Constitutionality of Consumer Bureau Challenged Before Supreme Court
The Consumer Financial Protection Bureau (CFPB), created in the wake of the 2008 financial crash, is unconstitutional because its director, unlike the typical federal official, isn’t accountable to the elected president of the United States who appointed the person, the Supreme Court heard.
The high court is expected to render its judgment in the case in coming months, a move that seems certain to enliven the election cycle no matter what it decides.
Democrats have long defended the 9-year-old agency, brainchild of presidential candidate and U.S. Sen. Elizabeth Warren (D-Mass.) from the time when she was a bankruptcy law professor.
Then-President Barack Obama signed the Dodd–Frank Wall Street Reform and Consumer Protection Act, creating the CFPB, and appointed Warren to take the lead role in establishing it. Former Sen. Chris Dodd (D-Conn.), who as chairman of the Senate Banking Committee spearheaded the legislation, attended the Supreme Court hearing.
From the campaign trail, Warren took to Twitter as the court heard oral arguments in the case on March 3:
“Big banks & their allies will do anything to undermine the @CFPB – even ask the Supreme Court today to shut it down. We won’t let President Trump gut the consumer agency & let the big banks go back to cheating customers & gambling with our economy.”
House Democrats even filed a brief with the Supreme Court urging the justices not to take up the case, but the high court went its own way and agreed Oct. 18, 2019, to hear the matter, cited as Seila Law LLC v. CFPB.
The CFPB was designed to be free of the influence of the president. Federal law blocks the president from dismissing its director, who has to be confirmed by the U.S. Senate, before that person’s five-year term lapses, unless the termination is for “inefficiency, neglect of duty, or malfeasance in office.”
The CFPB’s unusual funding mechanism also keeps the agency independent. Although it may seek funding from Congress, the agency is excluded from the normal congressional appropriations process, and instead receives most of the money it needs to operate from the Federal Reserve System.
Republicans have long accused the agency of overreach. Then-House Financial Services Committee Chairman Jeb Hensarling, a Texas Republican who has since left Congress, called the CFPB “arguably the most powerful, least accountable agency in U.S. history,” in a 2017 Wall Street Journal op-ed.
“CFPB zealots have the power to determine the ‘fairness’ of virtually every financial transaction in America. The agency defines its own powers and can launch investigations without cause, imposing virtually any fine or remedy, devoid of due process,” he wrote.
“The regulatory web spun by the CFPB can make every provider of financial services guilty until proven innocent, inviting selective enforcement and financial shakedowns.”
He said the agency embodies James Madison’s warning in Federalist No. 47 that “the accumulation of all powers, legislative, executive and judiciary, in the same hands … may justly be pronounced the very definition of tyranny.”
The petitioner, Seila Law, a California-based law firm, had refused to honor CFPB’s request for information, called a civil investigative demand, and challenged the entity’s structure, claiming it was unconstitutional.
The firm’s attorney, Kannon Shanmugam, told the Supreme Court that the president’s inability to fire the CFPB director “at will” is a historical oddity in need of correction.
“The structure of the CFPB is unprecedented and unconstitutional,” he said.
“Never before in American history has Congress given so much executive power to a single individual who does not answer to the president. By significantly limiting the president’s ability to remove the CFPB’s director, Congress violated the core presidential prerogatives to exercise the executive power and to take care that the laws be faithfully executed.”
The Trump administration, represented in court by Solicitor General Noel Francisco, opposes the CFPB in its current iteration but did not ask the court to dissolve it.
Francisco told Justice Elena Kagan that “the problem with … [Dodd–Frank’s] for-cause removal restrictions is that they vest executive power in individuals who are not ultimately accountable to the people through their duly elected president.”
Although it has been the position of Seila Law that the CFPB is unconstitutional, in oral arguments, Shanmugam said it would be a bad idea for the court to “rewrite the Dodd–Frank Act to give the president the power to remove the director.”
“The court should leave to Congress the quintessentially legislative task of deciding how to fix the CFPB’s defective structure.”
When questioning Francisco, Kagan echoed Shanmugam.
