[Senate Hearing 114-909]
[From the U.S. Government Publishing Office]
S. Hrg. 114-909
THE ADMINISTRATIVE STATE V. THE
CONSTITUTION: DODD-FRANK AT FIVE YEARS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON THE CONSTITUTION
OF THE
COMMITTEE ON THE JUDICIARY
UNITED STATES SENATE
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
JULY 23, 2015
__________
Serial No. J-114-26
__________
Printed for the use of the Committee on the Judiciary
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
www.judiciary.senate.gov
www.govinfo.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
53-397 WASHINGTON : 2025
COMMITTEE ON THE JUDICIARY
CHARLES E. GRASSLEY, Iowa, Chairman
ORRIN G. HATCH, Utah PATRICK J. LEAHY, Vermont, Ranking
JEFF SESSIONS, Alabama Member
LINDSEY O. GRAHAM, South Carolina DIANNE FEINSTEIN, California
JOHN CORNYN, Texas CHARLES E. SCHUMER, New York
MICHAEL S. LEE, Utah RICHARD J. DURBIN, Illinois
TED CRUZ, Texas SHELDON WHITEHOUSE, Rhode Island
JEFF FLAKE, Arizona AMY KLOBUCHAR, Minnesota
DAVID VITTER, Louisiana AL FRANKEN, Minnesota
DAVID PERDUE, Georgia CHRISTOPHER A. COONS, Delaware
THOM TILLIS, North Carolina RICHARD BLUMENTHAL, Connecticut
Kolan L. Davis, Chief Counsel and Staff Director
Kristine Lucius, Democratic Chief Counsel and Staff Director
SUBCOMMITTEE ON THE CONSTITUTION
JOHN CORNYN, Texas, Chairman
THOM TILLIS, North Carolina RICHARD J. DURBIN, Illinois,
LINDSEY O. GRAHAM, South Carolina Ranking Member
TED CRUZ, Texas SHELDON WHITEHOUSE, Rhode Island
DAVID VITTER, Louisiana CHRISTOPHER COONS, Delaware
AL FRANKEN, Minnesota
Noah J. Phillips, Republican Chief Counsel
Joseph R. Zogby, Democratic Chief Counsel
C O N T E N T S
----------
OPENING STATEMENTS
Page
Cornyn, Hon. John................................................ 1
Durbin, Hon. Richard J........................................... 3
Leahy, Hon. Patrick
Prepared statement........................................... 156
WITNESSES
Calabria, Mark A................................................. 12
Prepared statement........................................... 146
Gray, C. Boyden.................................................. 5
Prepared statement........................................... 32
Gupta, Deepak.................................................... 6
Prepared statement........................................... 77
Questions submitted with no response returned................ 157
Levitin, Adam J.................................................. 10
Prepared statement........................................... 127
Responses to written questions............................... 159
Rao, Neomi....................................................... 8
Prepared statement........................................... 107
APPENDIX
Items submitted for the record................................... 31
THE ADMINISTRATIVE STATE V. THE
CONSTITUTION: DODD-FRANK AT FIVE YEARS
----------
THURSDAY, JULY 23, 2015
United States Senate,
Subcommittee on the Constitution,
Committee on the Judiciary,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2 p.m., in
Room 226, Dirksen Senate Office Building, Hon. John Cornyn,
Chairman of the Subcommittee, presiding.
Present: Senators Cornyn [presiding], Tillis, Durbin, and
Franken.
Also present: Senator Lee.
OPENING STATEMENT OF HON. JOHN CORNYN,
A U.S. SENATOR FROM THE STATE OF TEXAS
Chairman Cornyn. This hearing of the Constitution
Subcommittee of the Senate Judiciary Committee is called to
order, and I thank all of our witnesses for being here with us
today. I look forward to an interesting exchange.
This week marks the 5th anniversary of the enactment of the
Dodd-Frank Wall Street Reform and Consumer Protection Act.
Eight hundred fifty pages long, 16 titles, vague standards on
critical issues, and requiring nearly 400 different rulemakings
and an alphabet soup of new bureaucracies, this law is too big
not to fail. Fail it has. When President Obama signed Dodd-
Frank into law, he said it would end ``too big to fail.'' But
it did not. The big banks are bigger, and the small banks are
saddled with regulations that make it hard to compete.
This perverse result should surprise no one. From the
start, Dodd-Frank was a wish list of new administrative
authority, much aimed at problems that did not cause the
financial crisis. As I tell the community bankers in Texas,
``Wall Street may have been the target, but you are the
collateral damage.''
Today's hearing is intended to explore many of the
constitutional issues raised by Dodd-Frank. In its conception
and implementation, Dodd-Frank would be unrecognizable to our
Founding Fathers. Take the Consumer Financial Protection
Bureau: vague and vast authority, Congress has no power of the
purse, the President cannot remove the Director at will, and
courts must defer broadly to the Bureau, even though and even
when it lacks expertise. These are serious constitutional
flaws, and the results are an affront: a President that
violated the Constitution to appoint the Director; a Bureau
collecting sensitive financial data on millions of Americans
without adequate protections or legally required approval;
employees reportedly being told to redo examinations because
they did not find violations; and a Director who upsets long-
standing precedent and overrules his subordinates to increase
the liability of targeted businesses.
However much this should shock us, it should not surprise
us. This is what happens when you give incredible power to
unaccountable bureaucrats.
James Madison, of course, wrote in ``Federalist 47'', ``The
accumulation of all power, legislative, executive, and
judicial, in the same hands, whether of one, a few, or many,
and whether hereditary, self-appointed, or elective, may justly
be pronounced the very definition of tyranny.''
Our Constitution clearly separates powers and for good
reason. Dodd-Frank does not. The Financial Stability Oversight
Council is another example. Based on vague standards and no
real check, the FSOC decides which companies the Government can
subject to additional regulation and liquidate under Title II's
Orderly Liquidation Authority, a process itself involving
frightening violations of due process.
For that, we have a solution. Senators Toomey, Lee, Crapo,
and I have introduced the Taxpayer Protection and Responsible
Resolution Act which would replace Title 2 with a bankruptcy
process that announces the rules in advance, gives parties due
process, and protects the rule of law.
Let us now turn to today's witnesses:
Ambassador C. Boyden Gray is a founding partner of Boyden
Gray & Associates. A graduate of Harvard University and the
University of North Carolina Law School, he served in the
Marine Corps and then clerked for Chief Justice Earl Warren. He
has had a distinguished career as a regulatory lawyer and
served as, among many other positions, Counsel to President
George Herbert Walker Bush. In litigation regarding the
constitutionality of Dodd-Frank, Ambassador Gray represents the
State National Bank of Big Spring, one of our wonderful
community banks in Texas.
Mr. Deepak Gupta is founding principal of Gupta Wessler. He
graduated from Fordham University and Georgetown University Law
Center and directed the Consumer Justice Project at Public
Citizen. From 2011 to 2012, Mr. Gupta served as senior
litigation counsel and senior counsel for enforcement strategy
at the CFPB.
Professor Neomi Rao teaches at George Mason University
School of Law. She graduated from Yale University and the
University of Chicago Law School. She clerked for Judge Harvie
Wilkinson on the Fourth Circuit and later for Justice Clarence
Thomas at the U.S. Supreme Court. Professor Rao has served this
Committee as Counsel for Nominations and Constitutional Law and
as Associate Counsel in the Office of Counsel to the President.
Professor Adam Levitin teaches at Georgetown University Law
Center. He graduated from Harvard, both undergraduate and law
school, and received a graduate degree from Columbia University
as well. Professor Levitin clerked for Judge Jane Roth on the
U.S. Court of Appeals for the Third Circuit and served as
Special Counsel to the Congressional Oversight Panel that
supervised the Troubled Asset Relief Program, known as TARP,
and currently serves on the CFPB's Consumer Advisory Board.
Dr. Mark Calabria is the director of financial regulation
studies at the Cato Institute. He holds a Ph.D. in economics
from George Mason University and served as Deputy Assistant
Secretary for Regulatory Affairs at the U.S. Department of
Housing and Urban Development and after that as a member of the
professional staff of the Committee on Banking, Housing, and
Urban Affairs.
I welcome all of you again, and I appreciate your being
here and for sharing your expertise and testimony with the
Committee.
Let me turn to the Ranking Member, Senator Durbin, for any
comments he would care to make.
OPENING STATEMENT OF HON. RICHARD J. DURBIN,
A U.S. SENATOR FROM THE STATE OF ILLINOIS
Senator Durbin. Thanks, Mr. Chairman. The title of this
hearing, ``The Administrative State v. The Constitution: Dodd-
Frank at Five Years,'' sounds like a prize fight. But the truth
is the main event we are watching these days is the Republican
Party versus Wall Street reform.
It is no secret that since the Dodd-Frank Wall Street
Reform and Consumer Protection Act was enacted 5 years ago,
Republicans have been obsessed with ending it and really
turning Wall Street loose again.
The Republican Party platform specifically calls for the
repeal of this law. The top three members of the Senate
Republican Leadership were all at one point cosponsors of a
bill entitled ``The Dodd-Frank Repeal Act.'' Just a few days
ago, in the GOP weekly address, House Financial Services
Committee Chair, Jeb Hensarling, said, quote, ``It is time we
commit to making sure this anniversary is Dodd-Frank's last
anniversary.''
It seems the GOP is committed to gutting Dodd-Frank any way
they can, either in Congress, in the courts, or they hope under
a Republican President who will have the ability to appoint or
remove the heads of regulatory agencies. I do not understand
this hostility to Wall Street reform. Some people have a very
short memory.
