December 7, 2022

Volume XII, Number 341

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December 06, 2022

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DFPI's Plethora Of Spoils

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.

© 2010-2022 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume XII, Number 258
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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
Partner

Keith Bishop works with privately held and publicly traded companies on federal and state corporate and securities transactions, compliance, and governance matters. He is highly-regarded for his in-depth knowledge of the distinctive corporate and regulatory requirements faced by corporations in the state of California.

While many law firms have a great deal of expertise in federal or Delaware corporate law, Keith’s specific focus on California corporate and securities law is uncommon. A former California state regulator of securities and financial institutions, Keith has decades of...

949-851-5428
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