Appeals Court Rules Part of Obama’s Dodd-Frank Law Unconstitutional

Another slap in the face for Obama and all who helped pass the Dodd-Frank law back in 2010.

Seems the law created the Consumer Financial Protection Bureau.

Apparently a federal appeals court found the CFPB structure unConstitutional !!!!!

W0W

And it looks like now Senator Elizabeth Warren had some say in this law when she was only an ivory tower academic.

Appeals Court Rules Part of Obama’s Dodd-Frank Law Unconstitutional

Judge Brett Kavanaugh wrote for the three-judge panel in PHH Corporation v. CFPB:

This is a case about executive power and individual liberty. The U.S. Government’s executive power to enforce federal law against private citizens – for example, to bring criminal prosecutions and civil enforcement actions – is essential to societal order and progress, but simultaneously a grave threat to individual liberty.

The Framers understood that threat to individual liberty. When designing the executive power, the Framers first separated the executive power from the legislative and judicial powers. “The declared purpose of separating and dividing the powers of government, of course, was to ‘diffus[e] power the better to secure liberty.’” Bowsher v. Synar, 478 U.S. 714, 721 (1986) (quoting Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 635 (1952) (Jackson, J., concurring)). To ensure accountability for the exercise of executive power, and help safeguard liberty, the Framers then lodged full responsibility for the executive power in the President of the United States, who is elected by and accountable to the people. The text of Article II provides quite simply: “The executive Power shall be vested in a President of the United States of America.” U.S. CONST. art. II, § 1. And Article II assigns the President alone the authority and responsibility to “take Care that the Laws be faithfully executed.” Id. § 3. As Justice Scalia explained: “The purpose of the separation and equilibration of powers in general, and of the unitary Executive in particular, was not merely to assure effective government but to preserve individual freedom.” Morrison v. Olson, 487 U.S. 654, 727 (1988) (Scalia, J., dissenting).

Kavanaugh notes with alarm the vast powers of the “headless fourth branch of government” of agencies that are independent from presidential control, and thus not answerable to American voters. He continues, “Because of their massive power and the absence of Presidential supervision and direction, independent agencies pose a significant threat to individual liberty and to the constitutional system of separation of powers and checks and balances.

I work in the finance industry and the CFPB is completely out of control. The issue is that the Director is not accountable to anyone. They basically pass regulations with zero oversight and accountability. The other issue is that they basically fund themselves through fines, so their incentives are misaligned by causing them to look for wrong doings to collect fines even if companies are not behaving improperly.

The CFPB approaches all regulations from a "business is evil and out to screw over consumers" standpoint. Every regulations they pass is done so under this assumption. The egghead bureaucrats have no experience whatsoever in any of the industries they attempt to regulate.

The CFPB is bureaucractic tyranny. If consumers only knew how much all this supposed protection is actually costing them. As I explain to my clients, the regulations inconvenience 99.9% of people to protect the .1% who are too stupid for their own good.

What frustrates me is that the average person really has no idea how this rogue organization and Dodd-Frank have mucked stuff up. This is why stories like this get no traction and liberals can get away with things like Dodd-Frank. They simply aren't connected enough to it to really grasp or get how poorly thought out Dodd-Frank as legislation. It impacts a lot of different aspects of the financial industry. Consumers don't really see the impact, but I can assure you that prices are up quite a bit.

Mortgage rates are at least .25% higher than they should be due to various CFPB's regulations. For the average homeowner, this is thousands of dollars over the life of their mortgage.

a reply to: xuenchen

Uh, sounds a lot like FEMA to me.

a reply to: Edumakated

Do you know why this law was bought in, specifically?

If so, would you mind giving us a hint as to what it is, why it was bought about, and what you would rather have seen in its place? I am asking you because you stated that you have some experience in related fields, so your perspective would probably be more helpful than that of someone whose understanding of the subject matter is less detailed.

i bet half the people who will star this thread dont even know anything about this law or never heard of the cfpb or the reason for is inception.
'thread starter', 'Obama', 'unconstitutional; stars and flags...
click click spam

Could have SWORN that laws are passed by Congress, not the White House.

originally posted by: TrueBrit
a reply to: Edumakated

Do you know why this law was bought in, specifically?

If so, would you mind giving us a hint as to what it is, why it was bought about, and what you would rather have seen in its place? I am asking you because you stated that you have some experience in related fields, so your perspective would probably be more helpful than that of someone whose understanding of the subject matter is less detailed.