“Why don’t we just leave it to the political branches, who actually know about these things?”
Justice Ruth Bader Ginsburg remarked that the for-cause removal provision in the law was a “very modest restraint.”
Because the Trump administration refused to defend the law that created the CFPB, the Supreme Court appointed Paul D. Clement, who served as solicitor general under then-President George W. Bush, to represent the agency’s interests.
Clement told Justice Samuel Alito that he believed the statute that created the agency is “still perfectly constitutional.”
Sanders called JPMorgan’s CEO
America’s "biggest corporate socialist" — here’s why he has a point
Sen.
Bernie Sanders called JPMorgan CEO Jamie Dimon the “biggest corporate socialist
in America today” in recent ad
PAUL
ADLER
FEBRUARY 13, 2020 9:59AM (UTC)
Billionaire JP Morgan chief attacks socialism as 'a
disaster'
Jamie Dimon, spare us your
crocodile tears about inequality
Business Today: sign up for a
morning shot of financial news
JP Morgan CEO Jamie Dimon takes on socialism, says it will lead to
an ‘eroding society’
With democratic socialist Sen. Bernie Sanders among the leaders in the Democratic presidential race and other candidates espousing similar-sounding ideas, the head of the nation’s biggest bank by assets said the idea of socialist control of the means of production would be detrimental to the U.S.
“I honestly don’t think they understand what socialism is,” Dimon told CNBC during a “Squawk Box” interview at the World Economic Forum in Davos, Switzerland, referring to a question about millennials.
Sanders has been the most out front of the candidates in backing socialism, though many of his opponents in the Democratic race also back universal health care, increased business taxes and greater government control over private enterprise.
Dimon said he did not want to address any specific candidates. But he said that socialist governments traditionally have done a poor job allocating capital and end up backing politically popular endeavors and “bridge to nowhere” projects.
“Once you do that, you will have an eroding society,” he said.
“They do need to fix inner-city schools, infrastructure, health care,” Dimon added. “We can fix all of those in a capitalist society.”
Bernie Sanders Slams Jamie Dimon On
Socialism – They’re Both Wrong
Bernie Sanders Stretches The Truth To Slam Jamie Dimon
The JPMorgan Chase CEO Owes A Lot Of
His Considerable Wealth To Socialism
Fed Interventions Are Enabling Wall Street Recklessness, Again
You Can’t Cherry-Pick What Is
Socialism & What’s “Necessary”
Sanders called JPMorgan’s CEO
America’s "biggest corporate socialist" — here’s why he has a point
Sen.
Bernie Sanders called JPMorgan CEO Jamie Dimon the “biggest corporate socialist
in America today” in recent ad
PAUL
ADLER
FEBRUARY 13, 2020 9:59AM (UTC)
Sen. Bernie Sanders called
JPMorgan Chase CEO Jamie Dimon the "biggest corporate socialist in America today" in a recent ad.
He may have a point
— beyond what he intended.
With his Dimon ad, Sanders is
referring specifically to the bailouts JPMorgan and
other banks took from the government during the 2008 financial crisis. But
accepting government bailouts and corporate welfare is not the only way I believe
American companies behave like closet socialists despite their professed love
of free markets.
In reality, most big
U.S. companies operate internally in ways
Karl Marx would applaud as remarkably close to socialist-style central
planning. Not only that, corporate America has arguably become a laboratory of
innovation in socialist governance, as I show in my own research.
Closet socialists
But inside JPMorgan and most
other big corporations, market competition is subordinated to planning. These
big companies often contain dozens of business units and sometimes thousands.
Instead of letting these units compete among themselves, CEOs typically direct
a strategic planning process to
ensure they cooperate to achieve the best outcomes for the corporation as a whole.
This is just how a socialist
economy is intended to operate. The government would conduct economy-wide
planning and set goals for each industry and enterprise, aiming to achieve the
best outcome for society as a whole.
And just as companies rely
internally on planned cooperation to meet goals and overcome challenges, the
U.S. economy could use this harmony to overcome the existential crisis of our
age — climate change. It's a challenge so massive and urgent that it will
require every part of the economy to
work together with government in order to address it.
