power. And that principle was adopted by a unanimous court in the Humphrey's Executor case.
So, tell us why you think that, uh, Taft was right in Myers and- and the court was wrong in Humphrey's.
Ilya Shapiro: [00:15:19] Well, the- the idea, uh, certainly isn't that our government structure is set up to prom- promote efficiency. We don't have a- a parliamentary, uh, uh, government, say, where the executive is housed within the legislative and they're essentially, uh, unified while the Prime Minister has the confidence of- of the House. Uh, here we have, uh, checks and balances, the different branches are supposed to check each other. But for that to work properly, uh, all of the institutions of government, have to fit into one of the those branches. That's why there's this talk in Humphrey's of quasi judicial or quasi legislative and the reason that, uh, there can be these independent, uh, uh, officials who cannot, uh, uh, uh, are not subject to, uh, removal, uh, at will by the President, is because they're exercising these, uh, these quasi, uh, uh, powers of the other branches.
Um, uh, the- the problem is, if you're gonna be creating, you know, even more modern type of structures, uh, then- then what was at issue with the- the SEC and the FTC, these alphabet agencies from, uh, the New Deal Era, uh, if you're going beyond that, then you're getting beyond even the administrative state and into kind of the, uh, a branch that's not accountable to anyone. And- and fundamentally that was Congress's purpose, the thought, uh, in, uh, in- in, uh, Dodd-Frank and creating the CFTC, was that there needed to be something completely independent, as independent as the Federal Reserve is, without, uh, political, uh, control really.
And the problem is that, that d- that- that defies constitutional design, particularly when there's only one director. In effect, the director of the FTC- of the CFTC, is the president of, uh, consumer financial, uh, uh, policy. Uh, and there's something wrong with that in way, for reasons that- that- that- that Richard enumerated, uh, are different than what happens with the FTC, because with a multi-member agency there's- there's rule by consensus, there's deliberation, there are staggered terms, so each president gets to a point at- at least, uh, uh, a few of the members.
Whereas, here, and this came up, uh, uh, repeatedly during our oral argument yesterday, particular Justice, uh, Kavanaugh raised this, that, uh, a president can be saddled with, uh, a CFTC head, uh, I'm sorry, a CFPB head. I've been misstating it but the alphabet agency's run amuck. But anyway, for his entire tenure potentially, the- the head of the CFPB serves for five years. And if the President feels that in his duty to faithfully execute the laws, his constitutional duty, uh, that Chief Justice Taft hearkened on in Myers. If he- in doing that, he feels that he has to do things, enforce the law in a very different way, then, the CFPB's director wants, uh, well, we're at loggerheads.
And in effect, uh, there's a constitutional crisis of sort, because if the CFPB is part of the executive branch, then the President is prevented from, uh, faithfully executing the laws, uh, as he sees them. That's f- that- that's where, uh, this problem comes in, and it's important that it was Justice Kavanaugh who was raising these concerns, because when he was on the D.C. Circuit, uh, in a case called PHH Corp versus CFPB, uh, he wrote that, uh, uh, talked about how the director of the CFPB is the single most powerful official in the entire United States Government, uh, at least when measured in terms of unilateral power over this particular issue.
And he would have, uh, well, he, uh, we can get to the- the remedy of- of what you do with this problem, but he certainly saw a defect, uh, in this structure, and would've, uh, uh, uh, made it, uh, uh, at will, uh, removal, rather than, uh, for a cause, and- and so he's certainly one of the leaders, uh, on the court, and- and, you know, he might be assigned to write the opinion for all we know of- of finding, uh, a- a problem with this structure.
Jeffrey Rosen: [00:18:58] Richard, can you tell our listeners why you think that, uh, Humphrey's was correctly decided, that shouldn't be narrowed and why it comfortably leads to the upholding of the constitutionality of the CFPB?
Richard Cordray: [00:19:11] Yeah, and- and let- let me dig into the fundamentals a little more of separation of powers doctrine, because there's- there's different schools of thought, and a lot turns on which school of thought you adhere to. Uh, fir- first of all, I would just say, generally, about the, uh, th- overheated claims about the power of the director of the CFPB, uh, there's, uh, uh, those are- those are really overstated, uh, claims about how powerful that position was. I served in that position for six years. There was never any question that I was much less powerful than say, the Secretary of Defense, the Secretary of the Treasury, the Attorney General. Uh, even the Chair of the Federal Reserved exerted much more authority over, uh, financial markets in the United States.
