INTRODUCTION STATEMENT OF FACTS

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1 TO: FROM: RE: The Justices of the United States Supreme Court The Moot Court Board Consumer Financial Protection Bureau v. PHH Corporation, et al. INTRODUCTION This matter involves a challenge to the constitutionality of an independent agency created by Congress. The agency, known as the Consumer Financial Protection Bureau, was established in 2010 under the Dodd-Frank Wall Street Reform and Consumer Protection Act. The agency exercises executive power in various consumer protection arenas and is led by a single Director who is subject to removal by the President only for cause. In exercising this executive power, the Bureau has the power to create rules, bring and adjudicate enforcement actions, and impose penalties for violations of its rules. Petitioner is the Consumer Financial Protection Bureau. Respondents were the subject of an enforcement action by the Consumer Financial Protection Bureau which imposed a disgorgement penalty and injunction against Respondents totaling more than $100 million. Respondents challenged the Consumer Financial Protection Bureau s order on grounds that, inter alia, the agency s structure violated the principle of separation of powers and was thus unenforceable. The District of Columbia Circuit Court of Appeals agreed with Respondents and severed the for-cause provision. The Consumer Financial Protection Bureau petitioned the United States Supreme Court for a writ of certiorari to consider the following question: does the Consumer Financial Protection Bureau s structure satisfy the separation of powers principle? STATEMENT OF FACTS In 2010, Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act (hereinafter the Dodd-Frank Act ). Intended to address the financial practices that lead to the financial crisis in the early 2000s, the Dodd-Frank Act instituted a number of reforms, including the creation of the Consumer Financial Protection Bureau (hereinafter the Bureau ). In establishing the Bureau, its stated purpose was to act as an Executive agency and regulate the offering and provision of consumer financial products or services under the Federal consumer financial laws. 12 U.S.C. 5491(a). In regulating consumer financial products and services, the Bureau was given significant authority to centralize and coordinate rulemaking and to act as the primary enforcer of various consumer financial protection laws. Congress elected to utilize an independent agency structure for the Bureau, headed by a single Director rather than a multi-member body as originally proposed. See 12 U.S.C. 5491(b). Appointed by the President of the United States with the advice and consent of the Senate, the Director serves a fixed five-year term and is removable by the President only for cause. See 12 U.S.C. 5491(c). Under the Dodd-Frank Act, the Bureau is responsible for enforcing approximately 19 federal consumer protection statutes. As part of its enforcement power, the Bureau has the authority to prescribe rules in these consumer protection arenas, bring enforcement 1

2 actions against violations of those rules, and adjudicate those actions. See 12 U.S.C Additionally, the Dodd-Frank Act mandates that the Director establish a Consumer Advisory Board, which advises and consults with the Bureau on implementing and enforcing the consumer financial protection laws. See 12 U.S.C The Dodd-Frank Act further requires the Director to appear at semi-annual hearings before select Congressional committees and the Bureau submit reports concurrently with the Director s appearances before Congress to the same select Congressional committees. See 12 U.S.C Respondent PHH Corporation is a large home mortgage lender. In providing mortgage loans to homebuyers, PHH required certain homebuyers purchase mortgage insurance. Mortgage insurance protects lenders by covering part of the lenders losses if homebuyers default on their mortgages. Homebuyers pay monthly premiums to the mortgage insurance for the insurance. Mortgage insurers can obtain mortgage reinsurance whereby the reinsurer protects the mortgage insurer. In exchange for assuming some of the risk of insuring the mortgage, mortgage insurers pay a fee to the reinsurers. The fee paid to the reinsurer is typically a portion of the homebuyers monthly insurance premiums. 1 In 1994, PHH established a wholly owned subsidiary known as Atrium Insurance Corporation. Atrium provided reinsurance to those mortgage insurers that insured the PHH mortgage loans. In return, PHH often referred borrowers to mortgage insurers that used Atrium s reinsurance services, a process known as captive reinsurance. Under the Real Estate Settlement Procedures Act of 1974 ( RESPA ), it became unlawful to pay or receive a fee for the referral of a real estate settlement service involving a federal related mortgage loan. Standing alone, this would have prohibited mortgage lender s referrals of customers to mortgage insurers who in turn purchased reinsurance from a reinsurer affiliated with the lender; however, RESPA contained a series of exceptions, including