Federal Overreach

As C Boyden Gray and Jim R Purcell note in a recent Wall Street Journal op-ed, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 is an especially egregious example, an Act that arrogates vast power to the Federal government and then concentrates it in the Executive Branch.

As they note,

Dodd-Frank created both the Financial Stability Oversight Council and the Consumer Financial Protection Bureau, giving each agency effectively unlimited power. The FSOC can declare a financial firm “systemically important”—that is, too big to fail—based on “any” “risk-related factors” that it “deems appropriate.” And the CFPB can punish even responsible lenders who in good faith offer loans that the bureau later deems to be “unfair,” “deceptive” or “abusive.”

Demonstrating just how far this overreach is intended to go, the illegally appointed head of the CFPB, Richard Cordray, has instructed Congress that it is “probably not useful” to define in advance what an “abusive” lending practice is.  No, he’s just going to use his enormous, and unconstrained, his enforcement powers to retroactively punish lenders based on his carefully ex post definition of the “facts and circumstances” of each of their cases.  Nice company you got there.  Be too bad if something was to happen to it.

That this overreach is deliberate is demonstrated by the Act’s cynical elimination of any pretense of control by any branch of the government over these two Executive Branch bureaucracies, and the Act’s cancelation of even the most ephemeral separation of the three branch’s powers.

The CFPB is not subject to Congress’s “power of the purse,” which James Madison knew to be Congress’s “most complete and effectual weapon.”  Instead, Dodd-Frank lets the CFPB claim more than $400 million from the Federal Reserve each year and prohibits Congress from even reviewing that budget.  The president’s control over the CFPB is limited because by law he can remove the agency’s director only under strictly limited circumstances.  Finally, Dodd-Frank limits the courts’ review of CFPB’s legal interpretations.


The FSOC is similarly free from checks and balances.  For example, when the Council—a working group of the Treasury secretary, Federal Reserve chairman, comptroller of the currency, and other unelected regulators—anoints a financial institution as too big to fail, the courts are prohibited from even reviewing whether the regulators properly interpreted the applicable laws.

And that illegal appointment?  Cordray was given a recess appointment while the Senate was in session.

So much for the Constitution, that document that’s more than 100 years old and hard to understand.  So much for the Rule of Law.


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