What do they have against the Consumer Financial Protection
Bureau, the only Federal agency that puts the interests of
consumers first? This agency has taken on credit card
companies, payday lenders, for-profit colleges, and others who
have tried to trick and trap consumers with rotten financial
products. Holly Petraeus has made her work at the Consumer
Financial Protection Bureau a focus on military--men and women
in the military and their families being exploited. What is
wrong with having an agency that really is trying to protect
our military families?
The CFPB so far has achieved over $10 billion in relief for
17 million consumers through its enforcement actions. Is that
bad news or good news? I think it is good news.
Have the Republicans forgotten why Dodd-Frank was created?
In 2008, we were standing on the precipice of the greatest
economic meltdown in the United States of America since the
Great Depression. How did we get there? It started years
earlier with the growth of subprime mortgages, which were often
fueled by predatory lending practices.
I remember many years ago debating a previous Senator from
Texas, Phil Gramm, on the floor of the U.S. Senate in 2001,
over an amendment I offered to curb predatory subprime lending.
He fought my amendment, and it failed by one vote. Senator
Gramm said, and I quote, ``Some people look at subprime lending
and see evil. I look at subprime lending, and I see the
American dream in action.''
Senator Gramm's view prevailed. Subprime lending continued,
and it did not take long for mortgage companies to start
securitizing these shaky mortgages and for Wall Street to
create unregulated derivatives based on them. It was a huge,
fast-growing house of cards that the financial industry put
together, and our regulatory system was unprepared. The
financial regulators were either co-opted or behind the curve.
It all fell apart a few years later in 2008, when one financial
giant after another collapsed: Bear Stearns, Lehman Brothers,
Merrill Lynch, AIG, Washington Mutual, Wachovia, and a host of
smaller entities. It was a time of panic. Credit markets froze;
the stock market swung wildly. We went into a recession. We
were losing 800,000 jobs a month in the United States. Millions
saw their home values diminish or lost their homes in
foreclosure. They also lost a substantial part of their
savings.
Who suffered the most from Wall Street's misbehavior? Main
Street Americans. Unemployment rose above 10 percent, 8 million
jobs lost. GDP, home values, and household wealth dropped
significantly. Foreclosures in the millions.
It was clear we had to get out of the recession, and we
did. Our economy has stabilized since those dark days, thank
goodness. It was also clear we needed to reform our financial
regulatory system and curb risky, predatory financial
practices. Congress embarked on a deliberate effort to pass
Wall Street reform. We spent 7 months on Dodd-Frank between the
introduction of the House bill and its enactment in July 2010.
The legislation was thoroughly debated in Committee, on the
floor, and in conference. Much thought went into crafting
reforms that comply with the Constitution. Dodd-Frank does not
place unrestrained power in the hands of regulatory agencies.
While the law includes commonsense mechanisms to keep Wall
Street and its allies from co-opting regulators, there are
meaningful checks and balances.
With respect to this Committee, the Constitution
Subcommittee, constitutional challenges have been brought
against Dodd-Frank. I am happy to debate their merits again
today. I note that in at least four separate cases--one in
California; one in Indiana; two in my home State of Illinois--
Federal district courts have already rejected constitutional
challenges to the Consumer Financial Protection Bureau, and
none of the other constitutional challenges to Dodd-Frank's
core provisions have yet to gain any traction in court.
I will also note the irony of this effort to overturn Dodd-
Frank. The other party has long complained about judicial
activism, but it has now become the standard operating
procedure for the Grand Old Party. When they lose in the court
of public opinion, they ask judges to overturn the law, and
that is what happened with the Affordable Care Act. That effort
was doomed to failure, and so is this one.
In closing, I would say this: When the banking industry
comes to Capitol Hill and asks Congress to undo Wall Street
reform and rewrite the rules their way, I hope my colleagues
will remember those grim and ghastly days of 2008. We almost
went over the edge of the cliff because of Wall Street's tricks
and rigged games and the inability of our regulators to stop
them. We do not need to go back to those days. We ought to move
forward.
Chairman Cornyn. As you can see, Senator Durbin and I are
of one mind on the issues that are raised here. We look forward
to hearing from the witnesses, but first will you stand and be
sworn? Raise your hand. Do you affirm that the testimony you
are about to give before the Committee will be the truth, the
whole truth, and nothing but the truth, so help you God?
Ambassador Gray. I do.
Mr. Gupta. I do.
Professor Rao. I do.
Professor Levitin. I do.
Dr. Calabria. I do.
[Witnesses are sworn in.]
Chairman Cornyn. Thank you very much. Mr. Gray, we will
hear from you first, please.
STATEMENT OF HON. C. BOYDEN GRAY, FOUNDING
PARTNER, BOYDEN GRAY & ASSOCIATES, PLLC,
WASHINGTON, DC
Ambassador Gray. Thank you very much for the opportunity to
talk about these issues, which I think are very, very
important. My written testimony goes through the details, which
I think are fairly well known as to why I and others, some on
this panel, think that there are portions of Dodd-Frank that
are unconstitutional. I just want to make some preliminary
comments about the result of this.
The result of the lack of oversight that is so much part of
this legislation is a regulatory flood which is very hard to
challenge, here, in the courts, in the executive branch. This
leads to a bias for large institutions which can afford the
regulations and which in turn leads to larger Government to
monitor what these large institutions do, and this is a bad
spiral. The biggest banks have grown, doubled in size since the
crisis, and the smaller banks--as you say, the collateral
damage--have been disappearing. With them the consumer
financing or small business financing that is so necessary for
job growth in this country; 80 percent of new jobs are small
business. The community banks have really suffered.
The biggest banks, Wall Street, you might say, does
complain loudly about this legislation, but they do benefit.
The chairman of one of the largest banks has referred to Dodd-
Frank as his ``moat''--that is, his protection against
competition. Another chairman of one of the largest banks has
said, ``Never have regulatory barriers to entry been so high as
they are now.'' I do not think either of those banks is anxious
to get rid of their protection against competition.
The Fed has reacted, I think, well in recent months to
raise the capital requirements for these very large
institutions, but that, unfortunately, does not help the
community banks at all. They never were at fault for any of
these loans. These loans were the result of the insatiable
hunger by Fannie Mae and Freddie Mac, which were not addressed
in this legislation, for subprime loans. The community banks
now really cannot make a lot of loans like they used to or
issue a lot of mortgages as they used to because character
loans, which were the basis for the community banking system in
the United States, are basically off limits. I think that is a
great loss. There are studies that show that character loans
have far greater reliability than cookie-cutter, check-the-box
loans, and that loss is very, very serious.
The problems with the Consumer Bureau are illustrative of
other sections of Dodd-Frank, including Sections 1 and 2,
Titles I and II. There is no executive branch oversight. There
is no removal authority on the part of the President. You here,
in Congress, are handcuffed because the money comes from the
Fed, not from you. The courts are required to give deference to
whatever the consumer agency wants to do, even at a time when
the courts are raising serious, serious questions about the
propriety of the doctrine of deference.
Some say, ``Well, there is congressional oversight,'' but
congressional overseers get answers to questions like, ``Well,
what does that matter to you?'' I think Cordray was heard to
say to one question about the size of the cost of their new
offices.
We see the results, of course, with the data gathering,
which is detailed in my testimony and in others', and I think
that is a dangerous thing. We know about the disappearance of
the smaller banks. I was gratified to read that Barney Frank
suggested that maybe designating an ordinary insurance company
as a SIFI may have been overreach. I think there is a lot more
than just that one instance.
Thank you very much. I would be happy to answer whatever
questions you have.
[The prepared statement of Ambassador Gray appears as a
submission for the record.]
Chairman Cornyn. Thank you, Mr. Gray.
All of your written statements will be made part of the
record, without objection. Mr. Gupta.
STATEMENT OF DEEPAK GUPTA, FOUNDING
PRINCIPAL, GUPTA WESSLER PLLC, WASHINGTON, DC
Mr. Gupta. Chairman Cornyn, Ranking Member Durbin, Members
of the Committee, thank you for the opportunity to testify here
today on the constitutionality of Dodd-Frank, and, in
particular, Dodd-Frank's crown jewel, the CFPB, where I was
senior counsel 3 years ago. My testimony makes three basic
points.
The first thing I want to address is the subject of this
hearing, the constitutionality, the constitutional challenges
to Dodd-Frank. In my view, these challenges are extreme and
utterly lacking in legal merit, and the cases, the four cases
that Senator Durbin mentioned, I think bear that out. The
courts had no difficulty dispatching these challenges.
In the 5 years since the enactment of Dodd-Frank, its
political opponents have invoked every conceivable
constitutional principle--from the separation of powers, to
procedural due process, to the void-for-vagueness doctrine--in
an effort to turn back the clock on financial reform and
consumer protection. These efforts, as I mentioned, have
failed, and they have not got the buy-in of major financial
institutions or trade groups. In fact, in the D.C. Circuit
case, the Big Spring case, the most high profile of these cases
in which Ambassador Gray represents the plaintiffs, there are
no amicus briefs from any of those organizations or
institutions. The legal challenges we are talking about today
are truly at the fringe.
Unfortunately, I think they are emblematic of the moment
that we live in. As Senator Durbin mentioned, we live in a
moment in which every major political disagreement, it seems,
gets constitutionalized, from health care to immigration, and
now financial reform and even consumer protection are no
exception.
In this hearing I hope we can keep two things separate from
each other. We can have a legitimate policy debate about the
Dodd-Frank Act and about consumer protection. Let us not
confuse those debates with constitutional debates. It is very
important that we keep them separate lest we make the courts
the only branch that has the final answer on these kinds of
topics. I think conservatives should appreciate that as well as
people on the other side of the aisle.
