The Zero That Makes Mulvaney a Hero

By Democrats’ design, the CFPB director has vast power. He can use it to shrink the bureau.

Richard Cordray asked Federal Reserve Chair Janet Yellen for $217 million in October—his last such request as director of the Consumer Financial Protection Bureau. Last week Mr. Cordray’s acting successor, Mick Mulvaney, made his first quarterly funding request: “$0.” What a difference a few months make.

Established in the wake of the 2008 financial crisis according to now-Sen. Elizabeth Warren’s vision, the CFPB ran wild under Mr. Cordray’s leadership—issuing reams of punishing regulations and conducting endless fishing expeditions, sometimes into industries Congress had specifically excluded from its jurisdiction.

This was possible because the bureau was designed to be insulated from accountability. It is led by a single director, whom the president cannot fire except for cause, and funded by the Fed, so that it need not justify its actions and funding needs to Congress.

Whether this arrangement is constitutional is an open question, currently pending in the U.S. Circuit Court of Appeals for the District of Columbia. But for now, as that court’s Judge Brett Kavanaugh has observed, it renders the CFPB director “the single most powerful official in the entire United States Government” (with the possible exception of the president). Read more »

Mulvaney Can Undo Cordray’s Legacy

When Richard Cordray attempted to install his chief of staff as acting director of the Consumer Financial Protection Bureau, his evident aim was to buy enough time to cement his legacy—particularly a just-finalized rule that the agency expects will wipe out half or more of the short-term lending industry. On Tuesday a federal judge thwarted Mr. Cordray, holding that President Trump acted within his authority by appointing Mick Mulvaney to moonlight as acting CFPB director while continuing to lead the Office of Management and Budget.

On his first day at the bureau, Mr. Mulvaney put a freeze on new rules and guidance. But that doesn’t solve the problem of the payday-lender rule. Mr. Mulvaney acknowledged that he cannot simply recall rules that have already gone out the door. Repealing a final rule typically requires restarting the rule-making process, which can take years to complete.

But Mr. Mulvaney can stop the payday-lender rule by putting on his OMB hat and invoking the Paperwork Reduction Act of 1980. That law is generally thought of as—actually, strike that. Nobody ever thinks about the Paperwork Reduction Act. It has about as much currency in Washington as the Filled Cheese Act of 1896.

The PRA, which was purportedly strengthened in 1995, was an effort to address a real problem. Federal agencies are eager to impose paperwork burdens on citizens and businesses. It costs an agency almost nothing to impose a new record-keeping requirement or reporting mandate. The expense falls on those required to carry it out.

The obvious solution was to put agencies on a paperwork budget and force them to internalize the costs they foist on the public. To ensure that agencies don’t evade that responsibility, the PRA established robust centralized oversight in the Office of Management and Budget, which is part of the White House. Every “information collection request” issued or imposed by a federal agency must be approved by OMB. That includes government forms as well as requirements that private parties collect information. If OMB disapproves a request, the agency cannot enforce it.

In practice, however, the PRA doesn’t have much effect. Disapprovals from OMB are exceedingly rare. In part, that’s because most agencies are subject to presidential control, rendering the act superfluous—if the White House opposes a regulatory proposal, it can simply instruct the agency to drop or amend it. By the time PRA review rolls around, the White House has already had its say.

Then there are the independent agencies insulated from presidential control, such as the Federal Communications Commission, the Securities and Exchange Commission and most other financial regulators. The PRA empowers them to overrule a disapproval by majority vote. The CFPB was designed to be an independent agency, but unlike the others it has a single director. The PRA limits the ability to overrule to “an independent regulatory agency which is administered by two or more members.” So OMB can disapprove any action by the bureau that imposes unnecessary or excessive paperwork burdens, without fear of being overruled.

Mr. Mulvaney should exercise that power. Every single provision of the short-term lending rule is structured around information collection requests subject to the PRA. The rule’s central requirement is that lenders determine a borrower’s ability to repay by demanding financial information from the borrower, verifying it, and then recording the result of various calculations. Each step is its own paperwork burden.

