Supreme Court

This New Deal Precedent May Decide the Fate of Elizabeth Warren's Consumer Financial Protection Bureau

What’s at stake in Seila Law v. Consumer Financial Protection Bureau.

|

When Congress passed the Dodd-Frank Wall Street and Consumer Protection Act of 2010 it also created a powerful new federal agency charged with policing the financial sector. The brainchild of then–Harvard law professor Elizabeth Warren, the Consumer Financial Protection Bureau (CFPB) was supposed to safeguard the interests of American consumers by implementing and enforcing a wide array of federal laws.

The CFPB was also designed to be independent. Most notably, the agency was placed in the hands of a single director appointed by the president to a five-year term. Despite wielding many executive branch–like powers, however, the director of the CFPB does not answer to the White House and may only be removed by the president for "inefficiency, neglect of duty, or malfeasance."

In other words, the director may not be fired for purely political reasons. What that means in practice is that if CFPB inventor Elizabeth Warren is elected president while a Donald Trump appointee stands at the agency's helm, Warren is blocked from naming her own preferred CFPB director until the Trump appointee's term has expired.

That unique organizational structure has raised constitutional questions. How is it consistent with the separation of powers to have a quasi-executive agency run by a lone federal official who is essentially untouchable by the head of the executive branch? Is the CFPB effectively a fourth branch of government unto itself?

The U.S. Supreme Court will soon grapple with such questions. On March 3 the justices are scheduled to hear arguments in Seila Law v. Consumer Financial Protection Bureau. The case asks "whether the vesting of substantial executive authority in the Consumer Financial Protection Bureau, an independent agency led by a single director, violates the separation of powers."

The outcome of the case likely turns on the Court's interpretation and application of one of its own far-reaching precedents. At issue in Humphrey's Executor v. United States (1935) was President Franklin Roosevelt's 1933 dismissal of a Federal Trade Commission (FTC) commissioner for purely political reasons. The man fired, a Herbert Hoover appointee named William E. Humphrey, was not exactly a New Deal sympathizer. "So far as I can prevent it," Humphrey once said, "the Federal Trade Commission is not going to be used as a publicity bureau to spread socialistic propaganda."

FDR wanted him gone. "I do not feel that your mind and my mind go along together on either the policies or the administering of the Federal Trade Commission," Roosevelt informed Humphrey, "and frankly, I think it is best for the people of this country that I should have full confidence." Humphrey got the boot.

Did the president have the lawful authority to fire him? That question ultimately landed at the Supreme Court, which ruled 9–0 that Roosevelt did not. The FTC "must, from the very nature of its duties, act with entire impartiality," wrote Justice George Sutherland. "It is charged with the enforcement of no policy except the policy of the law." Because it "cannot in any proper sense be characterized as an arm or an eye of the executive," Sutherland concluded, the agency "must be free from executive control."

Which brings us back to the present case. If the president may not fire a commissioner of the independent FTC for political reasons, then the president likewise may not fire a director of the independent CFPB for political reasons, right?

Not necessarily. One difference—possibly huge—between the two is that the FTC is run by a panel of five commissioners and, according to federal law, "not more than three of the commissioners shall be members of the same political party." The CFPB, by contrast, is run by a single individual; there is no comparable nod towards partisan diversity in its leadership ranks.

Seila Law, the outfit now challenging the CFPB, argues that this makes a big difference. "While the Court has in limited circumstances upheld the constitutionality of certain multimember 'independent' agencies, whose leading officers the President can remove only for cause," Seila Law argues in its brief to the Supreme Court, "it has never upheld the constitutionality of an independent agency that exercises significant legislative authority but is led by a single person." In short, the argument goes, not even Humphrey's Executor allows for something like this.

That could prove a winning position, particularly if a majority of the justices question the legal underpinnings of the modern administrative state but would rather not pick a fight with an 85-year-old precedent. By following Humphrey's Executive without going one step beyond it, the Supreme Court could still spell constitutional doom for the CFPB.

NEXT: "An Introduction to Constitutional Law" Featured on Life, Liberty, & Levin

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. the director of the CFPB … may only be removed by the president for “inefficiency, neglect of duty, or malfeasance.”

    Easily done. “You were too slow in implementing that law.”

  2. Elizabeth Warren wont be president in 2020, so she can take her lies and shove them up her ass.

    1. True. If she gets elected in November she won’t be President until 2021.

      *not that she’s gonna be elected anyway

    2. Warren is the quintessential lying dog faced pony soldier.

  3. Humphrey’s Executor is at best questionable law. I hope the Supreme Court spends some time considering whether that decision should be overturned even though it is an old precedent.

    1. They could ask RBG in one of her lucid moments what it was like in those days.

      1. While she’s trying to hand out hard candy and change the block of ice in the icebox?

  4. This leaves me unclear on a lot of things. If the FTC is not a part of the executive branch, what is left — does it answer directly to Congress? Surely not the courts — so where does it sit? The argument here is that if the CFPB does not answer to the President, then it must be a fourth branch created out of whole cloth. Isn’t that what the FTC is, if it doesn’t answer to the President?