The principal constitutional argument that is made is
really a kind of disguised nondelegation argument. The argument
is basically that we are handing power to these administrative
agencies and the grant of power is too vague or too broad. That
kind of argument, that nondelegation theory, has not been
successfully invoked since 1935 at the height of judicial
skepticism to the New Deal. That shows you how extreme it is.
Even Justice Scalia has explained in a 2001 opinion that the
Court has never felt qualified to second-guess Congress
regarding the degree of policy judgments that can be left to
agencies.
The next batch of challenges concerns Presidential removal.
The complaint here is that the President does not have enough
control over the CFPB because the Director can only be removed
for cause. This argument, too, seeks to turn the clock back to
the same year, 1935. That is the year in which the Supreme
Court in a case called Humphrey's Executor held that the exact
same language, limiting removal of Federal Trade Commissioners,
met constitutional scrutiny.
At the end of the day, these constitutional arguments on
Dodd-Frank and on the CFPB are not so much attacks on those
particular pieces of legislation or agencies, but on the very
foundations of the modern administrative State.
The second point I want to make, turning now away from the
constitutional precedent, is that the basic accountability
critiques about the CFPB are groundless, and we should all care
about whether our institutions of Government are accountable
and transparent. The CFPB was specifically designed to resist
capture by special interests. It is at least as accountable to
the public as were the existing banking regulators that were
captured before the crisis, and in several respects, the Bureau
is far more accountable. Its budget is capped. Its rules can be
vetoed by a committee of other regulators, something that is
not true of any other agency in Washington. It is subject to
special small business reviews that no other financial
regulator faces.
The last point I want to make is something that is more
immediate to what is going on in this building, and that is,
you know, the CFPB has already proven that it is working for
consumers. There are efforts to gut the agency outside the
normal kind of legislative process. Again, just as with the
constitutional challenges, those that do not have the votes to
overturn the law are trying to challenge it in the courts. They
are also trying to use the back door of the appropriations
process to gut the agency.
I just want to flag one issue because I think it has not
gotten the attention it deserves, and that is, the hard work
that the CFPB is doing to fulfill its statutory mandate to look
at the fine print of consumer contracts where there are
arbitration clauses--and issue, I know, Senator Franken, you
have worked on. There is an effort now in the House to use
appropriations language to kill that effort by the CFPB. It
should be stopped.
Thank you for the opportunity to testify today, and I look
forward to answering your questions.
[The prepared statement of Mr. Gupta appears as a
submission for the record.]
Chairman Cornyn. Thank you. Professor Rao.
STATEMENT OF NEOMI RAO, ASSOCIATE
PROFESSOR, GEORGE MASON SCHOOL OF LAW
Professor Rao. Thank you very much. Chairman Cornyn,
Ranking Member Durbin, distinguished Members of this Committee,
thank you for inviting me to testify on the constitutionality
of Dodd-Frank Wall Street reform.
Dodd-Frank has raised serious constitutional questions
since its inception, but today I will focus on the problems
with the Consumer Financial Protection Bureau. This Bureau's
structure and power provides an unfortunate case study of this
hearing's topic: the Administrative State v. the Constitution.
Five years of regulation and enforcement demonstrate how
the lack of constitutional accountability encourages the Bureau
to exceed its legal authority and undermine the predictability
and stability of the rule of law. Let me just begin with a few
first principles.
Our Constitution is, of course, the supreme law of the
land. All three branches of the Federal Government have a duty
to ensure the constitutionality of administration as they
exercise their respective powers. Importantly, this means the
Supreme Court has no monopoly on constitutional interpretation,
and judicial doctrine does not exhaust the meaning of the
Constitution.
Thus, in determining whether the CFPB is constitutional and
whether it should be reformed or abolished, Congress may be
informed by Supreme Court precedent, yet it need not be limited
by it.
Let me turn now to some of the problems with the CFPB,
which have already been mentioned.
First, the Bureau enjoys an unprecedented degree of
independence from Presidential control and congressional
oversight. Such independence, however, finds no place in the
Constitution. The Constitution creates three distinct branches
of Government, but no fourth branch for independent
administrative expertise.
The CFPB is an agency that implements the law and,
therefore, it exercises executive power within the executive
branch. Yet the President cannot remove at will the Director of
the CFPB. In addition, the agency lacks meaningful
accountability to Congress because the Bureau sets its own
budget and, therefore, is not responsive to the appropriations
process.
What can be done about this super independence? Judicial
challenges, such as the one brought by Ambassador Gray, are one
possibility. The Court could restore the CFPB's accountability
by invalidating the Director's removal protections. This remedy
finds significant support in the Supreme Court's recent
decision in Free Enterprise Fund v. PCAOB. Striking down the
removal limits would be a limited judicial remedy that would
not invalidate the agency or its regulatory mandate. It would
restore a kind of constitutional accountability to the
President.
Supporters of the CFPB have defended its constitutionality
by emphasizing that the Court is unlikely to fix these problems
of independence. They cite jurisdictional limits like standing
and cases like Humphrey's Executor that uphold removal
restrictions.
While I have argued that courts should address these
constitutional problems, I agree that these lawsuits face an
uphill battle. This, however, only suggests the urgency of
congressional action. Congress can unravel the dangerous
regulatory independence created by Dodd-Frank, and, indeed,
there are many bills proposing to do just that.
Another serious flaw with the CFPB concerns the breadth of
its delegated authority, and I am not disguising my
nondelegation arguments. I am bringing them right out in front.
For example, the Bureau can regulate ``abusive practices,'' a
term the Bureau has almost complete discretion to define.
Mr. Gupta and Professor Levitin express a commonly held
view that the nondelegation doctrine is dead, yet the Supreme
Court has steadfastly maintained the importance and centrality
of the principle that Congress cannot delegate its exclusively
legislative power.
Admittedly, the Court's nondelegation doctrine has
permitted many expansive delegations under the toothless
intelligible principle standard, but this is only a rule for
courts. It reflects the limits of the judiciary, and it also
reflects deference to Congress' judgment about structuring
agency discretion. These institutional limitations simply do
not apply to Congress.
Congress can withdraw delegated authority or else provide
more specific guidance about its enforcement. This would
promote rule of law values by providing more notice to
regulated entities. Defining core statutory terms would also
eliminate the Bureau's ``I know it when I see it'' approach to
enforcing the abusive standard.
Supporters of the CFPB have suggested that nondelegation
arguments are on the fringe. Of course, they are only on the
fringe if one believes that the full meaning of the
Constitution is reflected in Supreme Court caselaw. It never
has been. Moreover, judicial doctrine can and does change. The
Free Enterprise Fund case, decided in 2010, suggests a
willingness to reconsider Humphrey's Executor and agency
independence. Just this past term, Justices Thomas and Alito
stressed the importance of the nondelegation principle to
individual liberty.
May I have another moment?
The constitutional problems here have real-world urgency
because an agency lacking accountability will predictably
expand its powers beyond its legal authority. The CFPB's
massive data collection, its circumvention of statutory limits,
its Orwellian enforcement tactics--all reflect an agency that
answers to no one.
Let me just be clear that today my arguments are not simply
about the particular policies of the CFPB. The CFPB's policies
may be destroying various markets, as critics contend, or it
might be defending the underdog consumer, as its supporters
say. It is precisely the function of our accountable lawmaking
process to reflect these diverse interests. By contrast, an
independent agency cuts off this debate and compromise.
Moreover, the agency's expertise is not a substitute for
representative Government. Expertise does not answer the hard
questions about what the agency should do and at what cost.
These are questions that are invariably laden with economic,
legal, social, political, and even moral judgments. There is no
independent standpoint with the CFPB, just raw authority of the
bureaucrats.
Fixing these constitutional infirmities does not require
tearing down the administrative state. It only requires that
administration occur with proper deliberation and
accountability.
Thank you for this opportunity to testify. I look forward
to your questions.
[The prepared statement of Professor Rao appears as a
submission for the record.]
Chairman Cornyn. Thank you. Professor Levitin.
STATEMENT OF ADAM J. LEVITIN,
PROFESSOR OF LAW, GEORGETOWN UNIVERSITY
LAW CENTER, WASHINGTON, DC
Professor Levitin. Chairman Cornyn, Ranking Member Durbin,
Members of the Committee: Today's hearing is on the
constitutionality of the Dodd-Frank Act. Simply put, there is
no credible constitutional problem with Dodd-Frank.
While the Act does create some novel administrative
structures, the financial regulatory world is full of agencies
that do not conform to hornbook administrative law paradigms.
None of these agencies have previously caused constitutional
consternation. The Office of the Comptroller of the Currency,
for example, has been around for over 150 years without a
constitutional challenge despite being equivalently sheltered
from Presidential and congressional control as today's bugbear,
the Consumer Financial Protection Bureau.
The CFPB was deliberately designed to be somewhat
politically insulated, with a single Director and independent
funding. A point that was made repeatedly in the debates
leading up to the enactment of the Dodd-Frank Act was that the
existing Federal financial regulators were totally ineffective
at consumer protection, in part, because of internal deadlock,
regulatory capture, and political pressures.
Congress recognized that consumer interests versus banking
interests were inevitably a David-versus-Goliath mismatch.
Therefore, if the CFPB were left subject to the horse trading,
log rolling, and hostage taking of the appropriations process,
the Bureau would never be effective.
