Consumers Lose, Wall Street Wins, in Right-Wing Court Ruling

A federal appeals court issued a two-fold ruling against the Consumer Financial Protection Bureau (CFPB) on Tuesday, overturning the CFPB’s action against a mortgage lender and ruling that the CFPB itself was set up improperly.

According to the court's majority, the independence of the CFPB's director is unconstitutional and the agency should therefore be subject to more direct presidential oversight. (Certain other regulatory agencies are led by multiple-member boards or panels, rather than a single individual.)

It was an unusual ruling, especially because it invoked the Constitution on an issue the Constitution doesn't address directly: whether an agency should be run by a single individual or a committee. (Brian Simmonds Marshall, Policy Counsel for Americans for Financial Reform, explains in more detail here.) But, while the Constitution may be silent on that subject, conservatives have been claiming that presidential appointees have too much power ever since … well, ever since a Democrat named Obama began choosing those appointees in 2009. (Remember all the "czar" talk of a few years back?)

By this author’s count, the word “tradition” and its variants (“traditional,” “traditionally,” etc.) appear 33 times in the court’s decision. The court’s majority leans heavily on past behavior – or, at least, its own characterization of past behavior – in order to challenge the CFPB’s management structure. "Tradition," too, is a mainstay of conservative terminology.

If this decision rings with right-wing rhetorical overtones, that should come as no surprise. The judge who wrote it is a former protégé of Kenneth Starr, the inquisitor who served as Inspector Javert to Bill Clinton’s Jean Valjean. In fact, Judge Brett Kavanaugh assisted Starr in his pursuit of Clinton.

Sen. Ted Kennedy described Kavanaugh as a “political operative” when George W. Bush appointed him to the bench in 2006, adding: “I can say with confidence that Mr. Kavanaugh would be the youngest, least experienced and most partisan appointee to the court in decades."

This ruling appears to confirm that assessment. But it will come as good news to PHH, the mortgage lender that was hit with $109 million in fines after illegally taking kickbacks in return for steering customers to mortgage insurers. $103 million of those fines were vacated by Tuesday’s ruling.

One major takeaway from this decision is: Judicial appointments matter. That’s why Republicans are so determined to prevent Democratic presidents from appointing judges – and why Republican appointees can no longer be counted upon to uphold the law in a fair and even-handed manner. From the Supreme Court on down, the nation is experiencing the fruits of a decades-long conservative assault on the concept of an independent judiciary.

Sen. Elizabeth Warren, the architect of the Consumer Financial Protection Bureau, is cited extensively in Tuesday's ruling. She issued a response that is worth quoting in full:

“This split decision — which bizarrely relies on a mischaracterization of my original proposal for a new consumer agency — will likely be appealed and overturned. But even if it stands, the ruling makes a small, technical tweak to Dodd-Frank and does not question the legality of any other past, present, or future actions of the CFPB. The CFPB has been, and will remain, highly accountable to both Congress and the President, and continued Republican efforts to transform the agency's structure or funding should be seen for what they are: attempts fostered by big banks to cripple an agency that has already forced them to return over $11 billion to customers who have been cheated."

The two interconnected battles that are highlighted by this decision – the battles to rein in Wall Street fraud and resist the right-wing assault on an independent judiciary – are far from over. The upcoming election may prove to be decisive on both fronts. Voters, beware.