Speaker 1: Thanks June, the Consumer Financial Protection Bureau has a new
Speaker 1: lease on life. A federal appeals court here in Washington
Speaker 1: will reconsider a ruling that slashed the agency's powers and
Speaker 1: made it much easier for the president to fire its
Speaker 1: aggressive director, Richard Cordray. The earlier ruling came from a
Speaker 1: three judge panel of Republican appointees on a court known
Speaker 1: as the d C Circuit. The case, which involves kickback
Speaker 1: allegations against a mortgage lender, will now be taken up
Speaker 1: by the full DC Circuit, with its majority of Democratic appointees.
Speaker 1: It's all happening against the backdrop of a congressional battle
Speaker 1: over the cfp B and the Dodd Frank law that
Speaker 1: created it. Republicans want to ease the burdens they say
Speaker 1: the law has placed on the financial industry. With us
Speaker 1: to talk about the legal fight over the cfp B.
Speaker 1: Our Dai him In is a professor at the University
Speaker 1: of Connecticut School of Law and Christopher Peterson, professor at
Speaker 1: the University of Utah College of Law DAIA. Let let
Speaker 1: me start with you. The earlier ruling had several aspects
Speaker 1: to it, but let's let's cut to the part of
Speaker 1: it that deals with the president's power to fire the
Speaker 1: director of the CFPB. Can you just explain what the
Speaker 1: panel said about that issue? Yeah, sure, Um. The panel
Speaker 1: decided that, um, it didn't the separate from the sort
Speaker 1: of um statutory problems um that the PhH Company was
Speaker 1: bringing against the CFPP, they would decide they would look
Speaker 1: at whether or not the structure of the CFPP is
Speaker 1: actually constitutional um, and which uh, maybe it was something
Speaker 1: that they didn't actually have to do. And in doing that,
Speaker 1: they decided that it was unconstitutional that um, there was
Speaker 1: only one director and that they could only be uh
Speaker 1: that that director could be fired um, only for cause um.
Speaker 1: And so they decided that uh that instead um uh,
Speaker 1: the way to fix it was to say to basically
Speaker 1: rewrite the statute and say that the director can be
Speaker 1: fired for any reason at the will of the president um.
Speaker 1: And so obviously making it a lot easier for now
Speaker 1: President Trump to fire the director. But now that decision
Speaker 1: has been vacated, now that the Full Court has decided
Speaker 1: to hear the decase again. And Christopher, what is the
Speaker 1: reasoning for the Full Court taking on the case. Well,
Speaker 1: I think the Full Court is is recognizing that the case,
Speaker 1: first off, is very important that it has significant implications
Speaker 1: both for this new UH consumer Protection Agency, but also
Speaker 1: for the power of the presidency of the United States. UH.
Speaker 1: And what's more, I think that the it's I think
Speaker 1: it's fair to say that the DC Circuit panel opinion
Speaker 1: was um someone uncharitable to the motives and the structure
Speaker 1: of the CFPB. So I think that, you know, look
Speaker 1: to take away is that the the entire DC Circuit
Speaker 1: is going to look at the case and UH it
Speaker 1: has implications about whether or not President Trump will may
Speaker 1: be able to is effectively assert his agenda UH in
Speaker 1: in in you know, pursuing de regulatory goals for the
Speaker 1: economy dai UM. As you mentioned, there's also a statutory
Speaker 1: component to this case, which is basically pH H arguing
Speaker 1: that the cfpv PP had changed what had been the
Speaker 1: common understanding of a law involving real estate settlements and
Speaker 1: then UH improperly applied it retroactively. When the d C
Speaker 1: Circuit yesterday said we want to reconsider this case, it
Speaker 1: sort of suggested that maybe we can avoid getting to
Speaker 1: those constitutional questions and just deal with that statutory issue.
Speaker 1: Does that seem like a realistic possibility to you. UM,
Speaker 1: I think that's right. Actually, UM, I think it was
Speaker 1: surprising that the panel had asked for briefing on the
Speaker 1: constitutionality question, UM, and it's the case can totally be decided,
Speaker 1: and infect the panel really did decide it in the
Speaker 1: alternative on the statutory question, and h p H is
Speaker 1: basically one on the statutory question. So I think it
Speaker 1: is very likely, UM, that the that the full Court
Speaker 1: will decide, UM, you know, will make the decision on
Speaker 1: those narrow grounds. Also not just for the reasons that
Speaker 1: Professor Peterson just pointed out, but also because UM, their decision,
Speaker 1: the panel decision had actually thrown into question, um, the
Speaker 1: constitutionality of the structure of the Federal Housing Finance Agency,
Speaker 1: which was actually created before the CFPP. UM, and that
Speaker 1: you know, you know, not a party to the case
Speaker 1: or anything. So H that may be another reason why
Speaker 1: they might want to go narrower. And so just I
Speaker 1: understand you you're suggesting that what could happen would be
Speaker 1: that PhH could win on that narrower question, and then
Speaker 1: the Court would never have to deal with the question
Speaker 1: of whether the whole structure of the the CFPP is unconstitutional,
Speaker 1: that's right. I mean they could win or lose. You know,
Speaker 1: they could decide it the same way or a different way.
