On Dodd-Frank's third anniversary, it is appropriate to ask if it has all been worth it.

Well, I guess it depends on who you ask. If you ask Dodd or Frank, the answer would be yes. If you ask all of the newly hired compliance professionals that have been hired over the last three years, the answer would be yes.

If you ask the lobbyists who are continuing to make money hand-over-fist lobbying various provisions of the bill, the answer would be yes. If you asked the Beltway bureaucrats who had their budgets, power, and authority increased exponentially, the answer would be yes.

If you ask the trial lawyers and unions, the answer would be yes. If you asked Fannie Mae and Freddie Mac who have been able to continue to crowd out private investment in the housing market and further entrench their monopolization of the secondary mortgage market, the answer would be yes.

If you ask the too-big-to-fail banks who had their implicit backing locked into law by Dodd-Frank, the answer would be yes. If you asked Chairman Gensler, who is trying to exploit the law by fundamentally altering a limiting provision into one that enables him to regulate the entire global swaps market, the answer would be yes.

So, the law has obviously benefited quite a bit of people.

However, there is another side of to this debate. Who would say that all of this has probably not been worth it? If you asked small community banks and credit unions, the answer would be no.

If you asked job creators, innovators, and risk-takers, the answer would be no. If you asked the taxpayers, who now explicitly support large too-big-to-fail banks, the answer would be no.

If you asked the overworked DC Circuit Court who has to keep striking down unworkable and unnecessary regulations, the answer would be no. If you ask the homebuyers, consumers, and small businesses that are struggling to access much-needed credit, the answer would be no.

And, finally, if you were to ask the Founding Fathers of this country, the answer would be no. I realize that we cannot ask them, but we can reference a document they left us called the Constitution.

I voted against Dodd-Frank because it failed to address the most important core causes of the recent financial crisis and instead focused on further empowering failed regulators; it continued government intervention into the private sector; and it instituted policies that will kill jobs. But there is another, more fundamental reason why I opposed and still oppose Dodd-Frank. And that is because it is, without question, unconstitutional.

Currently, there is a lawsuit challenging the constitutionality of Dodd-Frank and surprisingly little attention has been paid to it. That is why I would like to take up this topic with you today.

The philosophical foundation of our Constitution is the protection of individual liberty through limited government. And, as a result, our Constitution establishes a government of restraint. It enumerates a series of few and defined powers, divides responsibility among three branches of government, and establishes a system of checks and balances.

But rather than establish a regulatory regime that is consistent with these constitutional principles, Dodd-Frank is the great exception to the Constitution. Dodd-Frank creates not one, but two agencies that are granted unlimited power to define and regulate every conceivable financial transaction while being accountable to no one.

Those two agencies; the Consumer Financial Protection Bureau (CFPB) and the Financial Stability Oversight Counsel (FSOC) are effectively the judge, jury, and unfortunately, the executioner of the American economy.


Let's take the case of the CFPB first, which couldn't even get off the ground without violating our Constitution. I of course refer to the illegitimate recess appointment of Richard Cordray as the so-called Director of the CFPB. Unfortunately, last week Leader Reid held over 200 years of Senate tradition hostage and, by default, wound up pulling the nuclear option and forcing the minority party to approve the President's outstanding executive branch appointments regardless of their concerns.

The president's actions on the illegitimate recess appointment of Mr. Cordray effectively erased the advice and consent of the Senate from the appointments clause and imperiled the legislative checks on executive power that our Founders thought necessary to prevent the emergence of a tyranny.

Regardless of the formal confirmation last week of Mr. Cordray, the CFPB is still an unconstitutional monster. The CFPB's mission is to prevent practices that it is empowered to define as "unfair, deceptive, or abusive." And with that limitless grant of authority, no check is placed on the CFPB.

It is well known that the CFPB nullifies what James Madison called Congress's "most complete and effectual weapon," the power of the purse, by funding the CFPB through the Federal Reserve and not through the congressional appropriations process.

But the CFPB director is exempt from executive branch oversight as well. While the director is appointed by the president for a five-year term, he can stay on indefinitely if no successor is confirmed. The director can only be removed under strictly limited circumstances, but not for policy reasons. And judicial review is limited because special deference must be given to CFPB legal interpretations.

So the CFPB is headed by a singular regulator, with unlimited power, and is not accountable to the legislative, executive, or judicial branch.

