New Executive Order Aimed at Deregulation Includes CFPB

Last week The White House released a Presidential Executive Order on a Comprehensive Plan for Reorganizing the Executive Branch. This is the latest in a series of memos and orders aimed at deregulation:

January 20 – Trump’s first day in office -- Chief of Staff Reince Preibus sent a letter to the heads of executive departments and agencies putting a hold on new regulations.

January 30 Trump signed his “2-for-1” Executive Order, stating that for every new regulation proposed, two old ones must be proposed for elimination.

February 2, a White House memorandum was released, titled “Interim Guidance Implementing Section 2 of the Executive Order of January 30, 2017, Titled “Reducing Regulation and Controlling Regulatory Costs.”

February 27, Trump Signed Another Executive Order, establishing regulatory reform task forces within federal agencies.

This new Order directs the Office of Management and Budget Director to propose a plan to reorganize governmental functions and eliminate unnecessary agencies, components of agencies, and agency programs. Agencies have 180 days to propose reorganization plans. The public will be invited to suggest improvements to the executive branch (the timetable is not clear for this), and within 180 days after the closing date for suggestions, the OMB Director must submit a proposal to the President.

The important difference with this Order is that it specifically refers to agencies “as defined in section 51(1) of title 5, United States Code.” The Section 51 definition says “’agency’ means each authority of the Government of the United States, whether or not it is within or subject to review by another agency…” [emphasis added].

Previous orders specifically excluded independent agencies, though compliance was suggested.

insideARM Perspective

This is an interesting Order as it relates to the Consumer Financial Protection Bureau, as it is issued against the backdrop of the PHH case, which is expected to determine the constitutionality of the CFPB’s leadership structure. That case now awaits a hearing en banc by the full D.C. Circuit. Oral arguments are set for May 24 (just about two months into the six months allowed by the current Executive Order to present plans to OMB).

The Trump administration made it clear that it views that case differently than the Obama DOJ, which supported the CFPB’s Director “removable only for cause” protection. On Friday the DOJ filed an Amicus Brief in the case, urging that this “for cause” removal provision be struck down.

The timing of the next step after that is unknown, but could certainly bump up against, or exceed, the deadline. Meanwhile, it is hard to imagine what kind of reorganization Director Cordray would suggest for his own embattled agency.

Meanwhile, many on both sides weigh in.

An interesting article posted last week in Forbes by Clyde Wayne Crews Jr., Policy Director at the Competitive Enterprise Institute, addressed the topic of regulatory ‘dark matter,’ which consists of ‘memoranda, guidance documents, notices, circulars, and administrative interpretations.’ Many have complained that the CFPB has engaged in rulemaking via these methods which skirt the lengthy public comment process. Crews is a fan of deregulation, and outlines pending Congressional action that address ‘dark matter’, including:

The Article I Regulatory Budget Act, sponsored by Sen. Mike Lee in the 114^th Congress, would provide for notice and comment for significant guidance, and for a private right of civil action in district court when one is affected by significant guidance not so labeled. The bill’s summary sheet explains that the Act will “Eliminate the abuse of regulatory ‘dark matter.’”

He also suggests a litany of other ways to address the loophole of “dark matter.”

On the other side, a recent article by Andrew Koppelman, Law Professor at the Northwestern University Pritzker School of Law, criticizes Trump’s approach (and to some degree, Republicans’ philosophy in general), suggesting that the administration is focusing only on “cost” of regulation but completely ignoring the “benefit” side of traditional “cost-benefit” analysis. He says,

There's room for reasonable disagreement with Obama's regulations. The calculation of both costs and benefits inevitably involves some guesswork. The cumulative effect of regulation can hamper businesses. The big difference between Trump and the standard conservatives' critique of Obama is that Trump's executive order holds, as a matter of principle, that benefits don't matter. Consumer fraud, tainted food, pollution, unsafe airplanes and trains, epidemic disease all have to be put up with, if stopping them would increase the costs of regulation.

He goes on to suggest that Libertarians have been duped by the President,

Freeing businesses to hurt people is not libertarian. The libertarians -- at least, the ones who don't see through Trump -- are being played. If the crippling of the state allows economic behemoths to do whatever they like to others, then what libertarianism licenses, in the garb of liberty, is the creation of a new aristocracy, entitled to hurt the commoners. This is just a different kind of mooching and looting.