On Monday, the Supreme Court struck down the original structure of the Consumer Financial Protection Bureau (CFPB) as unconstitutional, ruling that the way the Dodd-Frank Wall Street Reform and Consumer Protection Act (2010) set up the CFPB violated the Separation of Powers under the Constitution. Yet Sen. Elizabeth Warren (D-Mass.), CFPB’s architect, claimed victory nonetheless, because the Court preserved the CFPB’s existence, claiming that the unconstitutional directorship was “severable” from the rest of the legislation.
“Let’s not lose sight of the bigger picture: after years of industry attacks and GOP opposition, a conservative Supreme Court recognized what we all knew: the [CFPB] itself and the law that created it is constitutional. The CFPB is here to stay,” Warren insisted, responding to the Court’s decision in Selia Law v. CFPB (2020).
The case revolved around the constitutionality of the CFPB’s original structure. As Chief Justice John Roberts explained in the syllabus for the case, “Congress gave the CFPB extensive rulemaking, enforcement, and adjudicatory powers, including the authority to conduct investigations, issue subpoenas and civil investigative demands, initiate administrative adjudications, prosecute civil actions in federal court, and issue binding decisions in administrative proceedings. The CFPB may seek restitution, disgorgement, injunctive relief, and significant civil penalties for violations of the 19 federal statutes under its purview. So far, the agency has obtained over $11 billion in relief for more than 25 million consumers.”
“Unlike traditional independent agencies headed by multimember boards or commissions, the CFPB is led by a single Director, who is appointed by the President with the advice and consent of the Senate, for a five-year term, during which the President may remove the Director only for ‘inefficiency, neglect of duty, or malfeasance in office.’ The CFPB receives its funding outside the annual appropriations process from the Federal Reserve, which is itself funded outside the appropriations process through bank assessments,” Roberts added.
The Court ruled that under the Constitution, “the executive power belongs to the President, and that power generally includes the ability to supervise and remove the agents who wield executive power in his stead. While we have previously upheld limits on the President’s removal authority in certain contexts, we decline to do so when it comes to principal officers who, acting alone, wield significant executive power. The Constitution requires that such officials remain dependent on the President, who in turn is accountable to the people.”
In other words, the CFPB director’s unique position as financially independent from Congress and protected from getting fired by the president is a gross abuse of the way the Constitution holds the U.S. government accountable to the people. The CFPB director exercises a nearly dictatorial power, unchecked by Congress or the president.
Warren intended for the director to wield this power — she argued that it is necessary for the CFPB director to be insulated from the will of the people in order to hold financial institutions accountable. As Warren put it on Monday, the CFPB director “works for the American people. Not Donald Trump. Not Congress. Not the banking industry.”
Naturally, the senator disagreed with the centerpiece of the Court’s ruling. “Now, the Supreme Court should not have ignored the intent of Congress and allowed the President to remove the [CFPB] director without cause. They just handed over more power to Wall Street’s army of lawyers and lobbyists to push out a director who fights for the American people.”
Now, the Supreme Court should not have ignored the intent of Congress and allowed the President to remove the @CFPB director without cause. They just handed over more power to Wall Street's army of lawyers and lobbyists to push out a director who fights for the American people.
— Elizabeth Warren (@SenWarren) June 29, 2020
Yet Devin Watkins, an attorney for the Competitive Enterprise Institute (CEI), celebrated the ruling and explained that Warren was incorrect to say the Supreme Court upheld her agency as constitutional.
“I think this makes the CFPB more electorally accountable, and that’s the important thing,” Watkins told PJ Media. “The president of the United States is voted in by the people. He is selected for his wisdom and his judgment, the director of the CFPB is not.”
Watkins noted that in November, President Trump will stand before the American people for reelection, while “the CFPB director never has to face voters.”
“That’s why this case is important,” the lawyer explained. “It is ensuring that the president can review and if necessary fire the CFPB administrator to ensure the law is faithfully exercised. Ultimately, this is about democracy, it is about ensuring that the will of the people can have a real influence on their government.”
Watkins also addressed Warren’s claim that the Court had ruled CFPB constitutional.
“It didn’t rule that at all,” he said. “It wasn’t a question as to whether every provision of the CFPB is constitutional. No one’s even arguing that case.”
Rather, the Supreme Court “only dealt with the issue that was directly presented to it,” namely whether the CFPB director’s protection from firing violates the Separation of Powers.
“Clearly, not the entire law was constitutional,” Watkins said. Indeed, he predicted that the courts would consider another question about the constitutionality of the CFPB — whether or not its immunity from Congress’s power of the purse also violates the Separation of Powers. “The funding sources are going to be a big question, going forward.”
“It would be absurd to think that the CFPB is now immune from every constitutional attack whatsoever,” the CEI lawyer added. Even if the CFPB’s funding sources survive a court challenge, the facts on the ground could change. Watkins noted that in 1938, the Supreme Court ruled that a regulation on the price of milk was constitutional, yet 34 years later, a lower court struck down the provision. Why? “The facts had changed,” so the law “no longer survived rational basis review.”
Contrary to Warren’s statement, this ruling does not uphold the CFPB as constitutional in its entirety — indeed, it is virtually certain her pet agency will face another legal challenge.
Tyler O’Neil is the author of Making Hate Pay: The Corruption of the Southern Poverty Law Center. Follow him on Twitter at @Tyler2ONeil.