It was an over reaction to the financial crisis. Basically, politicians had to come up with some new regulations to show they did something and to insulate themselves from being blamed for the crisis. The typical lib response to anything that goes bad is more regulations. This is rich considering Dodd-Frank is named after Chris Dodd and Barney Frank who basically help instigate the housing crisis through Fannie Mae / Freddie Mac.

The CFPB is essentially Elizabeth Warrens creation. It is designed to "protect consumers" from unscrupulous banks, credit card companies, etc. It was created as part of Dodd-Frank. The problem is that they have too much power and quite frankly really have no idea how banking works.

I actually don't have an issue with the concept, but they operate under these misguided principles assuming that consumers do no wrong, companies are always trying to screw over consumers, and that these unelected bureaucrats know what is best for individuals.

To put this in perspective, my company literally had to create TWO entire departments of several people just to oversee compliance with several sections of Dodd-Frank/CFPB. We probably added about 10 people to the payroll. These aren't people who produce revenue for the company. They just make sure we are following the regulations. The price to clients had to go up as a result. A lot of our smaller competitors just went out of business as they couldn't afford the overhead.

This is why the big banks are getting bigger. It is easier for the megabanks to spread the additional costs whereas smaller banks simply don't have the resources. Only three new banks have opened since 2010. Think about that...

a reply to: Edumakated

So would you say, that the regulations as they stand are not capable of protecting the consumer from the sort of predatory behaviour that was the root cause of the last banking collapse? Or is the situation rather more, that the regulations protect only government from the consequences, and also the blame? I mean, is there no laudable, meritous element to the Dodd-Frank Act at all?

originally posted by: TrueBrit
a reply to: Edumakated

So would you say, that the regulations as they stand are not capable of protecting the consumer from the sort of predatory behaviour that was the root cause of the last banking collapse? Or is the situation rather more, that the regulations protect only government from the consequences, and also the blame? I mean, is there no laudable, meritous element to the Dodd-Frank Act at all?

Dodd-Frank is very encompassing and complex. The CFPB is just one aspect of the law. Other parts of Dodd-Frank deal with arcane banking procedures such a capital controls, etc. I don't even think 50% Of the law has even been implemented yet it is so vast.

The CFPB does very little to protect consumers. In fact, many of the regs they put in place actually wound up hurting consumers with some unintended consequences. As I mentioned earlier, the law raised prices for consumers across the board. In addition, the penalties are so onerous and some of the regulations are so poorly worded that many banks just stopped offering certain products for fear of persecution.

The problem with consumer protection in the government's eyes is that they focus on procedure not results. In other words, they want certain disclosures, time frames, and other procedures to be met, but they never really look to see if the regulation is effective.

In the government's eyes, a bank could be perfectly run if they are great at providing disclosures and other legalese even though they rake their clients over the coals with high interest rates. However, a bank that consistently gives lower interest rates and has happy clients, but didn't give out some disclosure would be run out of business.

originally posted by: odzeandennz
i bet half the people who will star this thread dont even know anything about this law or never heard of the cfpb or the reason for is inception. 'thread starter', 'Obama', 'unconstitutional; stars and flags...

Which is all the more reason to read the thread and learn about it. The thing is, it's not being covered by the MSM, so this is one of really few instances when the OP and ATS have actually brought something to the table that isn't being talked about to any great extent. I won't claim it is being 'covered up,' but certainly you can say it is getting little attention.

If there are any opposing views I'm sure we'd like to all read them.

a reply to: xuenchen

Im proud of this judge. Its a difficult environment presently to stand up for the beauty of our Constitution

Well, the only change is that the Director of the CFPB will now report directly to the President (rather than being an independent agency).

Everything else about the Bureau will remain in place.

To remedy the constitutional flaw, we follow the Supreme Court’s precedents, including Free Enterprise Fund, and simply sever the statute’s unconstitutional for-cause provision from the remainder of the statute. Here, that targeted remedy will not affect the ongoing operations of the CFPB. With the for-cause provision severed, the President now will have the power to remove the Director at will, and to supervise and direct the Director. The CFPB therefore will continue to operate and to perform its many duties, but will do so as an executive agency akin to other executive agencies headed by a single person, such as the Department of Justice and the Department of the Treasury.

Actual Case here

So, no, it's not a "slap in the face" to Obama ... it's not a removal of the CFPB, etc. etc.

Much ado about nothing (as usual.)

a reply to: Edumakated

Edumakated...

Right, so perhaps I should have worded my question differently...