    There’s also no mention here of the CFPB having its own special budget from the Fed, and thus Congress having no control of its purse. How can that be? Don’t all appropriations have to go though Congress and originate in the House? Does this mean that Congress could, say, move the DoD to the Fed and make it independent of both Congress and the President?

    1. Fauxcahonata’s crystal ball sees a forth branch of government, superior to the others, and she’d hoping to be coronated to head that branch.

    2. The Adminstrative State = The argument here is that if the CFPB does not answer to the President, then it must be a fourth branch created out of whole cloth.

      The entire law should be thrown out.

  5. More egregious than its structure is it’s funding mechanism. Nothing but bad will happen if Congress thinks it can start finding agencies and programs off the books having the Fed manufacture the money. The Fed should have told Congress to pound sand and taken the issue to the courts.

    1. Why the dickens would you expect ANY bureaucracy, let alone the imperious Fed, to complain of having too much authority, especially when independence from Congress is included on a silver platter?

    2. Throw in the civil rights commission, the EEC, Amtrak and the National endowment for the arts.

  6. I don’t know what’s wrong with you clingers. Warren is the only person fighting for socialism and “economic nationalism”. Clearly giving total power to someone who favors a combination of nationalism and socialism is the only smart thing to do.

    1. Sorry, this does not contain nearly enough NPC boilerplate to properly parody an Arthur L. Hicklib post.

  7. By following Humphrey’s Executive without going one step beyond it, the Supreme Court could still spell constitutional doom for the CFPB.

    Riiiight. With John “judicial deference” Roberts on the court? Tell me another one.

    I’d bet the house the case gets struck down.

  8. I thought us mere mortals had to have standing to go to court to challenge something. What ‘standing’ does this Seila Law character have? What specific harm are they claiming?

    1. re: standing – In 2017, the CFPB issued a “civil investigative demand” to Selia Law. Selia Law is fighting that demand.

      Note that Selia Law is a “debt relief services” company and, in my opinion, likely a scam organization. But whether or not Selia Law is a legit company has no bearing on the question of whether CFPB are the right folks to do the investigating.

  9. The correct answer, of course, is that since the President has the duty of seeing the laws be “faithfully executed”, and the Constitution vests the executive power (which consists of executing the laws) solely in him, the argument that “It is charged with the enforcement of no policy except the policy of the law” is a straightforward statement of why the FTC cannot properly be termed as anything except an arm of the executive, exercising power vested in and thus controlled by the President.

    Accordingly, Humphrey’s Executor v. United States is nothing more than a bald-faced, 9-0 repudiation of the Constitution. Even more blatantly ridiculous than Plessy v. Ferguson, which at least acknowledged that it had to nod to the 14th Amendments “equal” with the formulation “separate but equal”. Any Justice upholding Humphrey’s Executor should be (but of course won’t be) unanimously impeached and removed.

  10. “How is it consistent with the separation of powers…”
    Because SoP refers to the separation between _branches_, not between _administrations_. A president and Congress can nominate/confirm a judge who, then, cannot be removed/replaced by a different president/Congress except for cases of severe negligence or incompetence.

  11. There is an easy solution for some intrepid member of Congress. Propose a FBI, CIA and EPA with the exact same structure.

  12. I am making a good salary from home $1200-$2500/week , which is amazing, under a year back I was jobless in a horrible economy. I thank God every day I was blessed with these instructions and now it’s my duty to pay it forward and share it with Everyone, Here is what I do. Follow details on this web page…..Read MoRe

  13. Hi…
    I am Elena gillbert.When Congress passed the Dodd-Frank Wall Street and Consumer Protection Act of 2010 it also created a powerful new federal agency charged with policing the financial sector. The brainchild of then–Harvard law professor Elizabeth Warren, the Consumer Financial Protection Bureau (CFPB) was supposed…
    you can also read more….click here http://klantenservie.eklablog.com/er-is-een-onbekende-netwerkfout-opgetreden-op-instagram-a182050814

  14. on Saturday I got a gorgeous Ariel Atom after earning $6292 this – four weeks past, after lot of struggels Google, Yahoo, Facebook proffessionals have been revealed the way and cope with gape for increase home income in suffcient free time.You can make $9o an hour working from home easily……. VIST THIS SITE RIGHT HERE
    >>=====>>>> Detail of work

  15. This is enoug for me to Earn money at home on laptop ,Just work on laptop 4 to 6 hour par day and Make 50 Dollar Easily This is very nyc for me and my family….. Read more

  16. Now imagine Warren with executive power.

    Amazing how FDR is considered the best President.

    Humphrey sounds like he was a god dang hero.

  17. ★I Get paid over $90 every hour telecommuting with 2 children at home. I never thought I’d have the option to do it however my closest companion gains over 10k a month doing this and she persuaded me to attempt. The potential with this is unending.
    Heres what I’ve been doing…….w­w­w­.­m­o­n­e­y­8­1­.­c­o­m

Please to post comments

Comments are closed.