And as Justice Sotomayor, uh, uh, claimed at the oral argument, the head of the Social Security Administration which is another single director agency, in some respects, has more to do- more power- exerts more power over American, uh, life than the director of the CFPB. But let's talk about the fundamentals of separation of powers. Some people see the separation of powers in the Federal Government as three hermetically sealed, uh, branches, and that they cannot trench upon one another. And so, if we're talking about any kind of executive power or enforcement authority that has to be entirely lodged with the President, has to be under the President's control and direction. All s- subsidiary officials in the executive branch have to be removable by the pre- by the President, uh, at will.
Uh, first of all, th- that doesn't even describe our current government by a long shot. Many, many executive branch officials are civil service, they cannot be removed, uh, except for cause. Uh, they exert a lot of power in the aggregate. Thousands and thousands of executive officials, that's not thought to trench upon the constitution.
The second thing I would say is, a different version of the separation of powers is that it is a system of checks and balances, in which the branches interact with one another, inevitably and- and constantly. Uh, and the question is simply, did they trench too far on one another's authority. There's going to be push and pull. There has to be push and pull. If there's going to be checks and balances, they're gonna run up against one another.
And when you come to the removal power in particular, it is notable that in the Constitution, the constitutional framers gave the President, specifically the appointment power. They described how it would be, uh, uh, exercised, and they gave it directly to the President. Uh, they, even there, in- introduced the Con- the Congress by giving the Senate the ability to advise and consent to nominations. But when it came to the removal power, which the framers could've described and they could've also placed that exclusively in the President's authority, they said, nothing, they were silent.
So, what does that mean? That means that Congress has some right here, and some authority. Congress has some ability to sketch out how the executive branch will work. Remember, and I think it was Professor Corbin who made this point 80 or 90 years ago. Uh, if Congress so desired, they could limit the executive branch under the Constitution, to a President, a Vice President and perhaps give each of them a desk and a lamp. All the rest of the executive branch is created by Congress and statutes that have created say, the Treasury Department, the State Department, the, uh, the Department of War, now the Department of Defense. Uh, and in- in many cases in the 20th Century, different independent executive agencies, who exert, uh, different forms of- of authority, including executive authority and have never thought to violate the Constitution.
Why? Because this isn't solely a question of presidential prerogative, and President authority, it's also a question of congressional authority. And if Congress can create the executive branch, and- and describe who the officials will be, and put some conditions on their tenure, and describe what their powers are, and what their responsibilities are. It is not at all farfetched to- especially since the Constitution says nothing about giving the President exclusive removal power, that Congress can specify some aspects of removal as well, that's consistent with the separation of powers and it actually furthers and is necessary to execute the, uh, checks and balances under our Constitution.
Jeffrey Rosen: [00:23:18] Ilya, you've just heard several strong arguments about why this structure is constitutional, including the fact that lots of executive officials exercise this sort of mixed authority and the framers gave the President appointment power, but said nothing about removal, meaning that Congress has the power to limit the removal of the offices it creates. What is your response?
Ilya Shapiro: [00:23:40] Well, I think the removal power is, uh, incident to the, uh, appointment power. To again quote Chief Justice Taft from- from Myers or more recently, Naomi [Rowe 00:23:50], now on the D.C. Circuit had a law review article about six years ago about the removal power. Says the removal power, although the removal power may not provide the President with every form of control, it satisfies a constitutional minimum for the exercise of executive powers.
So, certainly the President has all sort of appointees throughout the government, uh, to, uh, enforce the law and set policy. Uh, you know, in our large government now, one man cannot, uh, uh, or woman, cannot do, uh, the whole thing, uh, but there are certain, uh, uh, checks and controls. And the CFPB is different than other, uh, single director heads.
Uh, the Social Security Administration, which- which, uh, uh, Rich talked about has no enforcement powers. I mean, very important administratively. Social Security, the- the program obviously is very important, uh, but it doesn't, uh, create rules and then, issue investigative demands, and then, eventually finds people guilty of violations and- and- and punishes them, which is what the CFPB does. And that's very important, because once you start, um, uh, uh, throwing in, or- or- or putting people's, uh, uh, rights or freedoms, or- or property in jeopardy, uh, that, uh, at that point, that- you need political controls, or you're- you're gonna have due process violations at, uh, at a certain point.
