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Ever since Elizabeth Warren came up with the idea of a Consumer Financial Protection Bureau, directly funded by the Federal Reserve to shield it from congressional meddling, the CFPB, created as part of the Dodd-Frank Act, has been high on the right wing’s hit list. The animosity only intensified since the bureau has been headed by the superb Rohit Chopra, whose actions have spotlighted and curbed corporate abuses, levied billions in fines, and saved consumers at least $15 billion.
The CFPB has not only been consumer protection at its best. Its actions have been an ongoing reminder of all the ways that corporations and banks will use their power to deceive and harm ordinary people, and why we need the counterweight of affirmative, activist government.
Last October, a three-judge panel of the U.S. Court of Appeals for the Fifth Circuit, all Trump-appointed judges, ruled that the funding mechanism of the CFPB, and the provision that its director can only be removed for cause, violated the constitutional separation of powers, and that all of its decisions were presumably void.
In February, the Supreme Court agreed to take the case. But yesterday, in a blistering, scholarly, and thoroughly documented ruling, another appellate circuit court, the Second Circuit, held that the CFPB was entirely constitutional. This decision was also written by a Trump appointee, Judge Richard J. Sullivan.
The practical problem for any ruling holding unconstitutional the CFPB’s funding mechanism, which indeed circumvents the annual appropriations process, is that it would also have to toss out the funding systems for several other government agencies, including Social Security, Medicare, the FDIC, and the Federal Reserve itself.
Reviewing the history of similar legislation and repeated findings by earlier Supreme Court decisions, the Second Circuit ruling held: “[W]e cannot find any support for the Fifth Circuit’s conclusion in Supreme Court precedent. To the contrary, the Court has consistently interpreted the Appropriations Clause to mean simply that ‘the payment of money from the Treasury must be authorized by a statute.’” The decision also approvingly quoted an earlier ruling by Justice Elena Kagan, leader of the high court’s liberals.
Because the Supreme Court agreed to hear the appeal only in February, the case will not be argued this term, but in 2024. By then, the CFPB will have cracked down on more abusive corporate practices and saved consumers many more billions.
Once again, Elizabeth Warren did her homework well. Unless the high court wants to shut down the Federal Reserve—and there have been times when that seemed an attractive idea—it is awfully hard to see how even this Supreme Court can kill the CFPB.
