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CFPB Commission Structure Proposals

posted by Adam Levitin

I have an op-ed in American Banker about proposals to convert the CFPB into a commission structure.  Basically, the idea that a commission structure increases accountability and policy stability and reduces arbitrary or abusive actions by an agency just doesn't hold water upon examination.  

Not included in the piece is a brief history of independent agency structure. The reason that so many independent agencies are structured as commissions has absolutely nothing to do with a perceived superiority of the commission structure from any sort of good governance perspective. You'll be hard pressed to find any Congressional debate about single director versus multi-member commission structures. The prevalence of multi-member commissions is a matter of path dependency and Congressional desire to maximize patronage opportunities, not any considered debate.

 The commission structure began in 1887 with the Interstate Commerce Commission, which was primarily a rate-setting body. A commission structure made sense for a rate-setting body because there isn't a "right" answer, so much as a politically agreed-upon one.  Rate-setting is a politicized pricing activity in which multiple voices and consensus-building makes sense. Congress, however, saw that there were also lots of patronage opportunities with multi-member commissions, and scarcely looked back in the design of future agencies even when there was no rate-setting function. Thus, there was no discussion of single director versus multi-member commission structure in the legislative history of the next agency, the Federal Trade Commission or the agency that followed it, the Federal Reserve Board (there was a lot of debate regarding who would be on the Fed Board, but that's a different issue). 

Thinking about agency structures has advanced a lot since 1887. In particular, there's been a lot of administrative law learning about what works and what doesn't with agencies, and, in particular, the various problems that go under the rubric of "capture"--both of the agency and of Congress.  Rather sensibly, Congress has recently begun to shy away from appropriated multi-member commissions, at least in the financial regulatory space. Thus, the FHFA and CFPB both feature single directors and are not subject to appropriations, just like the OCC (and the late OTS). Rather than being some unholy aberration, this is beneficial evolution in government and should be embraced. The modern independent agency is designed to be effective at prosecuting its assigned mission and bred to be resistant to capture. It's hardly surprising that lobbyists for regulated industries (such as some of the folks who posted comments on the American Banker piece) hate the new and improved agency design, but such conniptions are the best sign that the new design features are working.      


I completely agree with everything you have said here and at American Banker, although there is a much simpler (albeit more cynical) analysis that gets you to the same conclusion. We know that the incoming Congress and Administration has the CFPB on its hit list. Folks might remember the conservative PAC sponsored ad that ran during one of the Republican debates portraying the agency as a communist organization and telling viewers to ask Congress to "stop the CFPB". Further, gutting the CFPB is a key linchpin of Republican strategies to discredit Elizabeth Warren as a potential 2020 candidate.

Therefore, it can be presumed that any changes in the structure, mission or governance of the CFPB are being made with those goals in mind. Recognizing that there may be some actual opposition to just abolishing it immediately, an alternate strategy is to guarantee its ineffectiveness to build a record for cutting it later when opposition fatigue sets in or some other suitable distraction is found.

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