Rarely has Congress devised anything as aggressively unconstitutional as the Consumer Financial Protection Bureau. Created by the 848-page 2010 Dodd-Frank financial regulation legislation, the CFPB is a crystalline illustration of progressivism’s aspirations for an administrative state largely free from political accountability.
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On Tuesday, the Supreme Court will hear oral arguments about the CFPB. Properly decided, this case will limit Congress’s capacity to diminish itself. There is a split between two circuit courts about this: Does the statute that stipulates the CFPB’s funding constitute an unconstitutional surrender of power by Congress? The Supreme Court can strengthen Congress by limiting its power to abandon its foundational power of the purse.
Congress empowered the CFPB to “regulate the offering and provision of consumer financial products or services.” Allowed to define “financial products” spaciously, it can regulate almost everything touching finance — mortgages, financial advisers, retirement plans, car loans, etc. It can “declare,” by criteria it concocts, business practices to be “abusive,” “unfair,” “deceptive” or involving “discrimination.” For these offenses, which businesses often cannot know in advance are offenses, the CFPB can impose whatever penalties it deems suitable.
The CFPB, without accusing a tiny law firm of any wrongdoing, drove it out of business with time-consuming and money-devouring demands for documents. Such bullying, critics of the CFPB argue, is enabled by the bureau’s unconstitutional funding process, which insulates it from accountability.
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To protect the CFPB from even presidential control, Congress stipulated that the bureau’s director could be removed only “for cause” (“inefficiency, neglect of duty, or malfeasance”), not for policy differences with the president. In 2020, the Supreme Court ruled that this uniquely unlimited sovereignty violated the president’s constitutional powers.
Tuesday, the court considers the CFPB’s most garish constitutional flaw. To insulate the bureau even from oversight by future Congresses, the 2010 Congress made the bureau’s funding independent of Congress. It placed the bureau in the Federal Reserve System, which itself is funded outside the appropriations process by bank assessments and by interest on its own holdings. The CFPB simply decides how much money it wants — up to 12 percent of the Fed’s “total operating expenses.” Last fiscal year, the bureau wanted almost $650 million.
The CFPB’s legislative history demonstrates that Congress intended lavish — effectively uncapped — funding to ensure what the bureau calls its “full independence.” And because the president now controls the bureau’s director, the president will predictably veto any attempt by Congress to regain power over the bureau. It is gone forever, unless the court acts.
The Supreme Court has said that the bureau “acts as a mini legislature, prosecutor, and court, responsible for creating substantive rules for a wide swath of industries, prosecuting violations, and levying knee-buckling penalties against private citizens.”
The Constitution’s appropriations clause says “no money shall be drawn from the treasury, but in consequence of appropriations made by law.” Congress has in no sense appropriated the CFPB’s money. Hitherto, the bureau has flaunted its “full independence” from Congress, pointing to Congress’s insistence that its funds “shall not be construed to be government funds or appropriated monies.” And indeed, the 2010 Congress was eager to surrender to the executive branch the power of the purse regarding the CFPB in perpetuity.
Now, however, the CFPB, facing a constitutional challenge, says Congress effectively appropriated the money the bureau requisitions because its power to do so ultimately derives from Congress’s 2010 statute. But as the U.S. Court of Appeals for the 5th Circuit has said in ruling against the CFPB, by the bureau’s logic, “no federal statute could ever violate the Appropriations Clause” because Congress enacts all statutes.
The CFPB embodies progressivism as Woodrow Wilson envisioned it. Wilson, the first president to roundly criticize the nation’s Founding, was a thorough foe of the Constitution’s separation of powers. He provided the template for today’s progressivism: Ever more power should be concentrated in Washington, and ever more of it should be concentrated in executive agencies staffed by supposedly disinterested experts insulated from supervision by a marginalized Congress. But the New Civil Liberties Alliance says in its amicus brief, “The improper concentration of power within the Executive Branch is no less a separation-of-powers violation simply because Congress itself has acquiesced in the violation.”
If properly decided against the CFPB, this case will demonstrate that when the court energetically uses its power to enforce the separation of powers, it often enlarges not its power but that of Congress. By invalidating the CFPB’s funding, the court can say: Congress lacks the power to surrender its power of the purse.