Uh, and that's why ultimately this is, you know, Rich keeps talking about the- why there is so much attention, it's because of the importance of consumer finance, and we're all consumers. And, you know, that might be a- a- a view, uh, on the progressive left, that might be a view inside the Beltway. Uh, uh, you know, I don't know how much people, uh, you know, outside- outside the, you know, the- the elite media or lawyers really, uh, talk about the CFPB, uh, but you know, generally there's a- there's a concern about, uh, agencies, uh, that- that, you know, are not accountable to the people. That are not accountable to the political branches.
Um, and, you know, whether it's you have a drain the swamp kind of, uh, attitude supporting President Trump, or, uh, kinda more conventional constitutional conservative, uh, uh, uh, uh, uh, concerns about, uh, uh, Congress, uh, uh, delegating powers that it can't or creating institutions that are separate from our, um, the original structures, uh, of the Constitution, a- as we, uh, understand them. I- I think these are- these are various serious concerns, particularly when Con- Congress effectively gave the CFPB, and this sole director carte blanche to write the rules about how to enforce these various, I think it's 19 consumer, uh, protection laws, um, that- that can be changed, uh, uh, uh, uh, uh, day-to-day.
And- and that's ultimately what's at stake here and I think we saw at the- at the oral argument, there's at least a majority that- that- that sees at least five votes, that sees a problem with this kinda structure. That sees removal and a- and a- as an important check, particularly when you have, uh, a single director, still plenty independent, uh, but at the end of the day, if the CFPB head is at loggerheads with the President, about, uh, the policies that are being pursued, you know, uh, we- we have to be able to, you know, the people that have elected the President to enforce policies to- to- to be the executive, to- to- to have the executive power.
And, you know, just because there's one drop of quote, unquote, quasi legislative, or quasi judicial power, you know, that makes these, independence of these agencies perhaps even more dangerous, because they become a government onto themselves, for at least those particular statutes that they're meant to be, uh, enforcing.
Jeffrey Rosen: [00:27:05] Richard, Ilya just suggested that there may be five justices who believe that the, uh, Humphrey's Executor case was wrong to approve this independence of quasi, uh, legislative quasi judicial agencies. He made an originalist argument, which he also makes in his brief. That proposals to have multiple executives or a counsel of advisors with separate authority were rejected by the Federal Convention.
So, maybe respond explicitly to Ilya's claim that, uh, there may be five originalist justices, who are ready to claim that this independent structure violates the original understanding of the separation of powers. And then, give us a sense of how important independence was to you, if you could've been, uh, fired more easily, would that have made you less effective?
Richard Cordray: [00:27:53] So, uh, yeah, I don't think that there will be five justices for that, uh, very strong, uh, unitary executive, pretty extreme view of how Congress and the President should interact in this area. I think there could be anywhere from one to three justices who will write such an opinion. And I think there will be multiple opinions in the case, it'll be a fractured court.
But I'd like to go back, uh, just a moment. The- these overheated claims that the director of the Consumer Bureau, or these independent, uh, agencies, can do anything they want, and are uncontrolled, is just to blink away reality. In fact, uh, the agencies are always subject to Congress. If Congress doesn't like what they're doing, it can overturn their regulations, as has been done from time to time. It can legislate anew, it can- it can change the statutes, it can overrule what the agencies do at any time, they only exercise delegated power and ultimately that power resides with the Congress.
Second, anything they do is subject to challenge in the courts. The fact that this case is in front of the United States Supreme Court, is a reaffirmation that the Bureau is not uncontrolled, everything it does has to comply with due process and any kind of challenge can be levied to its actions. Uh, and courts review agencies all the time. And they overturn their actions, all the time when they think they've got things wrong.
So, again, this is a- a practical mechanism of checks and balances where the branches are dealing with one another. And this agency is subject court oversight, it's subject to congressional oversight, and it is subject to President oversight. Uh, in terms of, uh, pressure, in terms of what it should be doing, in terms of other policies set by the administration and in terms of new appointments that will arise from time to time.
Uh, and so, there is- there's a great deal of interaction among the branches in the Federal Government that was designed by the framers. Just simply because you call something enforcement power, executive power, doesn't mean that Congress has no say over it, or that the courts have not say over it, they both do.