an exception for payments of a bona fide salary or compensation or other payment for goods and facilities actually furnished or for serviced actually performed. Prior to the Dodd-Frank Act, the Department of Housing and Urban Development ( HUD ) interpreted this exception as providing a safe harbor for bona fide transactions between a lender and mortgage insurer or a mortgage insurer and a lender-affiliated reinsurer so long as the mortgage insurer did not pay the lender for a referral. In other words, captive reinsurance arrangements were lawful so long as the mortgage insurer paid no more than reasonable market value for the reinsurance. PROCEDURAL BACKGROUND Under the Dodd-Frank Act, the Bureau took over the responsibility of enforcing RESPA. In 2014, the Bureau initiated an enforcement action against PHH claiming that PHH s captive 1 These so-called reinsurance agreements and captive reinsurance arrangements are not a material issue in this problem, nor one that needs to be analyzed or discussed in detail to solve the separation of powers problem. However, reinsurance agreements are the origin of PHH s dispute, so some background information is being provided so that students can understand the context of the underlying dispute. 2

3 reinsurance arrangement violated RESPA. Rejecting HUD s longstanding interpretation, the Bureau interpreted RESPA as prohibiting a captive reinsurance arrangement between a mortgage insurer and a lender-affiliated reinsurer even if the mortgage insurer paid no more than reasonable market value. The Bureau retroactively applied its interpretation to PHH s captive reinsurance arrangement and ordered PHH to pay $104 million in disgorgement. Following the Bureau s disgorgement and injunction order, PHH petitioned the District of Columbia Circuit Court of Appeals for review. On review, the Court granted PHH s petition, vacated the Bureau s order, and severed the for-cause removal provision. The Court s opinion is reported at 839 F.3d 1. After the Court vacated the Bureau s order and severed the for-cause removal provision, the Bureau filed a petition for writ of certiorari with the Supreme Court of the United State which was subsequently granted by the Supreme Court. The question below is now before the Supreme Court of the United States for review. DISCUSSION 1. Question on Appeal: Does the Consumer Financial Protection Bureau s structure as an independent agency led by a single Director removable only for cause satisfy the principle of separation of powers? Petitioner argues that the Bureau s structure satisfies the separation of powers principle because the Bureau s structure is reinforced by historical precedent and Dodd-Frank Act embeds within the Bureau a series of checks and balances to mitigate the risk of power to individual liberty. While the United States Supreme Court has previously considered the constitutionality of independent agencies and single-director agencies separately, the Court has not previously addressed whether an independent agency, led by a single-director subject to removal by the President of the United States only for cause, is constitutional. Therefore, this Court must decide whether the Consumer Financial Protection Bureau s structure is constitutional. There is ample room in the facts and law for good argumentation on both sides of this question. In the lower court decision, the Court considered the proper remedy for an independent agency that violates the separation of powers principle. While the Court decided to sever the forcause removal provision, that issue is not before the Court. The parties have agreed to focus solely on the issue of constitutionality and are not to argue how an independent agency may be remedied in the event that it is found to be unconstitutionally structured. In arguing over the constitutionality of the Bureau s structure, the parties will focus on two factors: (1) the historical practice between the Executive and Legislative Branches with respect to independent agencies and (2) the structure and purpose of the separation of powers principle. 2. Historical Precedent and Tradition 3

4 In separation of powers cases, the United States Supreme Court has often put significant weight upon historical practice. In the lower court decision, Circuit Judge Kavanaugh wrote that [a] long line of Supreme Court precedent tells us that history and tradition are important guides in separation of powers cases that, like this one, are not resolved by the constitutional text alone. PHH Corporation v. Consumer Financial Protection Bureau, 839 F.3d 1, 22 (D.C. Cir. 2016). A. What weight is to be given historical practice in considering the constitutionality of the Bureau s structure? Here, Respondents will likely reemphasize the lower court s opinion and argue that the Court must give significant weight to historical precedent. Within separation of powers jurisprudence, there is considerable case law in which the Supreme Court has looked to and relied upon historical precedent to assist it in the interpretation of the Constitution. In The Pocket Veto Case, the Supreme Court was called