Overcoming socialism's past
problems
But, of course, socialism
doesn't have a good track record.
One of the reasons socialist
planning failed in the old Soviet Union, for example, was that it was so top-down that it lacked the
kind of popular legitimacy that democracy grants a government. As a result,
bureaucrats overseeing the planning process could not get reliable information
about the real opportunities and challenges experienced by enterprises or
citizens.
Moreover, enterprises had
little incentive to strive to meet their assigned objectives, especially when
they had so little involvement in formulating them.
A second reason the USSR
didn't survive was that its authoritarian system failed to motivate either
workers or entrepreneurs. As a result, even though the government funded basic
science generously, Soviet industry was a laggard in innovation.
Ironically, corporations
— those singular products of capitalism — are showing how these and
other problems of socialist planning can be surmounted.
Take the problem of
democratic legitimacy. Some companies, such as General Electric, Kaiser Permanente and General Motors, have
developed innovative ways to avoid the dysfunctions of autocratic planning by
using techniques that enable
lower-level personnel to participate actively in the strategy process.
Although profit pressures
often force top managers to short-circuit the promised participation, when
successfully integrated it not only provides top management with more reliable
bottom-up input for strategic planning
but also makes all employees more reliable
partners in carrying it out.
So here we have
centralization — not in the more familiar, autocratic model, but rather in
a form I call "participative centralization." In a socialist system,
this approach could be adopted, adapted and scaled up to support economy-wide
planning, ensuring that it was both democratic and effective.
As for motivating innovation,
America's big businesses face a challenge similar to that of socialism. They
need employees to be collectivist, so they willingly comply with policies and
procedures. But they need them to be simultaneously individualistic, to fuel
divergent thinking and creativity.
One common solution in much
of corporate America, as in the old Soviet Union, is to specialize
those roles, with most people relegated
to routine tasks while the privileged few work on innovation tasks. That
approach, however, overlooks the creative capacities of the vast majority
and leads to widespread
employee disengagement and sub-par business performance.
Smarter businesses have found
ways to overcome this dilemma by creating cultures and reward systems that
support a synthesis of individualism and collectivism that I call
"interdependent individualism." In my research, I have found this
kind of motivation in settings as diverse as Kaiser
Permanent physicians, assembly-line
workers at Toyota's NUMMI plant and software
developers at Computer Sciences Corp. These
companies do this, in part, by rewarding both individual contributions to the
organization's goals as well as collaboration in achieving them.
While socialists have often recoiled against
the idea individual performance-based rewards, these more sophisticated
policies could be scaled up to the entire economy to help meet socialism's
innovation and motivation challenge.
Big problems require big
government
The idea of such a socialist
transformation in the U.S. may seem remote today.
But this can change,
particularly as more Americans, especially young ones, embrace socialism. One reason
they are doing so is because the current capitalist system has so manifestly
failed to deal with climate change.
Looking inside these
companies suggests a better way forward — and hope for society's ability
to avert catastrophe.
Paul Adler, Professor of
Management and Organization, Sociology and Environmental Studies, University of Southern California
Billionaire JP Morgan chief attacks socialism as 'a
disaster'
This article is more
than 10 months old
·
Jamie Dimon: socialism leads to ‘corruption and favouritism’
·
America’s top banker, paid $31m last year, defends capitalism
Thu 4 Apr 2019 12.45 EDTLast
modified on Sun 7 Apr 2019 20.55 EDT
5,968
Jamie Dimon said
capitalism was ‘the most successful economic system the world has ever seen’.
Photograph: Jacquelyn Martin/AP
The world’s most powerful banker has attacked socialism, saying
it produces “stagnation, corruption and often worse”.
Jamie Dimon, spare us your
crocodile tears about inequality
Robert Reich
Read more
JP Morgan’s chief executive, Jamie Dimon, took aim at socialism
in his annual letter to shareholders, and warned it would be “a disaster for our country”.