Uh, and again, to distinguish the Social Security Administration, because it involves administration of the law, rather than enforcement of the law, is a false premise, because administration of the law is a core executive function, as well. The Constitution does not refer to enforcement, it refers to taking care that the laws be faithfully executed. And that includes administration of the law, uh, and all these agencies are engaged, uh, in that, in part.
Uh, but, uh, I do not think that, uh, a workable, practical notion of the Constitution would lead to overturning Humphrey's Executor. Uh, it is a modest removal provision. Uh, it still leaves the removal power with the President, but just conditions it somewhat. Just as the Civil Service Act conditions the removal of many other officials in the Federal Government, uh, that the President can't just- just fire willy-nilly without being subject to the court's reviewing that, and potentially overturning it.
Uh, and so, uh, I think that, uh, uh, the notion that we should tear up these independent administrative agencies, which have been functioning for over 100 years, which Congress believes is a- is a effective structure for helping to administer some of these laws. Which, again, leaves the removal po- leaves the appointment power with the President, uh, and leave the removal power with the President, subject to conditions, is not an extreme view at all. And it's one that the courts have consistently upheld.
Not only in Humphrey's Executor, but in cases like Wiener. In Morrison versus Olson, which was almost a unanimous court, only Justice Scalia dissenting and Chief Justice Frank was writing the opinion in that case. In which he opined, that modest restrictions on the removal power, that left the removal authority with the President, but subjected it to certain conditions, did not violate the Constitution. That's been the law of the land very clearly for the last 30 years, uh, and I think should be upheld in this case.
Jeffrey Rosen: [00:31:55] Ilya, your brief, uh, sights, Justice Scalia's, uh, lone dissenting opinion in Morrison v. Olson, and suggests that the law that has developed, uh, since Humphrey's Executor is not workable. Uh, can you respond to, uh, Richard's argument, that overturning Humphrey's would not be workable, and practical. Uh, why do you think it would be, and, uh, if you were writing the opinion, just give our, We The People listeners a sense of what it would look like on constitutional grounds and why you would, uh, limit Humphrey's to apply to, uh, purely non-executive officials.
Ilya Shapiro: [00:32:28] Well, sure. Uh, first to clarify, uh, I don't think there are five votes to f- un- unfortunately for, uh, supporting my brief's position or kind of the Maximalist position to, uh, to either overturn, uh, Humphrey's Executor or even throw out the, uh, CFPB, uh, all together in terms of the so-called severability. Whether you can sever the removal provision, uh, from the rest of it, I- I agree with Rich on- on that point, that there are going to be, uh, one to three votes, uh, for that kind of, uh, position. I think, uh, Justice Gorsuch is probably there, Justice Thomas might join 'em.
Uh, but, you know, Justice Kavanaugh is already on the record, uh, as I- as I mentioned earlier in a- in a- in a different CFPB case, when he was on the D-, uh, D.C. Circuit, that you can sever that provision and simply make, uh, uh, uh, transform the- the for-cause removal into at will removal, and then, you're okay. Which is, uh, similar to what the court did in a case 10 years ago, called Free Enterprise Fund versus Public Company Accounting Oversight Board. Which was, uh, created by the, uh, predecessor, uh, uh, uh, statute, uh, over financial regulation to Dodd-Frank. And that's, The Sarbanes-Oxley Act under, uh, under President Bush.
Um, uh, there, there was a double for-cause provision, that is, the President can only remove, uh, SEC, Securities and Exchange Commissioners, for cause. And then, they could only remove, uh, members of this, uh, Public Company Accounting Oversight Board, PCAOB, it's acutely called, uh, for-cause, as well. And the, uh, the- the court there, uh, got rid of that dual for-cause, uh, provision in a- in a five to four decision. I think we'll- we're- we're likely to see five votes to have a redux of- of that, that you get rid of the for-cause, uh, and then allow it to- to go along. Although, who knows, severability doctrine might be in a flux.
Justice Thomas, in a case called, uh, Murphy versus NCAA, about, uh, uh, sports, uh, Federal prohibition on sports gambling, or rather prohibiting states from- from legalizing it, said, that the, you know, it's just one, uh, opinion, but- but he said that, rather than trying to get into the minds of Congress, and f- and figure out, uh, what it's purpose was, or what it would have been satisfied with, what kind of compromise it would've, uh, uh, made in the absence of a particular provision, we really should, uh, uh, be more modest, and- and, you know, not, uh, try to prognosticate in- in- in that way.