As it happens, the CFPB is one of the most dynamic,
innovative, and effective agencies in the entire Federal
Government. To illustrate, consumer financial protection
enforcement actions in the decade before the CFPB was created
totaled far less than $1 billion. In 4 years, the CFPB has
already obtained over $11 billion in consumer relief, and the
Bureau is the only financial regulator to finish its Dodd-Frank
rulemakings on schedule. Clearly, a motivated and politically
insulated agency produces better results, and nothing in the
Constitution provides that regulatory agencies must be designed
to be as ineffective as possible.
While the CFPB is politically insulated, that does not mean
it is not subject to oversight. The CFPB is subject to
congressional budget controls, just not through the
appropriations process. If Congress wants to change the budget,
it has to take affirmative legislative action. That would also
be what is required were Congress to appropriate funds for the
Bureau. Nothing in the Constitution requires that an agency be
subject to appropriations, and, indeed, none of the Federal
bank regulators are subject to appropriations.
The CFPB has a single Director, but the Constitution does
not require a multi-member commission. The Comptroller of the
Currency is not a commission, for example.
The CFPB's Director is removable only for cause, but,
again, that is a standard that the Supreme Court upheld in
Humphrey's Executor. The CFPB is subject not only to the usual
checks and balances on administrative agencies, but also to
special ones. The usual Administrative Procedures Act
requirements and judicial review apply to CFPB rulemakings and
adjudications.
The CFPB is the only Federal financial regulator required
to go through the SBREFA rulemaking process or subject to an
FSOC veto on its rulemakings or subject to an annual GAO audit.
The CFPB is also, of course, subject to the usual oversight
exercised by Congressional Committees such as this one. Most
importantly, Congress is always free to amend Title X of the
Dodd-Frank Act. Just get the votes.
There really is not much to say about the constitutionality
of the CFPB or any of the other parts of Dodd-Frank, and, you
know, it is not surprising that there has been little noise on
these issues aside from Ambassador Gray's lawsuit. If the Dodd-
Frank Act were so patently unconstitutional, do you not think
that the American Bankers Association or the Consumer Bankers
Association or the ICBA or CUNA or some of the major banks
themselves would have brought litigation? None of them have.
Surely a lawsuit would have been a lot cheaper for Citibank,
for example, than the $700 million settlement that it entered
into with the CFPB this week. Not one of these entities has
even filed an amicus brief in support of Ambassador Gray's
suit.
Let us be clear about what the real issue is behind the
trumped-up constitutional challenges to the Dodd-Frank Act. The
issue is not principled concerns about the CFPB's
constitutionality. Instead, the issue is that certain
businesses want to be able to continue profiting from illegal
practices against their customers. The Constitution is not
being invoked in any sort of principled way to protect
fundamental liberties. Instead, it is being cited as part of a
campaign to preserve ill-gotten corporate profits.
You do not need to take my word for it. Just read the
published scholarship of Professor Rao. She has actually
written that the motivation for Ambassador Gray's litigation
against the CFPB is to eliminate the CFPB rather than to
correct any alleged constitutional defects.
Reasonable minds can differ about the policy choices
embodied in the Dodd-Frank Act, and if the detractors of the
Act can get enough votes, they can change those policies. The
constitutionality of the Act is not seriously in question.
I look forward to your questions and, in particular, to
have the chance to address the uproar over CFPB data
collection. Thank you.
[The prepared statement of Professor Levitin appears as a
submission for the record.]
Chairman Cornyn. Thank you. Dr. Calabria.
STATEMENT OF MARK A. CALABRIA, PH.D.,
DIRECTOR OF FINANCIAL REGULATION
STUDIES, CATO INSTITUTE, WASHINGTON, DC
Dr. Calabria. Chairman Cornyn, Ranking Member Durbin, and
distinguished Members of the Subcommittee, I thank you for the
invitation to appear at today's important hearing. I also want
to thank the Subcommittee for its interest in hearing from a
nonlawyer. I like to think the Constitution is important to all
of us, not just lawyers. Just in case there are any tough
constitutional questions, I brought my Cato pocket
Constitution.
Over the many years I have worked on financial policy, one
of the most striking elements continues to be the vast
delegation of actual decision-making to executive branch and
so-called independent agencies. I would actually agree with
some of my colleagues that the CFPB is not new because we have
been doing this with a lot of other agencies for a long time,
and that is part of the problem.
While I share some of the concerns raised, I want to focus
my time on the CFPB, particularly two aspects, but I do want to
emphasize in no way should this be interpreted that I do not
think there are other flaws in the Act or that there are other
flaws of the CFPB. I am going to quickly talk about the funding
structure and the bulk collection of consumer data.
As the Committee has heard, the CFPB sets up a very unusual
process for funding where it is outside of the budget control,
it is outside of the appropriations process. As we have heard,
this is argued to be protective of the CFPB from Wall Street. I
will set aside the fact that Wall Street is actually not under
the jurisdiction of the CFPB. It remains at the SEC and the
CFTC. More importantly, the last time I checked, I could not
find a single Wall Street lobbyist sitting on the Senate
Appropriations Committee. Looked a couple times. Could not find
any.
What I did see, however, was earnest, hardworking Members
on both sides of the aisle trying to do the difficult and
sometimes thankless job of allocating our Federal resources.
Let me say I have the full confidence in the Chair, Ranking
Member, and other Members of the Financial Services
Subcommittee of the Appropriations Committee to competently
carry out the job of allocating resources to the CFPB. I have
no doubt they will be able to do that job effectively, whoever
is in the majority.
Turning to the data collection, many Members will well
remember 9/11. I remember it. I was in this building. One of
the things that came out of 9/11, the PATRIOT Act, was a vast
expansion of data collection by the Federal Government. We were
told that only if we had had more information and more data,
those attacks could have been avoided. Yet as the 9/11
Commission revealed, it was not a lack of data. It was a lack
of connecting the dots, the unwillingness to connect the dots.
Similarly, the financial crisis was met with the same
demand for more data as if the overheated housing markets and
mortgage markets were not obvious enough from the generally
available aggregate data that problems were coming. I will
certainly emphasize, as a critic of Dodd-Frank, and as someone
who spent his years up here trying to stop the crisis from
happening, in no way do critics of Dodd-Frank, certainly
myself, want to relive it. What we want to do is avoid another
crisis.
Unfortunately, the CFPB has become the lead prophet for
this false idol of more data. As GAO has reported, the CFPB has
engaged in at least 12 large-scale data collection efforts. At
least three of these directly identify individual consumers.
The remainder you can combine outside information and identify
individual consumers. In my opinion, I do not believe these
collections comply fully with the Right to Financial Privacy
Act.
Let me also say as a former Federal employee and one
subject to the recent OPM data breach, let me clearly say I do
not trust the CFPB with my personal data either. In fact, I do
not want any of the Government to have my personal data.
Unfortunately, in consolidating all this financial data in
one place, the CFPB has basically created one-stop shopping for
hackers and leaves consumers at the risk of identity theft and
even extortion from hackers.
Of course, that is just the risk from outside the CFPB.
Unfortunately, the CFPB's data collection efforts, particularly
in the area of credit cards, in my opinion poses significant
threats to our Fourth Amendment protections. As Justice Douglas
observed in his dissent to California Bankers, ``A checking
account--may well record a citizen's activities, opinions, and
beliefs as fully as transcripts of his telephone records.'' Of
course, credit cards are today's checks.
Such concerns are not simply the reflections of the
Watergate-era. As recently as 2012, Justice Sotomayor in her
concurrence to United States v. Antoine Jones correctly
observed that, quote, ``Awareness that the Government may be
watching chills associational and expressive freedoms. The
Government's unrestrained power to assemble data that reveal
private aspects of identity is susceptible to abuse.'' I think
that Justice Sotomayor was underexaggerating the threat there.
She also, in her concurrence, gave the example of identifying
medications purchased by online retailers. Of course, such a
purchase could potentially be identified within the CFPB's data
base of credit card accounts.
For a variety of reasons, the CFPB has become a highly
partisan issue. Were it to use the financial records of its
critics in an attempt to silence or intimidate these critics,
it would not be the first agency to do so.
As Justice Thurgood Marshall sadly observed, ``The
technique of examining bank accounts to investigate political
organizations is, unfortunately, not a rare one.''
The CFPB should end these sweeping data collections. I do
not think they are needed for--they could actually try to
respond to the consumer complaints more often. Plenty of
consumer complaints out there.
Let me also end with saying, you know, if I thought that
the benefits of Dodd-Frank outweighed the costs, I would be the
first to stand up and applaud it. If I thought it would stop
future financial crises from happening, I would be the first to
stand up and applaud it. In my opinion, if we continue along
the path that we are going on today, we are certain to have
another financial crisis in the next 10 years that will be
worse than the last one. Thank you.
[The prepared statement of Dr. Calabria appears as a
submission for the record.]
Chairman Cornyn. I thank all the witnesses for their
testimony. We will go with 5-minute rounds, and I will start.
All of us who serve in the Congress have taken an oath to
uphold and defend the Constitution of the United States of
America, and I find it odd that some of the witnesses would say
that only the courts can decide or consider questions of
constitutionality, particularly given the fact that courts by
the limitation of their jurisdiction to people with standing,
ripe cases, can adjudicate cases or controversies. Clearly,
Congress' authority is much more broad, is plenary, and so I
think it is entirely appropriate for us to consider the
constitutionality of these laws, even in the absence of any
litigated case that would raise those issues.
Ambassador Gray, perhaps you can start. We have heard from
some of the witnesses the purposes for which Dodd-Frank was
passed, and most of the concerns, like those raised by the
Ranking Member, had to do with the subprime crisis, the credit
agencies on Wall Street that graded the paper that was then
bought by investors, and the house of cards that was created
that eventually collapsed.
