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DFPI’s Plethora Of Spoils – Financial Services



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In January, 1832, William Learned Marcy rose in the United
States Senate to defend Secretary of State Martin Van Buren from
criticism by Henry Clay. Clay’s attack on Van Buren is not
remembered, but the words of Senator Marcy’s defense are still
quoted: “The politicians of New York . . . see nothing wrong
in the rule, that to the victor belong the spoils of the
enemy.”

In 1913, California Governor Hiram Johnson signed into law a
state civil service law to address in response to the
“spoils” system of government in which politicians
rewarded their supporters with government jobs. Civil service
reforms were later embedded in the California Constitution. Today,
Article VII, Section 1 provides:

(a) The civil service includes every officer and employee of the
State except as otherwise provided in this Constitution.

(b) In the civil service permanent appointment and promotion
shall be made under a general system based on merit ascertained by
competitive examination.

In a recent post concerning Governor Newsom’s appointment of
a new General Counsel for the Department of Financial Protection
& Innovation, I noted that the California Constitution provides
for gubernatorial appointments of “state officers” and a
deputy or employee of that officer. There are at least four
appointed positions at the DFPI in addition to the Commissioner and
the Chief Deputy Commissioner. According to the Governor’s
office, the legal bases for these appointments is found in the
Financial Code in addition to Article VII, Section 4(f) &
(g):

  • Section 322: Commissioner

  • Section 350: Chief Deputy

  • Section 351(A) – Senior Commissioner, Division of Consumer
    Financial Protection

  • Section 351(B) – Senior Commissioner, Division of Corporations
    and Financial Institutions

  • Section 14200.2 – Deputy Commissioner, Office of Credit
    Unions

Civil service in which employment is based on merit was
implemented to address the problem of government agencies populated
with incompetent political appointees. It also provides for
continuity and stability in government. However, the civil service
can also lead to an entrenched bureaucracy that is immunized from
political accountability. An interesting question is whether the
California Constitution permits the legislature to create any
number of exempt positions. The Financial Code provisions cited
above coupled with the Constitution grant the Governor the
authority to appoint at least 10 persons to the DFPI, several of
whom are not subject to Senate confirmation. Can the legislature
constitutionally grant the Governor the authority to fill 100
positions in the DFPI? If so, then the politicians of California,
like their predecessors in New York, may see nothing wrong with the
“spoils” system.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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