But anyway, the Maximalist position, uh, is simply that, uh, you have boards that, uh, perhaps have staggered provisions, and so, you don't have- if you have a five person board, like the, uh, the FTC or the SEC, what have you, um, you know, every two years or whatever the- however you stagger the- the- the terms, uh, that, uh, makes sense. And so, it would have independence, because the President doesn't simply appoint, uh, a full new slate, a c- c- wholly controlled board, uh, as soon as- as he takes office. And you have certain checks that way.
Uh, but just to have something completely independent of all political accountability, whereas in the CFPB's case, even the budget, uh, is not dependent on congressional appropriations. And sure, Congress could at any time, repeal, uh, the CFPB alone, or all of Dodd-Frank for that matter. Uh, but that, uh, particularly in- in this day and age, with the practicalities of- of- of passing significant legislation is- is an unlikely and kind of a femoral check, uh, rather than a real one of a kind that are, uh, that is built into our constitutional structures.
And so, just tweaking the removal, uh, is, uh, the- the very least, uh, that could be done, but really, uh, this should be sent back to the drawing board. Because as came out in oral argument yesterday, Kannon Shanmugam arguing for Seila Law, the- the consumer, uh, uh, affairs law firm that- that brought this challenge. Um, we- we have no idea what Congress would've done in the absence of having this for-cause removal provision. For that matter, there's evidence that Congress would've, uh, done something else, or maybe not passed any law at all. So significant was this idea that, uh, this agency would be independent, or this single director would be independent of presidential control.
Jeffrey Rosen: [00:36:23] Richard, uh, do you share Ilya's suggestion that the court may sever the for-cause provision, and otherwise allow the structure of the Consumer Finance Protection Bureau to stand? And if the court does that, um, how big a deal would that be, both for the operations of the CFPB and for other quasi independent agencies?
Richard Cordray: [00:36:46] Yeah, and for the, uh, l- listeners of- of your podcast who are not necessarily legal eagles, although, I know many of them are. When we talk about severability, which is kind of a technical legal term, what we're really talking about is, if the court were to hold, uh, that- some aspect of the CFPB as unconstitutional, in this case, what would be the consequences? What would be the effects of that decision?
One possible effect would be to say, that because the Bureau is infected with some amount of unconstitutionality, the entire Bureau needs to be invalidated and wiped out of existence. That would be the Maximalist position on severability. I think it is highly unlikely and would be quite wrong for the court to hold that here, for several reasons.
Uh, first of all, the issue of- of h- what effect const- unconstitutionality should have on a statute, uh, supposed to be limited by the court to the narrowest possible reading, uh, that is- that is permissible in the case. And secondly, if Congress itself speaks to what the effect should be, then the court is not supposed- there's another separation of powers issue, the court is not supposed to rewrite the statute itself, or come up with its own decision on that. It's supposed to defer to Congress.
And in this statute, that created the CFPB, Congress said very specifically, if any part of this statute were ever to be found unconstitutional, we wanna make it very clear that we want the rest of the statute, as much as possible, to remain in place. Why is that? Because Congress was dealing with a practical problem. They weren't dealing with a bunch of technical legal issues, they were dealing with a practical problem, that the economy had melted down in 2008. Many- millions of people lost their homes, millions of people lost their jobs, all of us lost substantial retirement savings, and they wanted to put safeguards in place to see that, that never happened again.
One of those was the Consumer Financial Protection Bureau, there are many others in that statute. And I think that the question is, would the court, if it finds the director's for-cause removal provision unconstitutional, would the- would the court think that Congress would prefer to have them sever that provision and make the director removable at will, but otherwise leave the Bureau in place to do its important work of protecting consumers in the financial marketplace? Or would it take that one change and cause it to strike down 138 pages of statutory text, that reorganized the government to strengthen consumer financial protections, something that's very important to middle class Americans who get hurt in the marketplace all the time.
And I think there's no question, that the courts should both defer to what Congress said, explicitly and also recognize that Congress was trying to solve a practical problem here. And this constitutional issue should be decided in the narrowest possible, uh, way.