upon to interpret Article I, section 7 of the Constitution to determine whether a bill which had passed both Houses of Congress but was neither signed by the President, notwithstanding its presentment, nor returned by the President to the House in which the bill originated had become law as if he had signed it. See The Pocket Veto Case, 279 U.S. 655 (1929). Ultimately, the Supreme Court held that the adjournment of the first session of that particular Congress during which the bill was passed and presented to the President prevented the President from returning the bill within 10 days of its presented and thus kept the bill from becoming law. In so holding, the Court wrote that its interpretation of Article I, section 7 of the Constitution was confirmed by the practical construction that has been given to it by the Presidents through a long course of years, in which Congress has acquiesced. Id. at The Court went on to write that [l]ong settled and established practice is a consideration of great weight in a proper interpretation of constitutional provisions of this character. Id. at In United States v. Curtiss-Wright Export Corporation, the Supreme Court considered whether a joint resolution by Congress, delegating a portion of its legislative authority to the President was void and unenforceable as constituting an unlawful delegation of legislative power. See United States v. Curtiss-Wright Export Corporation, 299 U.S. 304 (1936). In refusing to void the joint resolution, the Court held that to do otherwise would be to stamp this multitude of comparable acts and resolutions as likewise invalid. Id. at 327. According to the Supreme Court, [a] legislative practice such as we have here, evidenced not by only occasional instances, but marked by the movement of a steady stream for a century and a half of time, goes a long way in the direction of proving the presence of unassailable ground for the constitutionality of the practice.... Id. at In Youngstown Sheet & Tube Co. v. Sawyer, the Supreme Court was asked to determine whether an Executive Order directing the Secretary of Commerce to take possession of and operate most of the Nation s steel mills during war time was constitutional. In a concurring opinion, 4

5 Justice Frankfurter wrote the content of the three authorities of government is not to be derived from an abstract analysis. The areas are partly interacting, not wholly disjointed. The Constitution is a framework for government. Therefore the way the framework has consistently operated fairly establishes that it has operated according to its true nature. Id. at 610. Justice Frankfurter went on to say Deeply embedded traditional ways of conducting government cannot supplant the Constitution of legislation, but they give meaning to the words of a text or supply them. Id. In NLRB v. Noel Canning, the Supreme Court was faced with several interpretation questions concerning the Recess Appointments Clause. See NLRB v. Noel Canning, 134 S. Ct (2014). Before interpreting the Clause, Justice Breyer, writing for the Court, recognized that significant weight is placed on historical practice in interpreting the Recess Appointments Clause. Id. at Citing McCulloch v. Maryland, the Court quoted Chief Justice Marshall as saying a doubtful question, one on which human reason may pause, and the human judgment be suspended, in the decision of which the great principles of liberty are not concerned, but the respective powers of those who are equally representatives of the people, are to be adjusted; if not put at rest by the practice of the government, ought to receive a considerable impression from that practice. Id. (quoting McCulloch v. Maryland, 4 Wheat. 316, 401, 4 L.Ed. 579 (1819)). Going further in recognizing the importance of historical precedent, Justice Breyer wrote We recognize, of course, that the separation of powers can serve to safeguard individual liberty and that it is the duty of the judicial department in a separation-of-powers case as in any other to say what the law is. But it is equally true that the longstanding practice of the government can inform out determination of what the law is. Id. at The Court s consideration of historical precedent is neither new nor controversial. Id. at In 1819, James Madison wrote in a letter to Spencer Roane that it was foreseen at the birth of the Constitution, that difficulties and differences of opinion might occasionally arise in expounding terms & phrases necessarily used in such a charter... and that it might require a regular course of practice to liquidate & settle the meaning of some of them. Id. (internal citations omitted). According to the NLRB v. Noel Canning decision, precedent shows that the Supreme Court has treated practice as an important interpretive factor even when the nature or longevity of that practice is subject to dispute, and even when that practice began after the founding era. Id. In Zivotofsky v. Kerry, the Supreme Court again looked at historical practice to determine whether the president had the exclusive power to recognize foreign governments under the Constitution. See Zivotofsky v. Kerry, 135 S. Ct (2015). Citing NLRB v. Noel Canning, the 5

