One CFPB request for $94 million in Federal Reserve funds was made on a single sheet of paper. Its 2012 budget estimated $130 million for — this is the full explanation — “other services.” So it has been hiring promiscuously and paying its hires lavishly: As of three months ago, approximately 60 percent of its then 958 employees were making more than $100,000 a year. Five percent were making $200,000 or more. (A Cabinet secretary makes $199,700.)
The CFPB’s mission is to prevent practices it is empowered to “declare” are “unfair, deceptive, or abusive.” Law is supposed to give people due notice of what is proscribed or prescribed, and developed law does so concerning “unfair” and “deceptive” practices. Not so, “abusive.”
The term, Cordray concedes, is “a little bit of a puzzle.” An “abusive” practice may not be unfair or deceptive yet nonetheless may be illegal. It is illegal, the law says, if it “interferes with” a consumer’s ability to “understand” a financial product, or takes “unreasonable” advantage of a consumer’s lack of understanding, or exploits “the inability of the consumer to protect” his or her interests regarding a financial product. This fog of indeterminate liabilities is causing some banks to exit the consumer mortgage business.
C. Boyden Gray and Adam J. White, lawyers representing a community bank challenging the constitutionality of the CFPB’s “formation and operation,” note in the Weekly Standard: “By writing new law through case-by-case enforcement, and by asserting ‘exception authority’ to effectively rewrite statutes, the CFPB is substantially increasing bankers’ compliance costs. The absence of clear, simple, up-front rules will force banks to hire ever more lawyers and regulatory compliance officers to keep up with changing laws — an outcome that inherently favors big banks over smaller ones.” This exacerbates the favoritism inherent in the substantial implicit subsidy Dodd-Frank confers on some banks by designating “systemically important financial institutions” that are “too big to fail.”
Even worse, say Gray and White (in their complaint for the community bank), Dodd-Frank “delegates effectively unbounded power to the CFPB, and couples that power with provisions insulating CFPB against meaningful checks” by the other branches of government. This nullifies the checks and balances of the system of separation of powers. Courts are too reluctant to restrict Congress’s power to delegate quasi-legislative powers, but the CFPB is an especially gross violation of the Constitution’s Article I, Section 1: “All legislative powers herein granted shall be vested” in Congress. By creating a CFPB that floats above the Constitution’s tripartite design of government, Congress did not merely degrade itself, it injured all Americans.