Jeffrey Rosen: [00:39:30] Thank you so much for that. And Ilya, the last word is to you. Please tell our great, We The People listeners why you believe that the restriction on the President's power to fire the head of the Consumer Financial Protection Bureau except for-cause, violates the Constitution and why the court should overturn it?
Ilya Shapiro: [00:39:48] Well, I'm not gonna r- repeat all the things that I've already said, but fundamentally, uh, our Constitution sets up three branches, and Congress does not have the pro- power to create a fourth, that's- that's, uh, uh, independent of- of other, uh, political actors. This is- this is part of a- of a long-term trend where Congress doesn't, uh, really complete its work, uh, and- and passes the political buck to, uh, uh, faceless agencies. Uh, and ultimately to a judiciary that has to evaluate if what these agencies come up with, is within spitting distance of what the Constitution will, uh, allows.
So, what's supposed to be the most democratically accountable branch, has been punting its duties and avoiding hard choices, since long before the- the current polarization. And so, people get frustrated, um, that, uh, whoever they put in power in Washington, the situation doesn't change. And I think you see that, uh, both from, uh, Bernie Sanders supporters on the left, and, uh, Donald Trump supporters, particularly those who supported them in the- the 2016, uh, primaries. Uh, that- that you have this perpetual motion machine, uh, in Washington, that's not responsive and the- the courts become the only actors with an ability to throw in a monkey wrench from time to time.
Which is why you see people, uh, protesting more in front of the Supreme Court, than in front of Congress, which is a bizarre situation, when you come to think of it. So, uh, the less that we have the so-called, uh, ind- independent, uh, uh, agencies... uh, and independent just means, uh, you know, a- a bureaucracy, uh, uh, a civil service, an administration that, uh, is not accountable, uh, politically. That, uh, it's a rule by- by experts that doesn't fit in neatly into the checks and balances and the separation of powers, that were originally, uh, uh, set up.
It's a very Wilsonian, uh, uh, perspective on government administration. Uh, Woodrow Wilson, that- that with, you know, these, uh, these checks and balances are outmoded. And we have kind of- we- we- we need- we know what we need to do, we just put the experts in charge, uh, insolate them from political control, uh, and away they go.
This- this removal power issue is just one very small aspect of that, but it's an important one, because the potential check for a President to remove, uh, an official who is not enforcing policies, whose not, uh, uh, executing the law, in- in a faithful way that- that he considers his constitutional duty to be. Uh, that's, uh, that's- that- that can be an important check, uh, in one small way in which we can, uh, push back and- and- and get back to, uh, the- the- the structure that the- that the framers envisioned.
Jeffrey Rosen: [00:42:20] Thank you so much, Richard Cordray and Ilya Shapiro for a stimulating thorough and illuminating discussion of the Constitution and the Consumer Financial Protection Bureau. Richard, Ilya, thank you so much for joining.
Richard Cordray: [00:42:35] My pleasure, Jeff.
Ilya Shapiro: [00:42:36] Thank you.
Jeffrey Rosen: [00:42:43] Today's show was engineered by Greg Sheckler, and produced by Jackie McDermott. Research was provided by Anne Corbett, and Lana Ulrich. Homework of the week? Of course, it's Richard Cordray's new book, Watchdog: How Protecting Consumers Can Save Our Families, Our Economy, and Our Democracy. As well as, Ilya Shapiro's brief in the CFPB case, uh, filed for the Cato Institute and other groups.
And if you want extra credit, and want to sort out in your own minds, whose right on the constitution, please read, Chief Justice Taft's opinion in the Myers case and the court's unanimous opinion in the Humphrey's Executor case. And also, please rate and review and subscribe to, We The People on Apple Podcast and recommend this show to friends, colleagues, or anyone, everywhere who's hungry to know about the future of the constitutionality of the administrative state, and who isn't after all.
And always remember, that the National Constitution Center is a private non-profit. We rely on the generosity, the passion, the engagement and the devotion for life-long learning and for cultivating your faculties of reason, that all of you display by listening every week to, We The People, and learning and growing.
So, you can support our mission by becoming a member at constitutioncenter.org/membership or give a donation of any amount to support our work including this podcast at constitutioncenter.org/donate. On behalf of the National Constitution Center, I'm Jeffrey Rosen.