6 Court wrote that [i]n separation-of-powers cases this Court has often put significant weight upon historical practice. Id. at While the history of the recognition power was not one-sided, the Court found that the weight of historical evidence supports the view that the formal determination of recognition is a power to be exercised only by the President. Id. The Petitioner s strongest argument with respect to historical practice is that the Bureau s independent agencies have long been held constitutional and that there does exist historical precedent for single-direct independent agencies, albeit limited compared to multi-member independent agencies. Petitioners cannot completely ignore the ample case law emphasizing the importance of historical practice and should consider highlighting those aspects of the Bureau structure that do have a basis in history. Nevertheless, the petitioner may also argue that historical precedent, while entitled to significant weight, is neither the sole interpretive factor in separation of powers cases nor determinative on the question of whether the Bureau s structure violates the constitution. In the cases likely to be cited by Respondent in support of its argument that great weight must be afforded to historical precedent, Petitioner can raise several points of contention. For example, in The Pocket Veto Case, the Supreme Court recognized that a practice of at least twenty years duration on the part of the executive department, acquiesced in by the legislative department is not binding on the judicial department. The Pocket Veto Case at 690. In the Noel Canning case, the Supreme Court explicitly stated that historical practice has been treated as an important interpretive factor; however, the Court did not state that it is determinative. Rather, as is clear from the case law, historical practice is one of many factors that the Court considers in determining a separation of powers case. Here, the Petitioner can argue that the lower court placed more than significant weight on the historical precedent. In its decision, the Court held that [b]ecause this case is not resolved solely by the constitutional text, at least as the text was interpreted in Humphrey s Executor, the [Bureau] s departure from historical practice matters even more in this instance because this departure from historical practice threatens individual liberty. PHH Corporation, 839 F.3d at 25. While the lower court did give some consideration to whether the structure of the Bureau, including the embedded checks and balances, satisfied the structure and purpose of the separation of powers principle, Petitioner can argue that it was cursory at best and the Court was more convinced with historical precedent than it was with whether the Bureau s structure did in fact violate the separation of powers principle. B. Does the historical practice of independent agencies reinforce the constitutionality of the Bureau s structure? In the lower court s opinion, Circuit Judge Kavanaugh goes to great length to describe the background of independent agencies in general. In doing so, Circuit Judge Kavanaugh wrote that independent agencies have traditionally operated and continue to operate as multi-member bodies of experts appointed by law and informed by experience. 839 F.3d at 15. In a law review article, Marshall J. Breger and Gary J. Edles provided an in-depth look at independent federal 6

7 agencies. See Marshall J. Breger & Gary J. Edles, Establish by Practices: The Theory and Operation of Independent Federal Agencies, 52 Admin. L. Rev (2000). Petitioner will likely argue that the Bureau s structure does not violate the separation of powers principle. If historical precedent was required for every agency, Congress would not have been able to create the first independent agency, the Interstate Commerce Commission, nor would Congress be able to respond to novel social and economic issues it faces. Notwithstanding the lower court s decision, history does provide a firm footing for the Bureau s structure due to the establishment of many administrative agencies with similar structures, like the Social Security Administration (SSA) and Federal Housing Finance Agency. Congress specifically created the SSA as a single Director led independent agency to aid in effective administration of duties.... In providing that a single administrator, rather than a bipartisan board, will head the independent agency, the conferees place high priority on management efficiency, which they see as essential in enabling the independent SSA to address the problems that confront it. H.R. Rep , at Petitioner will likely discuss the parallels between these agencies and the Bureau to demonstrate there is historical precedent for the Bureau. Furthermore, Petitioner may discuss how a finding of unconstitutionality due to the single Director led agency would undermine the existence of multiple agencies with the same structure, such as the SSA which aids millions of Americans a year. Respondents on the other hand will likely argue that the