Whether or not the agency can ultimately justify its regulatory approach—and we have our doubts—it has to do its homework under the PRA. That includes accurately assessing costs, considering the need for and utility of each individual paperwork requirement, balancing the costs and benefits, and minimizing collection burdens. The bureau’s final rule differs substantially from its initial proposal, but the agency made little attempt to account for changes in paperwork burden, as the PRA requires it to do. Nor did it engage with the detailed criticisms of its analysis of the proposal’s costs. The three-page analysis published with the final rule can only be described as Mr. Cordray—perhaps unaware of the bureau’s unique status under the PRA—thumbing his nose at OMB and the White House.

That is reason enough to disapprove the rule and send the CFPB back to the drawing board. It would also signal that the Trump administration actually intends to enforce the PRA—to the point that it will halt a major regulation to ensure compliance. That should prompt other agencies to pay attention to paperwork burdens.

Messrs. Rivkin and Grossman practice appellate and constitutional law in Washington. Mr. Rivkin served at the Justice Department and the White House Counsel’s Office. Mr. Grossman is an adjunct scholar at the Cato Institute.

Source: https://www.wsj.com/articles/mulvaney-can-unravel-cordrays-legacy-1512086936

‘You’re Fired,’ Trump Should Tell Richard Cordray

Under a dubious statute, the CFPB head can be dismissed only for cause—but there’s plenty of it.

By David B. Rivkin Jr. and Andrew M. Grossman

April 13, 2017, in the Wall Street Journal

The greatest mystery in Washington involves not Russian spies or wiretaps but Richard Cordray’s continued employment as director of the Consumer Financial Protection Bureau. In the face of President Trump’s mandate for change, Mr. Cordray continues the Obama administration’s regulatory crusade against lenders, blocking access to the credit that supports so many small businesses and so much consumer spending.

Why would a president who made a TV show out of firing underlings now suffer a subordinate who refuses to get with the pro-growth agenda he campaigned on? If reports from the West Wing are to be believed, Mr. Trump’s unusual timidity is the result of overcautious legal and political advice.

Mr. Cordray is insulated from presidential control by a New Deal-era innovation: a statutory clause that allows the president to fire an independent agency head only “for cause,” meaning “inefficiency, neglect of duty, or malfeasance in office.” In October a three-judge panel of the U.S. Circuit Court of Appeals for the District of Columbia struck down that restriction an infringement of the president’s constitutional authority to “take care that the laws be faithfully executed.”

When Congress created the CFPB by passing the Dodd-Frank Act of 2010, Judge Brett Kavanaugh explained, it broke with decades of historical practice. Generally the power of independent agencies is diffused among multiple commissioners or directors so as to reduce the risk of abuse. Unless he can be fired, Mr. Cordray, as the sole director of the CFPB, wields more unilateral power than any government official save the president. Read more »

What Kind of a Judge Is Neil Gorsuch?

He carefully follows the law, and writes as engagingly as Scalia, without the abrasiveness.

By DAVID B. RIVKIN JR. and ANDREW M. GROSSMAN

The Wall Street Journal, Jan. 31, 2017 

Judge Neil Gorsuch, President Trump ’s nominee to succeed Justice Antonin Scalia, is a native Coloradan and avid outdoorsman. He clerked for a federal appellate judge and two Supreme Court justices and spent a decade practicing law before his appointment in 2006, at age 39, to the 10th U.S. Circuit Court of Appeals. In the decade since, he has written some 850 opinions.

The way to take a judge’s measure is to read his opinions, and so we set out to review Judge Gorsuch’s. It was not an arduous task, for his prose is unusually engaging—think Scalia, with none of the abrasiveness. Justice Elena Kagan has declared herself a fan of his writing style. The only difficulty in summarizing Judge Gorsuch’s output is the compulsion to quote, at length, from so many of his opinions.

One opens this way: “Haunted houses may be full of ghosts, goblins, and guillotines, but it’s their more prosaic features that pose the real danger. Tyler Hodges found that out when an evening shift working the ticket booth ended with him plummeting down an elevator shaft.” The case, by the way, was a prosaic dispute between insurers. Another opinion starts: “What began as a fight at a strip club finds its way here as a clash over hearsay.”