Can you tell me what part of that that the State National
Bank of Big Spring played?
Ambassador Gray. It played no part whatsoever. None. I do
not think any community bank contributed to the crisis at all,
but they are the ones who have suffered--have suffered the
most. The answer is nothing at all.
Chairman Cornyn. I believe, Ambassador Gray, you alluded to
the number of community banks that are simply disappearing. In
States like mine, in rural areas in particular, where the costs
of compliance with this new regulatory scheme have simply been
so burdensome, many community banks have simply ceased to exist
or have been bought by other institutions.
Professor Rao, Mr. Gupta, and Mr. Levitin said this
Committee does not have really any business raising
constitutional questions. It strikes me that, especially given
the nature of the regulatory state, with all of the protections
given to litigants in a court of law, questions of due process,
notice, and a right to be heard, the right to be heard by an
impartial adjudicator, not just at the first instance but also
on appeal, we have seen many instances here of late, for
example, like the Securities and Exchange Commission that has
been criticized for basically being the judge and jury and
executioner without any sort of independent view of the case
and an opportunity for people to be afforded some of the basic
elements of what we would consider to be due process.
Would you comment on that, please?
Professor Rao. Sure. Thank you. Thank you, Chairman Cornyn.
Your comments raise one of the other very significant problems
with the CFPB, which, as you say, combines all the three
functions of the Federal Government into one. It can make the
rules, which is a type of legislative function. It gets to
execute and enforce those rules, which is an executive
function. It, of course, gets to adjudicate.
You know, our Framers separated powers precisely so that
there would be checks and balances in the exercise of Federal
power. An agency that combines all the powers of the Federal
Government into one does not have those checks and balances.
That often leads to abuse, as some of the filed lawsuits have
indicated.
Chairman Cornyn. Mr. Gupta, I appreciated your testimony. I
would just like to ask, given the challenges that someone in a
bank, a financial institution, let us say a community bank like
the one that Ambassador Gray represents, given the challenges
that they have of getting essentially a fair trial in the
administrative process, number one, the people writing the rule
are not elected, unlike Members of this panel that can be
unelected if people do not like what we are doing, along with
the deference that the courts give under the Administrative
Procedures Act to the fact finding, and even under the Chevron
case, a deference in terms of interpreting the law where the
law might otherwise be considered ambiguous, along with no
opportunity for an appeal before an impartial third party, much
as you would, let us say, in a court of law. Isn't the deck
stacked against small financial institutions like the one that
Ambassador Gray represents such that you understand why they
may feel like they cannot get a fair shake?
Mr. Gupta. Thank you for the question, Senator Cornyn. I do
not think the deck is stacked at all, and I think part of the
point--this is in the DNA of the CFPB--part of the point of the
agency is to level the playing field between big banks and
small banks. Before the crisis, you had ten different
regulators with partially overlapping and distinct authority.
You had different rules for different players in the system.
The idea of the CFPB is if you have one set of rules for,
say, nonbanks and banks that are doing the same thing or for
big banks and small banks, that levels the playing field. It is
one of the reasons that the community bankers were so
supportive of this agency throughout the legislative process
and in its early years.
Big Spring Bank, by the way, is not actually subject to
CFPB enforcement at all, which is one of the reasons its
challenge ran aground on standing issues.
Let me get to what I think is the heart of your question,
which is the concern about due process. Of course, we should be
very concerned about due process, whether it is in the
administrative process or in the court system. It is just not
true that there is no right to appeal. In fact, you know, the
CFPB----
Chairman Cornyn. My question had to do with an impartial
third party, not to the agency itself.
Mr. Gupta. Right, but you can. You can appeal to the D.C.
Circuit from any adjudication through the agency, and that is
standard within administrative agencies. I think we have not
seen that happen yet simply because a lot of the action has
been happening in the courts. The CFPB can either go to court,
or it can do enforcement in its own process. But either way you
have a right, as a small bank or a large bank, to an Article
III Judge to ultimately decide that question.
Chairman Cornyn. Senator Durbin.
Senator Durbin. Thanks, Mr. Chairman.
I would like to address for a moment this question of
removal of the Commissioner--pardon me, removal of those who
are in charge at the CFPB. There has been reference to the Free
Enterprise case, and I did a quick read here. I would not want
to have to stand and address the class on it, but the quick
read I made suggests that the Court found that it violated
separation of powers to have a second layer of insulation in
this case so that the Public Company Accounting Oversight Board
members were removable--removable only for cause by the
Commissioners of the SEC, and the SEC Commissioners were
likewise only removable for cause by the President.
As I understand it, the President under the CFPB has the
power to directly remove the Director. Is that correct, Mr.
Gupta?
Mr. Gupta. That is exactly right. The President's ability
to remove the Director is unobstructed. The only way in which
it is obstructed is that there is a for-cause requirement, but
that has been true of the FTC for 100 years. It is true of lots
of agencies, and it entirely distinguishes this case from the
Free Enterprise case.
Senator Durbin. Professor Rao, am I pronouncing your name
correctly?
Professor Rao. Yes, you are.
Senator Durbin. Do you take exception to that, that the
distinction made in the Free Enterprise case was a dual layer
of removal, and in this case with the CFPB, it is only a single
layer?
Professor Rao. Yes, Senator Durbin, that is correct. That
is a correct factual statement of the difference between the
CFPB and the PCAOB.
Senator Durbin. That will help me in my grade.
[Laughter.]
Professor Rao. My argument is that the reasoning of the
Free Enterprise Fund case goes beyond the double layer of
removal protection. If you read that case, it seems quite clear
that Chief Justice Roberts is talking about the importance of
removal generally for Presidential control. He suggests that
the removal power is an essential part of Article II and of the
President's control as the Chief Administrator.
While that case does not address the first layer of
removal, I think its reasoning and its logic strongly casts
doubt on Humphrey's Executor and agency independence more
generally.
Senator Durbin. The FTC decision of many decades ago about
removal for cause being sufficient?
Professor Rao. Sure, that case, Humphrey's Executor, from,
you know, the 1930s, that case said that the FTC Commissioners
could be insulated for cause removal because they exercised
quasi-legislative and quasi-judicial powers and, therefore, the
FTC was not part of the executive branch.
An interesting thing, Humphrey's Executor is still
considered to be good law by the Supreme Court. However, its
reasoning has been strongly undermined. Even Justices who
recognize that agencies can have a certain amount of
independence and that for-cause removal restrictions are valid,
they all recognize that these independent agencies are part of
the executive branch. That is a very interesting shift in the
way of thinking about these agencies, and I think that also
casts doubt on the holding of Humphrey's Executor, because if
these agencies are part of the executive branch, they should be
accountable to the President.
Senator Durbin. My staff just informed me the district
courts have ruled that the Humphrey's Executor case does apply
to the CFPB.
Professor Rao. They need to hold that because they are not
the Supreme Court. We will see maybe perhaps in another case.
Senator Durbin. You are hoping your former boss gets his
hands on this.
[Laughter]
Dr. Calabria, you talked about the legal system, a basic
characteristic of a good legal system is one where private
parties can read the law and have a strong sense of whether
they are in compliance. I am dealing with for-profit colleges
and universities, the most subsidized industry in America.
Ninety----
Dr. Calabria. Let us cutoff those subsidies.
Senator Durbin. Ninety percent--90 percent of their revenue
comes from the Federal Government. I am dealing with students,
deep, head over heels in debt to these for-profit schools,
which account for 10 percent of the graduates from high school
and 44 percent of student loan defaults. Many of them are
forced to sign these arbitration clauses which keep them out of
court so that when they try to resolve their problems, they
really do not have access to due process. They have access to
whatever the schools decide will be the rules to play by. Is
that fair?
Dr. Calabria. There are at least three or four things in
there that probably are not fair, so where to start? Certainly,
I would encourage Congress to rethink the subsidy system that
encourages this behavior.
I think the point about arbitration is whether it is
properly disclosed or not ahead of time. I do not have a
problem with arbitration if you know what you are getting
into----
Senator Durbin. Excuse me. Would you have had a problem
when you were 19 years old on your first day at college
deciding whether an arbitration clause in your student loan was
the right thing for you?
Dr. Calabria. That is a good question. What I would say is
I still think if it is clearly disclosed, then to me what more
do we want? If we are going to say that it is unfair, it is not
clear to me that it is unfair, if that is your basic question.
Senator Durbin. I thought I was pretty smart in those days,
but I am not sure I would have been able to explain an
arbitration clause as I was signing up for school.
Dr. Calabria. I am not sure I would have understood
interest deferment and how the interest rate was going to reset
and all the subsidies, either. Of course, the whole structure
of it is unfair.
Senator Durbin. If the structure is unfair, that is what
the CFPB is all about, is to get to the question of fairness,
not whether it is spelled out in that loan agreement, but
whether it is a fair relationship.
Dr. Calabria. Let's pull some of this apart. I think we
probably all agree that it is fine, not just fine but needed,
to have an agency go out there and get rid of fraud. That is
agreed with. And then, you know, fairness is fairly subjective.
If the question is about that I think this party has more
bargaining power than that party, well, then, I generally do
not think that the role of the Federal Government is to decide
what the balance between bargaining is. I think the role of the
Federal Government is to make sure that you have got the deal
that you bargained for and that you were not defrauded. I think
we all agree on that. I certainly am not saying that there
should be no protections against fraud.
Senator Durbin. Thank you.
Chairman Cornyn. Senator Lee.
Senator Lee. Thank you, Mr. Chairman. I want to thank all
of our panelists for their very careful attention to detail in
this.