Bureau s structure is unprecedented and thus violates the separation of powers principle. The Bureau is a single Director independent agency with broad power to make rules, interpret rules, enforce rules, and adjudicate enforcement actions. In looking at those independent agencies that came before the Bureau, those agencies exercising substantial executive authority were typically multi-member commissions or boards. Examples include the Interstate Commerce Commission, the Independent Payment Advisory Board, the Federal Trade Commission, the Federal Communications Commission, the Securities and Exchange Commission, the National Labor Relations Board, the Federal Energy Regulatory Commission, and the Merit Systems Protection Board. What few independent agencies the Petitioner can point to that utilized a single Director structure are easily distinguishable and do not reinforce the constitutionality of the Bureau s structure. For example, the Social Security Administration and the Office of Special Counsel do not empower their Directors to unilaterally bring enforcement actions or impose penalties on private citizens. The Office of Special Counsel has a much narrower jurisdiction and the SSA predominantly acts as a supervisor in the adjudication of private benefits claims. What enforcement and adjudication power the SSA Commissioner has is not unilateral. Admittedly, the Federal Housing Finance Agency is similar to the Bureau; however, Respondents can argue that it is too recent to provide historical precedent. 7

8 Respondent s strongest argument is that the well settled practice with respect to independent agencies is to have the agency governed by a multi-member body. While the members of that governing body would not be checked by the President s removal power, their accountability to one another would mitigate against the risk to individual liberty that exists when power is concentrated in a single actor. The few examples Petitioner can point to are insufficient to overcome this well settled practice and amount to mere anomalies. Disregarding those anomalies, the clear absence of examples from the past in which an independent agency was given broad Executive power, unchecked by the President s removal power or other a multi-member board, indicates that such a structure is unconstitutional. In Noel Canning, the Supreme Court held that recess appointments made during a Senate recess of fewer than 10 days were presumptively unconstitutional. 134 S.Ct. 2550, 2567 (2014). In so holding, the Court heavily relied on the absence of past examples in which recess appointments were made under similar circumstances. In Free Enterprise Fund v. Public Company Accounting Oversight Board, the Supreme Court held that two layers of for-cause protection insulating Board members from the President violated the separation of powers principle due to the lack of historical precedent recognizing double for-cause protection. 561 U.S. 477, 505 (2010). 3. Agency Structure and Purpose of Separation of Powers The Preamble to the Constitution of the United States consists of two clauses: the Declaration Clause ( We the People of the United States... do ordain and establish this Constitution for the United States of America ) and the Enacting Clause ( in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity ). In achieving those purposes set forth in the Enacting Clause, the Founders established three branches of government: Legislative, Executive, and Judicial. The structure and powers of those three branches, including the checks and balances between, are laid out in the first three articles of the Constitution. In creating these three branches of government, each was given its own separate functions, superior to none, and all deriv[ing] their power to act equally by a constitutional grant of power from We the People who are sovereign. U.S. Const., pmbl. The very structure of the articles delegating and separating powers under Articles I, II, and III exemplify the concept of separation of powers. Immigration & Naturalization Serv. V. Chadha, 462 U.S. 919, 946 (1983). As explained by the Supreme Court, the declared purpose of separation and dividing the powers of government, of course, was to diffus[e] power the better to secure liberty. Bowsher v. Synar, 478 U.S. 714, 721 (1986) (quoting Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 635 (1952) (Jackson, J., concurring)). A. Does the for-cause removal provision undermine the purpose of separation of powers? Although historical conceptions are important when arguing the issues of separation of power, the Petitioner will also look to the legislative authority, the legislative reports, and the 8