Dimon, who was paid $31m last year as the head of America’s largest
bank and who is estimated by Forbes to be worth $1.3bn,
took his swipe as a new wave of left politics has emerged in the US.
Democratic socialism has been embraced by a new generation of
politicians, including New York congresswoman Alexandria Ocasio-Cortez, and supporters of Bernie
Sanders, a longtime socialist now making a second bid for the presidency.
Dimon’s attack also comes as many leftwing Democrats, including
Sanders and Senator Elizabeth Warren, have called for the breakup of big
businesses and greater regulation of banking in particular.
In his letter, Dimon wrote: “When governments control companies,
economic assets (companies, lenders and so on) over time are used to further
political interests – leading to inefficient companies and markets, enormous
favoritism and corruption.”
He went on: “Socialism inevitably produces stagnation,
corruption and often worse – such as authoritarian government officials who
often have an increasing ability to interfere with both the economy and
individual lives – which they frequently do to maintain power. This would be as
much a disaster for our country as it has been in the other places it’s been
tried.”
Socialism is set to be one of the
key issues of the 2020 election cycle. Donald Trump has already begun
campaigning against socialism and used his State of the Union address to
declare that “America will never be a socialist country.”
Business Today: sign up for a
morning shot of financial news
Read more
“It is absolutely obvious that a big chunk of [people] have been
left behind,” Dimon said last month. “Forty percent of Americans make less than
$15 an hour. Forty percent of Americans can’t afford a $400 bill, whether it’s
medical or fixing their car. Fifteen percent of Americans make minimum wages,
70,000 die from opioids [annually].”
In his letter, Dimon acknowledged capitalism’s “flaws” but
praised it as “the most successful economic system the world has ever seen”.
He wrote: “This is not to say that capitalism does not have
flaws, that it isn’t leaving people behind and that it shouldn’t be improved.
It’s essential to have a strong social safety net – and all countries should be
striving for continuous improvement in regulations as well as social and
welfare conditions.”
JP Morgan CEO Jamie Dimon takes on socialism, says it will lead to
an ‘eroding society’
PUBLISHED WED, JAN 22 20207:58 AM ESTUPDATED
WED, JAN 22 20208:57 AM EST
KEY POINTS
·
J.P. Morgan Chase CEO Jamie Dimon criticized socialism, saying
it leads to an “eroding society.”
·
Speaking at the World Economic Forum in Davos, Dimon told CNBC
that capitalism is not perfect but is capable of fixing the problems of today.
VIDEO01:59
Jamie
Dimon: ‘I don’t think people understand what socialism is’
Socialism
has failed where it’s been tried and ultimately leads to an “eroding
society,” J.P.
Morgan Chase CEO Jamie Dimon said Wednesday.With democratic socialist Sen. Bernie Sanders among the leaders in the Democratic presidential race and other candidates espousing similar-sounding ideas, the head of the nation’s biggest bank by assets said the idea of socialist control of the means of production would be detrimental to the U.S.
“I honestly don’t think they understand what socialism is,” Dimon told CNBC during a “Squawk Box” interview at the World Economic Forum in Davos, Switzerland, referring to a question about millennials.
VIDEO19:31
Watch
CNBC’s full Davos interview with JP Morgan Chase CEO Jamie Dimon
“Most
state-owned enterprises don’t do a particularly good job,” he added. “You look
around the world and they become corrupt over time. That doesn’t mean that
capitalism is perfect. That doesn’t mean that every public company is perfect.
No, there are flaws.”Sanders has been the most out front of the candidates in backing socialism, though many of his opponents in the Democratic race also back universal health care, increased business taxes and greater government control over private enterprise.
Dimon said he did not want to address any specific candidates. But he said that socialist governments traditionally have done a poor job allocating capital and end up backing politically popular endeavors and “bridge to nowhere” projects.
“Once you do that, you will have an eroding society,” he said.
“They do need to fix inner-city schools, infrastructure, health care,” Dimon added. “We can fix all of those in a capitalist society.”
Bernie Sanders Slams Jamie Dimon On
Socialism – They’re Both Wrong
Bernie
Sanders has hit back against Jamie Dimon's comments about socialism, but
they're both missing the point on Wall Street greed.