Professor Rao, I would like to talk to you about some of
your testimony and some of the constitutional implications that
we have here. Would it be fair to say that when the Supreme
Court articulates a constitutional principle, it is not always
articulating the extent to which it is willing to enforce that
principle? Would that be accurate?
Professor Rao. Yes, I think that is correct.
Senator Lee. You refer to this in connection with the
nondelegation doctrine. The Court has been pretty consistent in
how it has articulated the principle of nondelegation. Much of
this goes all the way back to Charles de Montesquieu, who
influenced the Founding Fathers and who understood that there
is a difference between the power to make law and the act of
delegating to someone else the power to make a law.
This principle exists in the nondelegation principle itself
as articulated in a number of Supreme Court opinions, even
though it is not necessarily enforced in those opinions. I
think there is an important point that I believe you make
reference to in page 7 of your written testimony and the text
accompanying footnote 33 wherein you make the argument that
there is also support for this in the Presentment Clause. Do
you think this represents what could be an independent basis
upon which some of this authority could be challenged?
Professor Rao. Under the Presentment Clause.
Senator Lee. Yes.
Professor Rao. Because delegations allow the agencies to
make law without presentment.
Senator Lee. Yes.
Professor Rao. Right, it is without either bicameralism or
presentment, right? Agencies, you know, one of the problems
with the way agencies exercise power is if they are actually
setting the rule of conduct and if they are making the
significant and important questions that the legislature should
be making, then they are essentially exercising a kind of
legislative function. As you say, they are doing so outside of
the requirements of bicameralism and presentment.
Senator Lee. Right, and so, in the case of Chadha, you had
a legislative veto that was being challenged both on the
grounds that there was a lack of bicameralism and because there
was a departure from the principle of presentment. The Supreme
Court concluded that, regardless of the bicameralism problem,
it was enough to say that there was an absence of presentment.
You did not have bicameral action by Congress followed by
presentment and signature of acquiescence by the President.
That was enough for the Court to say, okay, the final bell
here, the final action being taken is Congress, and it is not
acting in the manner prescribed by Article I, Section 7, so
that is a problem.
It seems to me that there is a corollary to that that says
that when the final legislative act, as you might say, is
undertaken by an executive branch agency, they are issuing a
new rule carrying implications, a new rule of general
applicability, imposing legally binding restrictions on members
of the public, could that not also be characterized as a
legislative act undertaken in the absence of bicameralism and
presentment as prescribed by Article I, Section 7.
Professor Rao. I think in some instances it certainly could
be characterized that way. Of course, the difficulty is that
the executive branch does have the authority to fill in the
gaps, right? You know, where they are implementing the laws,
there are certainly certain rules and regulations that the
executive branch can properly enact.
Senator Lee. Sure.
Professor Rao. The difficulty is separating those
legitimate rulemaking functions that are part of the executive
power from the power that is vested exclusively with Congress--
right?--the lawmaking power. That is a tough line to draw,
which is one of the reasons why courts, as you say, have not
wanted to draw that line very often.
Senator Lee. Correct. It is not always possible perhaps to
state with mathematical precision in a single mathematical
formula exactly where that line is crossed. Yet you can know
when it has been crossed in many instances.
I would imagine, for example, you would agree that we would
probably have--in addition to perhaps a nondelegation problem,
you might well have a presentment problem. If Congress went to
such a degree of abstraction as to say we shall have good law--
this is in an act of Congress--and we hereby delegate to the
herewith created U.S. Commission on the Creation of Good Laws
the power to create good law, the power to promulgate rules
carrying the force of generally applicable law that are good,
and they will also have the authority to implement those laws,
would that not create a Presentment Clause problem?
Professor Rao. Yes, that would seem to, even under current
supreme doctrine, violate the nondelegation----
Senator Lee. At the time Chadha was decided, in the mid-
1980s, the practice of using legislative veto provisions, not
just of adopting a legislative veto provision, but also of
allowing Congress to exercise either a bicameral or in some
cases a unicameral legislative veto had become rampant for more
than 50 years, had it not?
Professor Rao. Yes.
Senator Lee. In fact, we had not just dozens, not just
scores, but literally hundreds of legislative veto provisions
on the books. Few doubted the lack of constitutionality in
these provisions. No court had ever held that this violated the
Constitution. Yet was it any less violative of the
Constitution?
Professor Rao. No.
Senator Lee. It was not. I see my time has expired. Thank
you, Professor.
Professor Rao. Thank you.
Senator Lee. Thank you, Mr. Chairman.
Chairman Cornyn. We have statements for the record from
Americans for Financial Reform and 14 other consumer,
community, and civil rights groups, also from Public Citizen
and from Ranking Member Leahy. All of them will be made part of
the record, without objection.
[The information appears as submissions for the record.]
Chairman Cornyn. Senator Franken.
Senator Franken. Thank you, Mr. Chairman.
Mr. Gupta, thank you for your testimony. You mentioned
mandatory arbitration in your spoken testimony, and also you
highlighted the release of the CFPB's study on mandatory
arbitration clauses as well in your written testimony.
I have led a coalition of more than 50 Members of Congress
in urging the CFPB to use its authority under the law to ban
forced arbitration in consumer contracts, and I was very
pleased when Director Cordray announced last week that the
Bureau would be moving forward with a rulemaking on this
matter.
However, one of the challenges in this area is that a lot
of people do not really understand why arbitration is such an
important issue. It is not always easy to see how it affects
people's day-to-day lives.
Based on your experience, can you discuss how mandatory
arbitration clauses in consumer contracts, financial services
contracts, how they impact people's everyday lives?
Mr. Gupta. Thank you so much, Senator Franken, for the
question and for your work, really important work on this
issue. I think you are exactly right that the problem here is
this issue is so important and yet underappreciated because
every time we get a credit card or we get a cell phone, a
student loan, chances are that tucked into the fine print
somewhere is a mandatory binding arbitration clause. You say
those words, and people sort of tune out. They do not
understand what it means, and they do not think it is going to
affect them.
What it really means is that, you know, when Congress
passes laws, we think it enshrines some important right, and we
assume that right is going to be enforceable somewhere. If the
right just sort of vanishes, then all of the other things that
you do around consumer protection can become meaningless. That
is the threat of mandatory arbitration. It means that you are
giving up, without knowing it, you are giving up the right to
court, you are giving up the right to a jury, you are giving up
the right to have the dispute be public, you are giving up the
right to precedent, you are giving up the right to an appeal.
If you are talking about consumer claims that are, you know,
small-dollar claims, which they often are against banks, it
means that you are giving up any economically feasible way of
enforcing those claims because they are either going to be
enforced by people banding together and bringing those claims
in court, or it is just not going to happen.
You know, we were debating about this for years. The CFPB's
study I think completely pulls the rug out of so many of the
arguments that are made by the financial industry, because it
is 780-page document, it is the most comprehensive look at what
consumer arbitration means. It shows that over 2011 and 2012,
the period that they looked at, the biggest arbitration
provider, the American Arbitration Association, the CFPB looked
at how many claims were there under $1,000 that went to the
Arbitration Association, were actually decided, and what did
consumers get? The number is not 4,000 consumers or 400
consumers. It is four consumers. There were four consumers that
actually got some relief in claims under $1,000 in the American
Arbitration Association.
That shows that arbitration is not a better, cheaper, or
faster way of resolving disputes. It just means the claims are
going away. It is an exit clause from the civil justice system.
It is entirely appropriate that the CFPB exercise its authority
under the law to study this issue and to right the rules as you
have suggested. I am not surprised that there are efforts now
in the House Financial Services appropriations bill to kill the
CFPB's study by paralysis.
Senator Franken. They want to get rid of their rulemaking
authority on things like mandatory arbitration.
Mr. Gupta. Yes, but they are not saying it. They are not
actually coming out and saying that that is what they are
doing. Instead, they have come up with this list of, you know,
100 hurdles that the Bureau would have to jump through to do
the study and just sort of kill it quietly. I hope that does
not happen.
Senator Franken. Let me move on to Mr. Levitin. For 5
years, Wall Street banks and their allies in Washington have
gone after the Wall Street reform bill and the Consumer
Financial Protection Bureau. I think what they are saying is
very disconnected from what average people think about Wall
Street and about the need for a consumer watchdog.
Can you--I know I am running out of time, so I will just--
can you explain how an agency such as the CFPB is accountable
and responsive to Congress as well as to the general public?
Because I have gone to CFPB on mortgages--rules on mortgages in
rural areas and gotten them to change their rules. I go to them
all the time and get changes.
Is that okay, Mr. Chairman? I am sorry.
Professor Levitin. Thank you for the question, Senator
Franken. There are some formal ways the CFPB is accountable and
I think a bunch of very important informal ways that need to be
considered.
Formally, it starts with the Senate advice and consent for
the appointment of the Director. The CFPB is subject to the
Administrative Procedures Act for rulemakings and
adjudications. It is subject too judicial review. For major
rulemakings that are going to affect small businesses, there is
a special rulemaking process that the CFPB is one of three
agencies in the entire Government that has to comply with what
is called the SBREFA process.
There is an FSOC veto over CFPB rulemakings. It is the only
agency in the entire Federal Government whose rulemakings can
be vetoed by other agencies.
There is an annual audit by the GAO. There are
congressional hearings. There have been some 55 appearances on
the Hill in the past 4 years by senior CFPB officials. As you
note, Members of Congress exercise significant moral suasion
over the CFPB.