9 purpose of the legislation. When determining if the Bureau s purpose is constitutional, the court should look at the functional approach to understand its role in the administrative state. Petitioner will likely argue that the Court should look at Congress s intent when determining the Bureau s constitutionality as it did in Humphrey s Executor. The Court stated in Humphrey s Executor that [although] the general rule precludes the use of these debates to explain the meaning of the words of the statute, they may be considered as reflecting light upon its general purposes and the evils which it sought to remedy. 295 U.S. at 625. Here, Petitioner would likely discuss how the Bureau was created as a single Director led independent agency to implement the consumer financial protections laws more effectively. As shown through statements made by Congress Members on the floor, the Bureau was established to police lenders and ensure that predatory lending practices stopped. Members of Congress further emphasized that an independent director would aid the office in acting swiftly to ensure the enforcement of laws enacted by the legislative and executive branches; instead of waiting years for an Act of Congress to fix the wrongful conduct occurring in the financial industry. H.R. Rep , at Furthermore, multi-member leadership is not constitutionally required and is less effective that a single director. According to Breger and Edles, an important element of independence is the protection under for cause. Marshall J. Breger & Gary J. Edles, Establish by Practices: The Theory and Operation of Independent Federal Agencies, 52 Admin. L. Rev. 1111, 1138 (2000). Based upon the historical importance of the ICC multi-member structure which was not considered independent until the Secretary of Interior authority was eliminated, the oversight of the Secretary caused unnecessary burdens on the administrative activities of the commission. Thus, it could be found that multi-member agencies do not operate efficiently, and should not be required. There are many issues associated with operating under a multi-member leadership. For instance, an agency that holds nominations may delay efficiency and lead to members serving expiring terms. One example is the Federal Election Commission (FEC) which is currently led by five commissioners with four serving expired terms, however, in the past, the structure was a bipartisan commission of six members who were removable for cause. Therefore, when vacancies are available it can increase bipartisanship requirements. According to Datla and Revesz, this issue can affect both the outcomes and the volume of agency activity. Kirti Datla and Richard L. Revesv, Deconstructing Independent Agencies (and Executive Agencies), 98 Cornell L. Rev. 769 Additionally, multi-member agencies are generally not impartial. The chair of the agency is typically appointed by the President which will generally direct the agency to operate according to his agenda. According to Article 2, 2, clause 2, the President has broad authority to appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States. The chair of the agency must focus on policies that speak to the 9

10 mission of the agency while also considering the President s agenda. Therefore, there is no true independence of operating a multi-member structure. While the Respondent can argue that a single Director subject to removal only for cause is historically unprecedented, the Respondent s strongest argument is that the for-cause removal provision undermines the purpose of separation of powers. The separation of powers principle is embodied throughout the entire Constitution. From the division of power between federal and state governments to the division of power amongst different actors within each of the three branches of government, the Framers were careful to avoid a situation where power was concentrated in a single actor. Following the American Revolutionary War, the Framers were well aware of concentrated power and made sure to carefully define the limits on the power of each Branch, including a system of checks and balances to ensure those carefully defined limits were neither eroded nor invaded. See Chadha at The sole exception to the division of power within the three branches of government is the President. Unlike the Judicial and Legislative bodies, which are governed by multi-member bodies (Congress consists of two houses, each comprised of various representatives from the states and the Judicial branch is governed by the Supreme Court which is comprised of nine justices), the President is the sole head of the Executive Branch. Recognizing that the concentration of power in a single Executive posed a threat to individual liberty, the Framers embedded a series of checks on the President s power, just as they did with the Legislative and Judicial branches. Article II of the Constitution vests the Executive power in the President and requires that the President take care that the laws be faithfully executed. According to the Supreme Court, vesting the Executive power in the President while simultaneously requiring the President ensure that the laws enacted by Congress are faithfully executed means that the President must have sufficient power to fulfill his constitutional obligations. See Myers v. United States, 272 U.S. 52 (1926). Chief among those powers is the power to remove those who assist the President in discharging executive power but for whom the President can no longer be responsible for. Id. at 117. Without this