Speaker 1: But but the case could be entirely decided on the
Speaker 1: question of the statory questions. I think, Christopher, the twelve
Speaker 1: judge panel that will be hearing it will include Chief
Speaker 1: Judge Merrick Garland, whose Supreme Court nomination Republicans refused to consider.
Speaker 1: Does the panel being Democratic or Republican or center? Well, so,
Speaker 1: first off, with respected Judge Garland, He's a consummate professional,
Speaker 1: and I have absolute confidence that he'll do nothing other
Speaker 1: than follow the law and his best ambitions about you know,
Speaker 1: realizing what the how the laws of the United States
Speaker 1: should be interpreted. That thinks that the three judge panel
Speaker 1: that decided the decision below leaned fairly far to the right,
Speaker 1: or that's the way that people would normally conceptualize it.
Speaker 1: But the DC circuit itself the broader UH Court now
Speaker 1: and recently it's balanced, and power has shifted somewhat to
Speaker 1: the left with some recent Obama appointees. But I also
Speaker 1: want to caution that, you know, a lot of the
Speaker 1: questions that are here are not really very easily sort
Speaker 1: of tracked out on a you know, a traditional left
Speaker 1: right Democrat Republican spectrum. Some of the questions that issue
Speaker 1: are questions of constitutional power and separation of powers that
Speaker 1: are not just regulation good or regulation bad. So I
Speaker 1: do think that it's a little bit difficult to predict
Speaker 1: how the DC Circuit would rule on the independent regulatory
Speaker 1: agency question. Uh, you know that being said, I think
Speaker 1: that Professor Jimenez is exactly right that the fact that
Speaker 1: the d C Circuit has granted him bank review may
Speaker 1: be signaling that some of the judges are, perhaps the
Speaker 1: majority of the judges may prefer to resolve the questions
Speaker 1: in the case on statutorial statutory grounds rather than confirming
Speaker 1: the more difficult, broader reaching constitutional questions. And I just
Speaker 1: want to correct I understand now that the Chief Judge
Speaker 1: Merrick Garland is not going to be participating in this case.
Speaker 1: Greg dally Um. One thing that has puzzled me a
Speaker 1: little bit. It seems like there was Richard Corday, the director,
Speaker 1: has been very controversial. Republicans have been highly critical of
Speaker 1: him for being too aggressive, and it seems like until
Speaker 1: until this order to rehear the case came out, there
Speaker 1: was a little window where Donald Trump could have fired
Speaker 1: him for any reason at all. Are you surprised that
Speaker 1: the president didn't take advantage of that, Um, Well, I'm
Speaker 1: not sure there was such a window actually, because the
Speaker 1: case when um, the CFTV sought on bunk review, Uh,
Speaker 1: the the decision was stayed while the court decided whether
Speaker 1: or not the full court decided whether or not to
Speaker 1: grant on bunk review. So I think, um, the sort
Speaker 1: of correct legal thing to do there was just to
Speaker 1: wait until the court decided whether or not to grant
Speaker 1: on bunk and if they had denied it, um, then
Speaker 1: depending exactly what that word it looked like, then perhaps
Speaker 1: you know, if the CFPP didn't immediately file for a
Speaker 1: certain certain petitions and Supreme Court, uh, there might have
Speaker 1: been a small window. I mean, I think the right
Speaker 1: thing is really to you know, let the courts make
Speaker 1: this decision, um, at least to to get a chance
Speaker 1: at it. Um. So I'm glad that that I think that, uh,
Speaker 1: you know that that was not circumvented, Christopher. The Republicans
Speaker 1: have many options outside of court to use against the CFTB,
Speaker 1: So they could have legislation they're considering that would change
Speaker 1: the leadership from a single director to a five person commission.