Beyond that, there are things like--there is just direct
public input. The CFPB has a consumer complaint data base. Over
650,000 complaints have been filed. That is a level of consumer
participation unparalleled by any Federal rulemaking in
history, I believe. I do not think any rulemaking has gotten
650,000 comments. This is an important intelligence source for
the Bureau. It lets the Bureau know what real Americans are
concerned about.
The CFPB has a number of specially constituted advisory
boards. I have the honor of serving on one, which is
statutorily required, but there is also a Small Bank Advisory
Board and a Credit Union Advisory Board, which the CFPB was not
required to create, but it wanted to hear from those smaller
community financial institutions. Lest you think that these
yes-men advisory boards, let me point out that the Consumer
Advisory Board includes the CEO of Advance America, one of the
largest payday lenders in the U.S.; a senior American Express
executive; a vice president of the Bank of Hawaii; and a debt
collection attorney. The CFPB wants to hear not just from
consumers but from all segments of the industry that it
regulates, and it is trying to put out really good rules. It is
not just trying to squash banks. It is trying to find the right
balance between consumer protection and access to credit, which
is also part of its statutory mission.
Senator Franken. I am sorry to have asked a question at
negative 35 seconds.
Chairman Cornyn. Senator Tillis.
Senator Tillis. Thank you, Mr. Chair. Mr. Gray, would you
like to opine on your view of CFPB's accountability?
Ambassador Gray. Yes, sir. The point that I think I would
like to make is that the defects of oversight by the various
branches of Government are cumulative, and it is the totality
and the combination of this lack of oversight which I think
creates the problem.
There was previous discussion about whether, from Senator
Durbin with Professor Rao, about whether one or two levels of
insulation from removability was a problem, and there is only
one level with the Consumer Bureau, so what is the problem? The
problem is that ``peek-a-boo'' case, the PCAOB case, the Free
Enterprise case, what it really stands for, I think, is that
these problems compound, and when you have two levels of
separation, it is much worse than just one. When you have at
the Consumer Bureau not only executive branch formal insulation
and insulation by you, because you have no oversight
financial--I mean, taxpayer oversight, and when the courts are
required to defer to this one agency which may not know
anything about the subject matter, above all the other agencies
that may share jurisdiction and do know about the subject
matter, what you have is a combination which means the agency
has no limits.
I think a point I would like to add to that is that I sort
of welcome the notion that the CFPB is going to engage in
rulemaking, because at least the public gets a chance to
provide comment and has some notice as to what the violation
is. What the Consumer Bureau is more likely to do as a matter
of practice is--and Cordray has so said publicly--he is not
going to define ``abusive.'' He is just going to know it when
he sees it. You are not going to know whether you have violated
the abusive standard until after you have been charged with it.
That is--talk about delegations of authority. That is a totally
wide open delegation of authority and runs counter to the
development of the law in this country for--well, since the
Second World War with the Administrative Procedure Act. That
is--you add that to the other problems, and you have an agency
that can do anything it wants.
This data collection exercise makes the Office of Personnel
Management problems seem to me to be trivial because the data
breach that--God knows whether the Chinese have already looked
at my credit card accounts. I do not know. The data breach
possibilities are enormous, and there has been no rulemaking by
the Bureau to say the benefits exceed the costs or that they
balance out. There has been none of that. It has just been this
big data grab, and what they are going to do with it, nobody
knows and nobody has any way to find out.
Senator Tillis. Mr. Gupta, you had mentioned--and, Mr.
Gray, I may come back to you, because when we were talking
about the executive branch's authority over the CFPB, you
seemed to react to at least something that Mr. Gupta said. One
thing I was curious about, the CFPB, we had a lot of
discussions about information security and surveillance here a
few weeks back and were worried about the process--the national
security priorities over personal security. We dealt with that
about a month ago.
The CFPB has access to some of the most detailed
information about the citizens, and they say, well, we have
some, but we redact it or we do not use it.
If the CFPB had a data breach and all of this information
was exposed, would that be a terminate-for-cause event?
Mr. Gupta. I think the question assumes----
Senator Tillis. Could the President fire the head of the
CFPB if we had that sort of a data breach?
Mr. Gupta. If the CFPB Director exercised negligence or
malfeasance, yes; under the terms of the statute, yes. But----
Senator Tillis. That would seem to suggest that they would
have had to have been directly involved in the execution of the
policies or information security. It would seem like they would
be one level removed. Even though it would be a disastrous
consequence, it would be difficult for me to determine how they
could be terminated for cause if that is the standard that the
President would be held to.
Mr. Gupta. Negligence is included within that, so I think
it would meet the standard. Let me be clear because I think the
premise of the question is, with due respect, its incorrect. I
know that there has been a lot of talk about the data
collection at the CFPB. Director Cordray testified about it
last week. The Bureau simply is not collecting personal
information about consumers. It is instead aggregating
information looking for market trends. I want to, if I may--you
know, I know that Professor Levitin has looked into this far
more than I have, and I think it would make sense for him to
address the question.
Chairman Cornyn. The witnesses will answer. He will ask the
questions.
Senator Tillis. Actually, I was trying to get more to
breakdowns within the CFPB that could be bad management that
are not necessarily for-cause events that the President could
not actually make a change in the leadership. That to me is a
limit to the executive branch's control over the person running
the show. That was the point I was making. Maybe I used a bad
example.
Mr. Gray, you--and I am going over time. One thing I have
learned with attorneys, if you do not have a lot of questions,
you do not really need to worry because you are not going to be
able to ask many of them. I did want to come back. Mr. Gray,
you seemed to--you did not get a chance to answer this question
when Senator Cornyn asked Mr. Gupta about executive oversight.
Did you have any opinion in terms of the limits of the
executive branch over the CFPB with respect to
constitutionality?
Ambassador Gray. With respect to constitional reality--
again, I would repeat what I said before. It is the aggregation
of all of these difficulties that creates the central problem.
I can see that, yes, removal authority would make the CFPB more
responsive, but you have to have a President who is in a mood
to remove. I am not sure our current President would be in a
mood to remove, so I am not sure that in the current
circumstances that matters so much.
You go two steps over. What about you guys? What about the
Senate of the United States? What about the House? Then what
about the courts? They are all cut out; you are all cut out.
That gives Cordray the opportunity to say, as I said in my--I
do not think you were here, maybe, but during my prepared
testimony, when he was asked the question about the cost of
their new building, he said, ``What does it matter to you?''
That is the kind of insubordinate kind of response that you are
going to get from an agency that----
Senator Tillis. That is not accountable.
Ambassador Gray [continuing]. Does not have any
accountability to anybody.
Senator Tillis. My last--I just have one question,
Chairman, and this is a clarification for either Mr. Levitin or
Mr. Gupta. It was my understanding that the transactional data
that we are gathering from financial services industry, I
understand it is being used for aggregating purposes. It was my
understanding that at the point of entry there is indicative
data that is being captured. Is that not correct?
Professor Levitin. It depends on the data set, but
basically there are three data sets that the CFPB gets that
have some personally identifiable data. Two of them get
anonymized, and, frankly, one of them is about auto sales. The
CFPB might know that someone bought a car. That is not
particularly useful for a cyber criminal to know that. That is
data that comes from public records actually, from State and
DMV records.
What is important to know is that the CFPB does not have
your credit card number. If a cyber criminal were to get all of
the data the CFPB--if there was to be a hacking of the CFPB, it
is not useful information for a cyber criminal. No one can make
a purchase using the data that they get from the CFPB. The CFPB
does not know----
Senator Tillis. I do not want to go much further, but---so,
in your view, the data that is captured either at least
initially before it is redacted or the party is made anonymous,
there is no point in time that the CFPB receives information
that could in any way be triangulated to compromise the
identities of those financial transactions that are being
captured?
Professor Levitin. I do not want to say absolutely never. I
cannot say that there is no possibility. It would be very
difficult. Most of this is aggregate-level data, so the CFPB
will not know what your transactions are. They will not know if
you have an account with Ashley Madison or if you are buying
firearms or bongs. They do not know that. They do not have
transaction-level data. They have aggregate account balance
data. They will know how much a particular individual has on a
credit card balance, but not what the individual has been
buying. The concerns that Dr. Calabria raised, those really
just do not exist here. I understand concerns about, you know,
Big Brother Government having too much data. That is not what
is going on here. The CFPB needs this data, among other things,
to do fair lending enforcement. If you want to look for
disparate impacts, you have to have data. The attack on CFPB
data collection is really an attack on fair lending laws.
Chairman Cornyn. Professor Levitin, let me just follow up
on that. You are saying at the time that the CFPB receives the
information from banks, from credit agencies, from motor
vehicle transactions, none of that has the identity of the
consumer?
Professor Levitin. There is one data set--I am sorry. There
are three data sets that have some consumer identity. One of
them is a very small data set of about 11,000 arbitration
cases. It is not an ongoing data collection. It is a one-time
thing used in support of the report that the CFPB was required
to author, to undertake as part of the Dodd-Frank Act.
Two other data sets are rather small, and they do have some
personally identifiable information. The CFPB anonymizes that
data, and then the staff works with the anonymized data.
Chairman Cornyn. It is not anonymous in the hands of the
financial institution that the CFPB collects it from. It is
identified by the consumer, I presume. It would be a mortgage,
it would be a car purchase and the like. Are you saying that
CFPB anonymizes it?
Professor Levitin. Some of it, I believe, is anonymized
directly by the CFPB, but it is important to know the data,
most of it is not coming directly from financial institutions.
It is coming from other Federal bank regulators which collect
the same, if not more data. The OCC has long collected much
more credit card data than the CFPB does, and we have not heard
anything about that.
