The recent security breach at the Consumer Financial Protection Bureau shows the problems with the administrative state, but the threat that the CFPB and similar bureaucracies pose to consumers runs much deeper.
The Consumer Financial Protection Bureau, created under President Barack Obama in 2010 to regulate consumer affairs, reported to lawmakers March 21 that a staffer had forwarded the confidential financial information of 256, 000 consumers to his personal email address.
This astounding data breach also implicated confidential supervisory information from 45 different financial institutions.
Many naturally are concerned with whether the personal information of these consumers has been deleted from the staffer’s personal email. But the more profound implications of this incident boil down to one question: Why does the CFPB wield such tyrannical power that affects the lives of nearly a quarter-million consumers?
Sen. Tim Scott, R-S.C., got it right when he asked: “Why should the CFPB be trusted to collect more data, burdening financial institutions and potentially limiting services for consumers, when they themselves have demonstrated an irresponsible handling of consumers’ financial information?”
The senator’s instinct is correct: Why should consumers trust the Consumer Financial Protection Board?
In addition to this data breach, the Supreme Court recently agreed to hear a case from the 5th U.S. Circuit Court of Appeals challenging the constitutionality of the CFPB’s funding mechanism.
Article I, Section 9 of the U.S. Constitution demands that Congress approve all appropriations through law. The Consumer Financial Protection Board must not have gotten the memo, as the government agency’s structure allows it to demand a 12% increase in funding—a request that the Federal Reserve can’t deny, and Congress can’t adjust.
Separation of powers, anyone?
Regardless of an unconstitutional appropriations process, the Consumer Financial Protection Bureau clearly can’t do its job. The more important question is, should it? Should it even exist?
The answer here is also no.
Regardless of how the Supreme Court rules in this case, it won’t address the real problem with the administrative state: The nanny state is simply antithetical to self-government.
When administrative bodies hold such vast, unchecked power, we the people have no recourse to the democratic process. Instead, unelected bureaucrats—regardless of where or how they receive their funds—adopt rules and edicts from on high that tyrannize over our daily lives.
Although administrative law offers the pseudo-legislative functions of comment and rulemaking, this is an insufficient substitute for the intended purposes of republican government: representative, consent-based rule by the people.
Today, the people do not elect congressmen to enact legislation on their behalf; rather, they elect figureheads who abdicate their responsibility to agencies such as the Consumer Financial Protection Board. This renders the voters powerless.
Whether administrative rule produces positive or negative results, the American citizenry holds no control, no ability to hold those bureaucrats accountable. Is a beneficent allowance by unelected officials truly good if it is just that—an allowance? And what if the allowance is less than beneficent, or even malicious?
Rep. Patrick McHenry, R-N.C., has pledged to pass bills bringing the CFPB under the appropriations process and limiting its rule-making authority, but this likely wouldn’t solve anything. Congress no longer makes willful expressions of legislative consent, and this is a crucial problem.
Despite McHenry’s rhetoric, Congress doesn’t want to do its job. Lawmakers in both the House and the Senate have agreed to a corrupt bargain with the administrative state in which the congressmen and senators keep their jobs and maintain the dignified, public positions of our government while bureaucrats carry out the real substantive work through unconstitutional means.
So should the Supreme Court rule against the CFPB’s overreach, it is not likely that Congress would reassert its constitutional authority to legislate.
This vast delegation of power also grants the administrative state liberty to force whatever ideological framework it pleases upon consumers. Fueled by the dogma of DEI—diversity, equity, and inclusion—that pervades most American institutions, the Consumer Financial Protection Board tried to force its equity concerns upon Townstone Financial, a small mortgage firm in Chicago. The CFPB sued Townstone for violating the Equal Credit Opportunity Act, which bars discrimination on the basis of many factors, including race.
To Townstone’s surprise, the CFPB accused the company of engaging in racial redlining against blacks. However, it never actually alleged this in the suit, nor did it have any evidence of discrimination. Instead, it cherry-picked sound bites from a local radio show in which a Townstone commercial referenced the high crime rates in Chicago.
Thankfully, the U.S. District Court for the Northern District of Illinois struck down the CFPB’s claims and ruled in Townstone’s favor. However, even this example demonstrates the rogue power of the administrative state to make accusations against average citizens and burden them with years of litigation and legal fees.
What is clear above all else is that the Consumer Financial Protection Board makes consumers less safe, not more so. It can’t protect consumer financial information, but what it can do is remind the body politic of its power through malevolent lawsuits. This administrative tyranny threatens the American people and denies them the ability to act on their own.
So long as bureaucratic inertia rules our governing institutions, self-government and the rule of law constantly will be threatened.
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