Judge Gorsuch shows a concern for the people whose disputes are before the court. Each opinion typically begins with the name of the person seeking relief and why. A recent example: “After a bale of hay hit and injured Miriam White while she was operating her tractor, she sued the manufacturer, Deere & Company.” Ms. White’s appeal was summarily denied, but even the brief, three-page opinion reflects a serious engagement with her arguments and the facts—in contrast with the boilerplate language judges often use in such decisions. Win or lose, parties appearing before Judge Gorsuch surely know that they have been treated with fairness, consideration and respect. Read more »

When Is a Judge Not Really a Judge?

A dispute over whether the SEC can hear its own cases could lead to a shrinking administrative state.

By DAVID B. RIVKIN JR. and ANDREW M. GROSSMAN

Jan. 23, 2017 in the Wall Street Journal

An “alphabet soup” of federal agencies established since the 1930s have gradually supplanted the rule of Congress and the courts with the rule of supposed expertise. This accumulation of power is what James Madison identified in Federalist No. 47 as “the very definition of tyranny.” An example of this trend is the Securities and Exchange Commission’s increased use of in-house administrative law judges under the Obama administration.

Following high-profile losses in federal court—remember the insider trading charges against Mark Cuban?—the SEC decided to file fewer enforcement cases in courts presided over by independent judges. Instead, the agency began to take advantage of its in-house administrative law judges. Conveniently, a change in the Dodd-Frank Act authorized the agency’s judges to hear more kinds of cases and dispense more penalties.

Administrative law judges are agency employees. The proceedings they oversee provide fewer protections than court cases. They also tend to set stern deadlines and limit the right to factual investigation, often leaving defendants to rely on the SEC’s evidence. According to a 2015 Wall Street Journal analysis, the agency’s shift paid off: Through the beginning of that year, it won 90% of cases in its in-house court, compared with 69% of regular court cases. Administrative decisions can be appealed to court but are rarely reversed. That’s because the judges apply a deferential “clear error” standard to the agency’s factual findings. Read more »

Environmentalists’ fact-free case against Scott Pruitt

Pruitt’s record is one of defending the environment and attempting to get the EPA to operate within the law.

By David B. Rivkin Jr. and Andrew M. Grossman, in the National Review

January 18, 2017

Environmentalists know that they don’t like Scott Pruitt, the Oklahoma attorney general whom President-elect Donald Trump has tapped to lead the Environmental Protection Agency. But they don’t seem to know exactly why, based on the fact-free attacks being lobbed in his direction. Could it be that they’re simply mistaken?

Sure, Pruitt’s led the movement of states resisting the Obama-era EPA’s overreaches and challenging them in court. (In full disclosure, he brought us in to represent Oklahoma in its challenge to EPA carbon-emission rules.) But his point in those cases has always been that the EPA has to live within the limits of the law, including the constitutional prohibition on the federal government directing the states to do its bidding. So when EPA overstepped the line, Pruitt took it to court. A desire to see the agency follow the law isn’t exactly disqualifying for an EPA administrator.

It also doesn’t say much about how Pruitt regards the environment. He’s on record as arguing that conservatives should recognize the important role of the EPA in addressing pollution that flows across state lines, which is a uniquely federal problem. But that, he’s said, should be the EPA’s focus. Echoing the Clean Air Act itself, Pruitt’s view is that most pollution is the primary responsibility of states and local governments. Only they can understand and act on the trade-offs involved in environmental protection and have the flexibility to take into account local needs, rather than impose one-size-fits-all nationwide rules.

On that score, Pruitt has practiced what he preached. When Pruitt entered office in 2011, one of the most serious environmental problems facing Oklahoma was poultry runoff, mostly from Arkansas farms, fouling the waters of the Illinois River and Lake Tenkiller in the eastern part of the state. Oklahoma had brought a federal lawsuit against 14 poultry producers in 2005, and it took nearly five years for the case to be teed up for a decision, in 2010. Read more »