Chairman Cornyn. I think all of us find it ironic, to say
the least, that we were debating the National Security Agency's
meta data collection program where there were three data
points: There was a phone number, presumably from a foreign
source that could be matched up perhaps with a domestic phone
number, which would reveal the time and duration of the call,
that is it. To go back, then it would be required to go to the
FISA Court and show cause to get additional information. Yet,
according to the GAO, the CFPB collects data on 700,000 vehicle
transactions per month, 10.7 million consumer credit reports a
month, 173 million mortgages a month, 5.5 million student
loans, and up to 75 million individual consumer credit card
accounts monthly.
I think all of us realize that the more data you collect
and the more you compare that data with these different
sources, you pretty well can build a profile of an individual,
and I strikes me as a lot more intrusive than what--without the
similar protections that were given under Section 215 of the
Foreign Intelligence Surveillance Act, because there is not any
court overseeing the CFPB, and, of course, we have already
talked a little bit about the hacking concerns in the hands of
the Chinese or Russian hacker or anybody else, or just a common
criminal. It strikes me that there is a lot of risk.
Dr. Calabria, can you talk a little bit about how your
concerns about the intrusive nature of this data collection?
Dr. Calabria. Certainly, and let me clarify. You know, it
is not just a concern about CFPB. I am concerned about the data
and have long been concerned about the data that other bank
regulators collect. I feel like a common theme that I sometimes
hear is, well, other bank regulators do this, therefore it is
okay.
For instance, I think Mr. Gupta mentions in his testimony
that the Federal Reserve performed really badly before the
crisis. Let me say something. I 100 percent agree with is a
generality. Therefore, we must make the CFPB more like the
Federal Reserve.
No, the Federal Reserve is unaccountable. I testified in
the other body last week about how unaccountable the Federal
Reserve is. This is a common theme. To me, if your standard for
accountability is the Federal Reserve, then I would submit you
do not actually believe in accountability.
Let us get to the actual data question. I think Adam
downplayed this. Reading from the GAO report right now, for
instance, on the storefront payday lending loans, GAO says as
many as 40 million total loans are being collected. I do not
think 40 million is a small number myself. Some of the aspects
even collected by other bank regulators, such as the HMDA data
on mortgages, we have long known that you can identify, link
into courthouse records who HMDA individuals are in those
records.
Of course, we hear this every time. What I would emphasize,
the agency does not actually need this to do its job. It can
respond and collect consumer complaints. It could actually
follow up on those consumer complaints. It can investigate
those consumer complaints. As I talk about in my testimony,
this is one of the things that the Framers were very concerned
about with the Fourth Amendment, that you would just see these
fishing expeditions where you do these wide-sweeping--and so in
all due respect to my friend Adam, I feel like I read his
testimony, and there is a presumption of guilt on the part of
anybody in the financial services industry in his testimony
there. I think that is the approach of the CFPB.
To me, let us respond to actual complaints. Let us
investigate those actual complaints. These broad, sweeping data
collections where you are just looking for things rather than
actually responding to things that are illegal is very
troublesome to me.
Chairman Cornyn. Professor Rao, I would like to follow up
on the question that Senator Lee asked. If Congress delegated
to an agency, ``Write a good law for us,'' and so the agency
passed a rule or set up--there is an agency to administer or to
write those rules and to pass those good rules, and then when
they found a violation, they could adjudicate that and force a
taxpayer to come before them and have the authority to penalize
it and the like, you get the idea. Is there any limit to the
extent to which Congress can simply delegate its
responsibilities? I understand that the courts have not since,
what, 1935, I think Mr. Gupta said, actually found a violation
of the nondelegation doctrine.It strikes me as we have gotten
on a very slippery slope, and now Congress delegates far too
much responsibility to people who are simply unaccountable to
the voters.
Would you describe where you think that line--where that
crosses the line?
Professor Rao. I certainly think that there is a line that
can be crossed, and the ``Agency''--for, you know--``Goodness
and Niceness'' or the ``Commission for Goodness and Niceness''
almost is certainly on the wrong side of that line, and I think
it would be on the wrong side of that line even under current
judicial doctrine.
I think one way that it has been characterized is that
Congress has to make all of the important decisions that are
important enough for Congress to make them. It is a bit
circular, but, you know, it really reflects something that
Chief Justice John Marshall said many, many years ago about
what Congress has to decide for itself.
Chairman Cornyn. As I vaguely recall my legal training, the
whole purpose of the administrative state was they provided
expertise and detailed rulemaking that would allow the
implementation of the basic legal framework that was passed in
a law by Congress. Dodd-Frank is 850 pages long, and it calls
for 390 new rules, and many of them include vague standards,
which I assume under current legal doctrine the courts, rather
than intrude in that, they would simply defer to the agency.
Does this massive delegation of authority to Federal
bureaucrats concern you? What, if anything, would you suggest
that Congress do about it?
Professor Rao. I think it is a tremendous concern precisely
because the idea that Congress cannot legislate is at the
foundation of our republican form of Government. We have laws,
and the laws need to be made by people who are accountable to
the people and not made by agencies that are unaccountable.
I think it is a tremendous problem, and the solution to it
is really in Congress' hands to write more--as you mentioned,
Dodd-Frank is already incredibly long. If it is going to confer
authority on agencies, that authority perhaps should be more
specified, right? It should cabin them more.
One of the problems--I mentioned this in my written
testimony--is that because the CFPB, for instance, has such
sweeping authority, it can circumvent even the specific
limitations that Congress does put on its authority. There is a
problem with delegations, and even where Congress tries to be
specific, broad delegated authority allows them to evade those
limits.
Chairman Cornyn. Ambassador Gray, in your view, does Dodd-
Frank's Title II Orderly Liquidation Authority scheme afford
companies facing resolution due process?
Ambassador Gray. I mean, no, sir, I do not think it does
because most of the parties or the counterparties to an
institution that is undergoing resolution are not supposed to
be told about it. It is supposed to be done in secret. A court
is given 24 hours to respond, and if they do not respond,
whatever the Government says should be the plan will go into
effect. There is a real gag order in the form of criminal
penalties if anyone leaks the pendency of the proceeding.
Most of the people involved are not told until after the
fact or will not find out until after the fact what has
happened. I do not know of any precedent anytime in American
history--maybe the Alien and Sedition Acts going back a couple
hundred years. I do not know of any recent, modern precedent
where you have such secret court proceedings.
I can understand, for example, for a FISA Court involving
national security, that has to be secret. This is a purely
domestic matter, and the courts are instructed that they cannot
review major portions of the basis for the intervention.
Congress cannot do anything about it until later.
There is a fiction out there--not fiction, but a narrative
that the OLA is good because it does not involve any taxpayer
funds. That also means it does not involve any oversight by the
Senate or the House. How can this be done without taxpayer
funds? There is an internal tax that the OLA has. They can get
unlimited funding by the Treasury to do whatever they want to
do, and then they can get it paid back by taxing or levying
fees on the financial community.
You know, I do not--that is a tax. I do not think it is--I
am not even sure that is constitutional. It certainly deprives
everybody of any kind of review over what happens. I am told by
people on Wall Street and elsewhere that the purpose of the law
was to codify the kind of occurrence that happened with the AIG
where certain creditors were paid off 100 cents on the dollar,
when the regulators could have gotten a hair cut along with
what they got from other creditors.
I think your bill addresses these problems in a very
systematic and fair way and reintroduces, you know, the 100-
year tradition of bankruptcy law in this country where you
treat people fairly and with notice and people understand what
is going to go on, and there is full court review, including a
resort to the Tucker Act if at the end of the day you feel you
have been mistreated.
I certainly wish you luck with your legislation, and I hope
it gets enacted.
Chairman Cornyn. The purpose, of course, for our
legislation is to try to restore the resolution process to a
legal framework that already exists with rules everybody knows
about ahead of time which are impartially applied, which is to
me the opposite of sort of an ad hoc resolution process done in
secret. We have seen through the GM bankruptcy, where
favoritism is displayed toward different creditors and some are
left out in the cold and others are favored, the dangers of a
politicized process, and including one that does not have sort
of transparency and preordained rules.
I would just like to ask two last questions, and then any
other questions that Senator Tillis has. The President has said
that Dodd-Frank would end ``too big to fail.'' I would like to
see a show of hands of everybody who believes that Dodd-Frank
ended too big to fail.
The record will reflect no hands were raised other than
mine, which was not because I think it did but because I was
trying to be an example for anyone who did.
Professor Levitin, you wrote Dodd-Frank Act's Orderly
Liquidation Authority are not and never can be credible
guarantees against bailouts. Is that still your position?
Professor Levitin. Very much so. I am skeptical that we
will ever see Title II actually deployed. No one wants to find
out how well it is going to work, and because of that, I think
that if we have a major financial institution that is on the
verge of failure, there will be a bailout, whether it is legal
or not, and afterwards we will all wag our fingers and say, you
know, ``How did possibly happen?'' We will be right back where
we started.
Chairman Cornyn. Senator Tillis, do you have anything else?
[No response.]
Let me say to each of the witnesses, thank you very much
for answering our questions and sharing your expertise and
advice for the Committee.
This hearing is now adjourned--or I should say, before I do
that, that there could well be other written questions that
might be sent, or statements that will be made part of the
record. We will leave the record open for a while in order for
that to be accomplished, so just for your information.
Now, we are adjourned.
[Whereupon, at 3:32 p.m., the hearing was adjourned.]
[Additional material submitted for the record follows.]
A P P E N D I X
Submitted by Chair Durbin:
Americans for Financial Reform................................... 165
Public Citizen................................................... 175
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