Speaker 1: What are some of the other things that they could
Speaker 1: do and how likely is it that they would Well,
Speaker 1: I think that, UM, I mean the big the biggest
Speaker 1: options that they have is clearly to pass new legislation
Speaker 1: to reform the Dodd Frank Act and the portion of
Speaker 1: the Dodd Frank Act and the Consumer Financial Protection Act
Speaker 1: that created the CFPB. And that's that's something that is
Speaker 1: a viable legislative strategy. Uh. They do face the prospect
Speaker 1: of potential filibuster in the Senate recalled that. Uh. You know,
Speaker 1: one of the the sort of uh founding thought leaders
Speaker 1: for the creation of the CFPB was then Professor Warren
Speaker 1: now Senator Warren. Uh. Presumably, if there's anything that rules
Speaker 1: back on the cfpbs powers to aggressively, you can anticipate
Speaker 1: that she would attempt a filibuster. And and unless the
Speaker 1: Senate is willing to change its rules, whatever changes that
Speaker 1: the Republicans Congress wants to get to, the agency would
Speaker 1: have to surmount that sixty vote barrier. So who knows
Speaker 1: how that's going to shape out. Other but there are
Speaker 1: with respect that not just the structure of the agency
Speaker 1: but particular matters that the agency may be working on,
Speaker 1: such as regulations that are pending or enforcement actions that
Speaker 1: rely on particular statutory provisions. There are also potential options
Speaker 1: that the Republicans have there as well. So, for example,
Speaker 1: there's a regulatory review statute that allows Congress to invalidate
Speaker 1: regulations that are adopted by the agency with by voting
Speaker 1: to do so in Congress, and that that could potentially
Speaker 1: create another independent obstacle to some of the agenda that
Speaker 1: Director Cordrey has laid out. Christopher has inadvertently teased a
Speaker 1: later portion of the show, We're gonna actually talk about
Speaker 1: the Congressional Review active very important law that I confess
Speaker 1: I didn't know anything about until until a few weeks ago. Um,
Speaker 1: you could back to the legal fight. Um, the how
Speaker 1: does this play out in terms of the CFPB and
Speaker 1: the Trump administration? As I understand that the CFPB has
Speaker 1: independent litigating authority, so that at the on Bond DC
Speaker 1: circuit and perhaps elsewhere. Um, could we see the CFPB
Speaker 1: up against the Trump administration. Huh, That's that's an interesting question.
Speaker 1: I don't actually think that they have I mean, I
Speaker 1: think they still have to go through the Department of
Speaker 1: Justice to UH. They have to do that too. For
Speaker 1: restipcase might might actually know more. But I think that's
Speaker 1: right that they would not be able to UH. I
Speaker 1: mean that would be very odd. You've stunned me. I
Speaker 1: do Christopher jump in if you if you have have
Speaker 1: thoughts on it. Sure, No, it's it's perfectly understandable that
Speaker 1: there's there's some ambiguity here, and it's you know, the
Speaker 1: agency is still a young agency, so it's still working
Speaker 1: some of these things out as they go along. So,
Speaker 1: but the agency does have independent litigation authority, and unlike
Speaker 1: say some of the other agencies, does not have to
Speaker 1: rely on the Department of Justice's attorneys to to bring
Speaker 1: litigation enforcement litigation in court. That's one of the sort
Speaker 1: of key features of the Dodd Frank Act. But that
Speaker 1: being said, generally speaking, that Bureau has relied on the
Speaker 1: Solicitor General's Office in UH a Supreme Court matters UH,
Speaker 1: And that could create a potential issue in the event
Speaker 1: that petition for curtiary was granted by the Supreme Court.
Speaker 1: But that's the bridge that hasn't been crossed yet, and
Speaker 1: there's a good chance that that that won't actually happen
Speaker 1: now that the d C circuit may be signaling that
Speaker 1: it's going to sort of extinguish this case. Of course,
Speaker 1: I don't want to predict that with any real certainty.
Speaker 1: They don't hand out crystal balls with tenure at my university.
Speaker 1: But UM, at least for its time being before the
Speaker 1: courts tell us how important and what the role of
Speaker 1: the CSPB is. UM. And actually I think this is
Speaker 1: one of the sort of positives of the physician, you know,
Speaker 1: coming back being in the news again. Is the CSTB UM.
Speaker 1: You know, it's really the one agency who they're protecting
Speaker 1: consumers UM and UH. One of the reasons why it
Speaker 1: would be very difficult for President Trump to fire Director
Speaker 1: Cord for cause is because it's been doing a you know,
Speaker 1: stand up job of protecting consumers. Almost twelve billion dollars
Speaker 1: UM have been returned to consumers, thirty million UM consumers
Speaker 1: have received relief. UM. You know, companies have who have
Speaker 1: been violating the law UM in all sorts of different
Speaker 1: financial areas have been ordered to you know, change their practices,
Speaker 1: to correct them, to uh, to rest to give restitutions
Speaker 1: to consumers. UM. And I think that that's something that
Speaker 1: we need, you know. And then the reason it was
Speaker 1: created was because we thought, um, this might have prevented
Speaker 1: the financial crisis. Um. Perhaps the hope is that it
Speaker 1: will prevent the next financial crisis. And um uh, that's
Speaker 1: something that you know, I think we should all want.
Speaker 1: I want to thank our guest Dalia Jimenez the University
Speaker 1: of Connecticut School of Law and Christopher Peterson of the
Speaker 1: University of Utah College of Law, talking about new developments
Speaker 1: in the legal fight over the Consumer Financial Protection Bureau.
Speaker 1: Coming up on Bloomberg Law, we'll talk to former Senate
Speaker 1: Democratic Majority Leader George Mitchell.