I want to stress the point that this is not simply an academic exercise in constitutional theory. It is worth noting the real-life consequences that result due to Dodd-Frank's violation of our Constitution.

Take the issue of CFPB salaries. Of the 958 members of the CFPB staff, 577 of them, over 60% of the entire staff, makes over $100,000 a year. 20% make over $150,000. And finally, over 5% of the staff makes over $200,000 a year.

One might think that these high salaries are the cost that must be paid for talent. But then how can we justify to the taxpayers that a number of summer interns at the CFPB are salaried at over $40,000? But should we really be surprised by this?

Given immense powers to achieve an all encompassing mandate, with no one watching and with no consequences, the CFPB clearly feels justified in doling out outrageous salaries. This is what can result from the lack of accountability. And if that frightens you, just wait. There's more.


Title I of Dodd-Frank creates the Financial Stability Oversight Council which is charged with acting as a systemic regulator, preventing too big to fail, and preventing future bank bailouts. With a mandate such as this, the power of the FSOC cannot be overstated.

FSOC has the statutory ability to promulgate its own rules and regulations as well as the authority to determine which non-bank financial institutions would be subject to seizure. With all of this power, FSOC is chaired by a cabinet-level official who is removable by the President at will.

Additionally, FSOC is empowered with the ability to control the activities of any financial institution with a two-thirds vote of its members. If that sounds unconstitutional to you, you're not alone. It seems to have sounded unconstitutional even to those that wrote the bill because the courts are not authorized to review and rule on whether or not the FSOC has correctly interpreted the provisions of Dodd-Frank.

Who knew that all Congress had to do to enact an unconstitutional law was to prevent the courts from reviewing it? And it only took us 225 years to figure that out.

Liquidation Authority

But Dodd-Frank's violations of our Constitution don't stop there.

Title II of Dodd-Frank deals with orderly liquidation authority. Under this title, the government can decide if a financial company is in danger of default and if that company's failure poses a threat to the financial stability of the United States. If the Treasury Department answers yes to both of these questions, it can effectively replace the bankruptcy process by putting that institution into receivership.

This type of power is unprecedented and grants immense power to a handful of unelected bureaucrats, empowering them to pick winners and losers among a liquidated company's investors. Once the liquidation of a financial company is ordered by the Treasury Security, the company has all of 24 hours to convince a federal court to overturn the order.

If the company fails to meet this near impossible standard, the government wins by default and can begin the liquidation process, even if appeals are pending. And, for good order, Dodd-Frank prohibits the courts from reviewing whether the Treasury's decision was constitutional or even necessary to protect financial stability.

While Treasury is determining the soundness of an institution, Dodd-Frank prohibits the company from disclosing the threat of liquidation before the court decides the case. There may be some person somewhere that thinks that 24 hours notice is more than enough time to challenge to government's unilateral and arbitrary decision to liquidate a company. But if you are not this person, this authority in Dodd-Frank must seem like nothing less than a war on investment in which the Constitution's guarantees of due process and uniform bankruptcy laws are casualties.


It is astounding to think of the many ways in which Dodd-Frank is unconstitutional. It is bad enough when Congress acts in a way that violates a single part of the Constitution. But it is infinitely worse when Congress works to virtually eliminate all checks and balances in one fell swoop. And that is exactly what Dodd-Frank does.

What is even more frightening is that I am sure that the constitutional violations I have outlined today are not a comprehensive list. We are learning, first hand, why James Madison warned that laws should not be "so voluminous that they cannot be read, or so incoherent that they cannot be understood."

While I am sure most Americans have not read Dodd-Frank and even more do not understand it, the effects that Dodd-Frank has on their lives are very real. From the illegal appointment of Richard Cordray, to the unaccountable and unprecedented powerful agencies, to the demolition of investor and property rights, the violation of the Constitution results in real consequences that will hit the pocketbooks of every American.

If the first three years of this law's existence are any guide, unless we alter and remove significant parts of this unconstitutional monstrosity, Dodd-Frank will continue to benefit the bureaucrats, central planners, lobbyists, unions, and the too big to fail banks…all at the expense of free market economics and limited government.

And it is for this reason that I hope that three years from now, we won't be having a similar meeting on Dodd-Frank's 6th Anniversary.