·
Bernie Sanders went after Jamie Dimon on Twitter
calling him a hypocrite for his comments on socialism.
·
Senator Sanders is not telling the whole truth
when it comes to Wall Street bailouts.
·
Jamie Dimon is also wrong as corporate welfare is
rampant, and creating a dangerous imbalance in U.S. society.
What is the
saying about people in glass houses? Jamie Dimon has been getting a lot of press for his comments on several economic topics at
the billionaire ski-meet, otherwise known as the World Economic Forum in Davos. Of
particular interest were his comments regarding socialism, of which the
JPMorgan Chase CEO and Chairman were very critical. The United States’ most
famous socialist, Senator Bernie Sanders, is not having it, and reminded Dimon
of a very inconvenient truth.
Bernie Sanders Stretches The Truth To Slam Jamie Dimon
While the above tweet will no doubt get Bernie Bros feeling the
Bern and pumping their fists, a note of caution. JPMorgan Chase did pay back
their bailout money, and Bernie Sanders must be referring to Wall Street as a
whole, not specifically Jamie Dimon’s bank, which only received $25 billion.
Dimon can
state that his bank was a profitable investment, as President Obama’s decision to trust the bank’s ability getting
back on its feet resulted in a profit for the government.
The JPMorgan Chase CEO Owes A Lot Of
His Considerable Wealth To Socialism
So Sanders is not telling it precisely as it is here. The point he
is really making paraphrases as “don’t insult the concept of receiving aid from
the government when your corporation went broke and used Wall Street food
stamps.” The senator has a point.
What truly
irks the everyday American is not that some people rise to the top of the
corporate ladder on Wall Street and earn billions. What annoys them is when
those CEO’s mess up, get everything wrong, screw over the working man and crash
the housing market, and still walk away with their vast compensation packages.
Yes, the taxpayer technically got most of it back, but a large
contingent of those people didn’t get the jobs or houses back that they lost in
the recession.
Fed Interventions Are Enabling Wall Street Recklessness, Again
The same
economic mistakes that required the Federal Reserve to put the U.S. economy on
life support have, in turn, stagnated wage growth and disproportionately
benefited the financial class that got so greedy in the first place.
Now that Jamie
Dimon has shown that JPMorgan paid back their bailout money, what’s to stop
them from taking excessive risks and blowing everything up again? Rinse and repeat, as Wall Street relies on government handouts
to catch it when it falls.
Long considered somewhat of a conspiracy theory, more and more
market voices are speaking up against the Fed’s interventions in financial
markets. Scott Minerd, the CIO of Guggenheim Partners, is about as mainstream a
figure as you can get in the hedge fund world, and he called the stock market a
“Ponzi scheme” in Davos.
You Can’t Cherry-Pick What Is
Socialism & What’s “Necessary”
So Bernie Sanders is absolutely right. Taxpayer funds were used to
make the rich richer but looks to be wrong that these were not a good
investment from perspective of taxpayer funds.
Jamie Dimon is
wrong because he doesn’t understand that he is himself, a billionaire product
of corporate socialism. CEOs love to talk about how corporations should legally be
treated as individuals, so we can probably just call it socialism.
A person who
is down and out in society is no different from a bankrupt Wall Street firm
when it comes to needing a handout. Whatever the result, or the amount in
question, they are all part of the same system.
Bernie Sanders
is right to tell you not to listen to people like Jamie Dimon, who criticize
socialism when they don’t need it, yet are first in line and full of excuses
when they do. Secondly, please don’t believe word for word everything Bernie
Sanders says about Wall Street, because he is often exaggerating to make his point.
Finally, it’s impossible to have an article about socialism and
not give former U.K. Prime Minister Margaret Thatcher the last word.
This article was edited
by Samburaj Das.
Last modified: January 23, 2020 9:29 AM UTC
Financial speculator & author living in the hills in
Los Angeles. J.D. but very much not a lawyer. Favorite trading books are
anything written by Jack Schwager. Email: bullishtulips@gmail.com,
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