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Posts Tagged ‘Consumer Financial protection Bureau’

“President” Warren’s Empire

The Wall Street Journal   MARCH 16, 2011

The consumer finance czar answers to no one and sets her own budget.
A House subcommittee will hold an “oversight” hearing today on the new Consumer Financial Protection Bureau, the über-regulator that will soon have jurisdiction over most of the country’s credit-making institutions. We put “oversight” in quotes because Congress has little say over either the new bureau or its unofficial czar, Elizabeth Warren.

This unprecedented lack of accountability is by Ms. Warren’s design. The bureau was the Harvard professor’s idea, and she lobbied the Obama Administration and Congress to make it part of the 2010 Dodd-Frank financial reform. That law calls it an “independent bureau,” akin to an independent agency like the Securities and Exchange Commission. But that’s deceptive. Unlike other agencies, it isn’t subject to annual Congressional appropriations.

Incredibly, the law says the bureau’s director gets to set her own annual budget by requesting a share of the “combined earnings of the Federal Reserve System.” The total she can request is capped this year at 10% of the Fed’s total operating expenses (which in 2009 were $5.4 billion). That cap rises to 11% next year and 12% in 2013, and the Fed Chairman has no authority to deny her request. The director can also request an additional $200 million more per year for the next five years from Congress.

This arrangement may be unconstitutional under the separation of powers, and we hope it is soon tested in court. It was a deliberate political gambit to make the bureau less accountable to either Congress or the rest of the executive branch. In July, when its powers fully vest, the bureau will have supervisory authority over banks with more than $10 billion of assets and independent rule-making authority.

Both are cause for worry, given that the bureau will not have to incorporate the views of other banking regulators into its rules when it comes, for instance, to issues of safety and soundness. While the IRS Commissioner and Comptroller of the Currency report to the Treasury Secretary, Ms. Warren and her successors can tell him to crush rocks.

Elizabeth Warren, head of the Consumer Financial Protection Bureau
The affront is compounded by President Obama’s decision to evade the spirit of the law by letting Ms. Warren set up the bureau without Senate confirmation. Republicans objected to her potential appointment, and even Democrat Chris Dodd said she would be hard to confirm. So Mr. Obama created a special position for her at both the White House and Treasury, letting her essentially create the bureau and hire its staff without facing the Senate. She has proceeded to sign up a raft of liberal antibank populists, such as former Ohio Attorney General Richard Cordray, former AFL-CIO deputy counsel David Silbermann and University of Connecticut law professor Patricia McCoy.

Ms. Warren is also establishing the bureau’s priorities. She has backed stringent regulations on credit-card companies and worked to forge alliances with state Attorneys General. She’s also using the bureau’s presumed power to dictate a $20 billion foreclosure settlement with banks and muscling in on inter-agency processes to set mortgage servicing standards. Whoever Mr. Obama does formally nominate to run the bureau later this year will be Ms. Warren’s factotum.

This is no way to run a government, especially not one that Madison envisioned. The consumer bureau is essentially a bureaucratic rogue. We’d like to see Congress kill the agency entirely. But at the very least Congress should remove it from the Fed, make it part of the Treasury and subject it to annual appropriations. No one elected—or even nominated—Elizabeth Warren.

Obama, Warren and The Imperial Presidency

The Wall Street journal
OPINION
SEPTEMBER 22, 2010
The Senate should vote on all senior appointments within 60 days. But the president should give it a chance to vote.


By BRUCE ACKERMAN
President Obama’s appointment of Elizabeth Warren late last week is another milestone down the path toward an imperial presidency. During America’s first 150 years, Ms. Warren’s appointment as a special adviser to the White House would have been unthinkable. Today, it’s par for the course.
Only in 1939 did Franklin Roosevelt win the right to appoint six “special assistants.” To gain congressional approval, he pledged that his assistants would act strictly as advisers. Thus they did not require Senate confirmation.
Since Roosevelt’s initiative, presidents of both parties have consistently expanded the size and power of the White House establishment. There are now more than 500 super-loyalists intervening in the affairs of Cabinet departments. But until now, presidents have maintained the legal fiction that they were merely advisers without decision-making powers.
No longer. As White House Press Secretary Robert Gibbs explained, Ms. Warren has been appointed “to lead” a team of “about 30 or 40 people at the Department of Treasury working” in “standing up” the new Consumer Financial Protection Bureau.

This burst of candor punctures the legal fiction that has exempted White House appointees from the Constitution’s requirement of “advice and consent” from the Senate. Since Ms. Warren will be a key executive in Treasury, earning the salary of an undersecretary, shouldn’t she be treated as an undersecretary and be required to run the gauntlet of Senate approval?
To deflect this question, the president’s lawyers have cobbled together yet another legal fiction. The trick is to give her a second appointment. In addition to serving as President Obama’s special assistant, she will also serve as a special adviser to Treasury Secretary Timothy Geithner. This allows her to pretend she is Mr. Geithner’s humble consultant when she and her staff come up with an action plan for the new agency.
This legalistic gambit serves as a fig leaf for a very different reality: Mr. Geithner will never reject any of Ms. Warren’s “advice.” The simple truth is that the Treasury secretary is being transformed into a rubber stamp for a White House staffer.
In his great book on 19th-century British government, “The English Constitution,” Walter Bagehot emphasized the importance of distinguishing the “efficient” from the “dignified” aspects of the constitution. Britain’s “dignified” constitution then focused on the Queen, diverting attention from the “efficient” power wielded by the Cabinet.
A similar but opposite transformation is happening in today’s America. The dignified Constitution emphasizes Senate confirmation of cabinet officers, but effective power is increasingly exercised by presidential assistants. Despite Mr. Obama’s campaign against the excesses of the Bush White House, he is now making his own contribution to the ongoing construction of an imperial presidency.
Maybe so, say the president’s defenders, but the Senate has only itself to blame. John Kennedy had to wait two months for the Senate to confirm his initial round of nominees. It took six months for Ronald Reagan, and nine for George W. Bush, and even longer for Mr. Obama. Given the Senate’s increasing intransigence, the president has no choice but to engage in legal fictions that will allow him to govern effectively. Although Republicans are condemning Mr. Obama for creating another White House czar, they will change their tune if their party regains control of the presidency and confronts a Democratic roadblock in the Senate.
Americans can break through this impasse if both sides negotiate a “grand bargain.” Here is the deal: The Senate should change its rules to require an up-or-down vote on all executive branch appointments within 60 days. In exchange, the president should sign legislation to require Senate approval of all senior White House appointments. By reaching this agreement, the president regains the powers to govern effectively and the Senate regains its authority to approve all major appointments—regardless of their location in the executive branch.
This grand bargain requires both sides to give up the petty privileges of the existing system. Senators will lose their power to hold up nominations to blackmail the administration into approving their pet projects. Presidents will lose their ability to appoint super-loyalists who can’t convince 51 senators that they merit powerful White House positions. But the rest of us will profit greatly from the reinvigoration of the founding principle of checks-and-balances for a new century.
Mr. Ackerman is a professor at Yale and the author of “The Decline and Fall of the American Republic,” forthcoming from Harvard University Press.

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