removal power, an executive officer could ignore the President s direction without consequence. Bowsher at 726. While the Supreme Court has previously upheld a for-cause removal provision in an independent agency, the agency in question was made up of a multi-member body. See Humphrey s Executor v. United States, 295 U.S. 602 (1935). There, the Supreme Court pointed out that independent agencies are wholly disconnected from the executive department and have no direct accountability to the President. PHH, 839 F.3d at 6. B. Do the checks within the Bureau satisfy the separation of powers principle? The Petitioner will likely argue that the internal and external checks on the Bureau satisfy the separation of powers principle by limiting the Director s power. The Bureau does not operate on its own, but rather is regulated by the President, Congress, and other agencies. In addition to 10

11 being regulated by the President and Congress and statute regulations, the Bureau must report to the Attorney General. The Bureau has the responsibility of notifying the Attorney General of any investigations or proceedings it is a part of to ensure compliance and avoid conflicts. 12 U.S.C Additionally, the Director of the Bureau must appear before both Houses committees on a semi-annual basis to provide reports, rules, orders, and implementations by the Bureau done during the previous year. 12 U.S.C This ensures a complete check balance of the regulations and powers the Bureau may use throughout the year. Moreover, all regulations may be subject to review and approval or veto by the Financial Stability Oversight Council (FSOC). The FSOC operates to ensure that regulations created by the Bureau are safe and constitutional. Also, under 12 U.S.C. 5513(c)(1), if the FSOC does not have enough votes to veto a regulation, a member of the council may request a stay for up to 90 days. The Bureau is also required to coordinate with other financial agencies, such as the SEC, the CFTC, the FTC, and state regulatory agencies. These agencies also have the power to approve or reject regulations set by the Bureau. Furthermore, according to 12 U.S.C. 5494, the Director shall establish a Consumer Advisory Board to advise the Bureau in the exercise of its functions under the federal consumer financial laws. The members of the board must include experts in consumer protection, financial services, community development, fair lending, as well as those in civil rights, consumer financial products/services, and representatives of depository institutions that primarily serve under-privileged communities. Under Morrison v. Olson, the importance of separation of powers is recognized in the Petitioner s case. In Morrison, the court held that selecting an independent counsel did not violate the Appointments Clause and did not violate Article III. Additionally, the Act was not offensive to the separation of powers doctrine since it did not interfere with the functions of the Executive Branch. Here, to show that the constraint on the Bureau s decision-making is nothing but advisory would erase the vital role of the other branches. The Constitution created a system of checks and balance to absolve each branch with unlimited power. Thus, the Bureau s requirements to report to both branches, as well as other regulating agencies, creates a balanced system. The Respondent is likely to argue that the internal systems of checks created by the Dodd- Frank Act do not sufficiently protect individual liberty and thus the Bureau s structure violates the separation of powers principle. While the Bureau s Director is required to consult with the Consumer Advisory Board, nothing in the Dodd-Frank Act requires the Director follow the Board s advice or authorizes the Board to exercise full decision-making power. See 12 U.S.C. 5494(a). The little power the Financial Stability Oversight Council has to veto certain regulations is insufficient to check the Director s power. See 12 U.S.C The Council s veto power requires a two-thirds majority vote of its members and is limited solely to regulations the Director retains sole authority to bring enforcement actions and direct administrative adjudications. Id. Under the Dodd-Frank Act, the Bureau is established as a part of the Federal Reserve; however, 11

12 this relationship is limited to certain administrative purposes and the Federal Reserve lacks authority to supervise, direct, or remove the Director. See, e.g., 12 U.S.C. 5491(a), Admittedly, action agency is subject to judicial review; however, judicial review of Bureau actions is limited, see, e.g., Heckler v. Chaney, 470 U.S. 821 (1985); Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402 (1971), and is often shown significant deference by courts. See, e.g., Chevron U.S.A. v. Natural Resources Defense Council, 467 U.S. 837 (1984); Motor Vehicle Manufacturers Association of U.S. v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29 (1983). Finally, pre-enforcement challenges are not always ripe for review. See Abbott Laboratories v. Gardner, 387 U.S. 136 (1967); Toilet Goods Ass n v. Gardner, 387 U.S. 158 (1967). 12