The last banking collapse was nothing to do with banks charging too high of an interest rate on loans, but to do with the banks having been staggeringly unwise with the lending they were doing, the sub prime fiasco being an example. So when the banks just "stopped offering some products", are you talking about those products that were fantastically stupid and caused the whole mess in the first place? Because if so, I really do not have a problem with that.

What am I missing here, is what I am trying to ask?

originally posted by: TrueBrit
a reply to: Edumakated

Edumakated...

Right, so perhaps I should have worded my question differently...

The last banking collapse was nothing to do with banks charging too high of an interest rate on loans, but to do with the banks having been staggeringly unwise with the lending they were doing, the sub prime fiasco being an example. So when the banks just "stopped offering some products", are you talking about those products that were fantastically stupid and caused the whole mess in the first place? Because if so, I really do not have a problem with that.

What am I missing here, is what I am trying to ask?

I never said the collapse had to do with high interest rates. I was using that example to show that regulations care more about procedure than effectiveness.

The collapse was a perfect storm. No one is innocent. Government, banks, consumers, realtors, mortgage bankers, and Wall Street all had a hand in the debacle. The collapse was brought on because of the fraud that was taking place due to lax underwriting guidelines. Consumers were more than willing to lie to get financing so they could turn themselves into mini-Trumps moguls. The traditional checks and balances were relaxed to make it easier for people to qualify which invited a lot of fraud.

Once the music stopped, the first people to go under were "investors" who were buying condominiums to flip or rental properties. As these properties started going into foreclosure, it spread to the regular homeowners creating a domino effect.

Here is an article in the Chicago Tribune from 2005 talking about how many of the gangs got out of dealing drugs and into mortgage fraud. This is 2005 pre-crash.

Mortgage Fraud

But back to the point, the CFPB doesn't really address these issues. Dodd-Frank did somewhat by creating what is known as "Ability to Repay" rules, but the problem is that the rules are disconnected from prudent underwriting guidelines. Again, the problem is that a lot of these rules and regulations sound good to bureaucrats who have no experience in the fields they are regulating and they are unable to connect dots and see the unintended consequences that their rules may cause.

a reply to: TrueBrit

The US American Dodd-Frank law is one of those "everything and the kitchen sink" sort of laws. My opinion from when I worked for an Embassy in Washington many years ago is that the US American lawmakers like to write large omnibus vehicles for changing the laws, rules, and regulations. They knowingly put provisions into the law that will take their opponents years to fight in the courts so that the main body of change that they desire is implemented. Even if the courts strike down the entire law, the ground has been opened for further "tilling and farming" by politicians to eventually achieve the ends that were intended with the aforesaid omnibus bill/law.

One of the issues you touched on was that banks made sub-prime loans and "stated' loans where the borrower did not have to prove sufficient income to pay back the loan. One of the criticisms at the time was driven by the liberal media and stated that banks were "unfairly" NOT loaning to 'poor people' therefore that was discrimination. I remember Jesse Jackson standing on the steps of a big bank bemoaning how banks discriminated against Blacks. So there was considerable liberal pressure brought against the 'big bad banks' over this issue, whereupon they started these practices that led to the crash. Yet you have stated that speculators also abused the liberalization of loan rules and basically abused the system.

Is this a fair reading of what happened, or is this a diversion to the more important points?

originally posted by: schuyler
One of the issues you touched on was that banks made sub-prime loans and "stated' loans where the borrower did not have to prove sufficient income to pay back the loan. One of the criticisms at the time was driven by the liberal media and stated that banks were "unfairly" NOT loaning to 'poor people' therefore that was discrimination. I remember Jesse Jackson standing on the steps of a big bank bemoaning how banks discriminated against Blacks. So there was considerable liberal pressure brought against the 'big bad banks' over this issue, whereupon they started these practices that led to the crash. Yet you have stated that speculators also abused the liberalization of loan rules and basically abused the system.

Is this a fair reading of what happened, or is this a diversion to the more important points?

Exactly. What's funny is that the same thing is happening now. The same politicians are complaining that "underserved" borrowers cannot get loans now.

You connected the dots. "Stated" products had been around a long time. The were primarily used for highly qualified self-employed borrowers. So a guy clearly has the assets to make a large down payment, he is self-employed, and his tax returns really understate his income. These loans always performed well.

The guidelines were stripped back to the point that instead of legitimate borrowers getting the products, the products were used as "affordable" products to bring in Joe Six pack as this is the only way they could qualify. This also opened the door to fraud as it was easy to game the system.

Do a search on "Casey Serin". This guy was the poster child for the housing implosion.

Casey Serin