The Constitutional Case Against the Consumer Financial Protection Bureau 

Will the Supreme Court question the underpinnings of the modern administrative state?


When Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, it created a powerful new federal agency charged with policing the financial sector. A 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 regulations.

The CFPB was also designed to be independent. 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, 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 were elected president while a Donald Trump appointee stands at the agency's helm, Warren would be blocked from naming her own preferred CFPB director until the Trump appointee's term had 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 tackled those very issues in March when it heard oral arguments in Seila Law v. Consumer Financial Protection Bureau.

The outcome will likely turn on the Court's application of one of its own far-reaching precedents. At issue in Humphrey's Executor v. United States (1935) was President Franklin Roosevelt's dismissal of a Federal Trade Commission (FTC) commissioner for purely political reasons. The man he fired, a Republican 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."

Did the president have the lawful authority to fire him? The Supreme Court decided 9–0 that he did not. The FTC "must, from the very nature of its duties, act with entire impartiality," the Court said. "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," the ruling concluded, the FTC "must be free from executive control."

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 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 just one individual.

Seila Law, the outfit 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 told the justices in its brief, "it has never upheld the constitutionality of an independent agency that exercises significant legislative authority but is led by a single person."

That could prove a winning position. A majority of the justices may question the underpinnings of the modern administrative state yet balk at the idea of picking a fight with an 85-year-old precedent. By following Humphrey's Executor without going one step beyond it, the Supreme Court could still spell constitutional doom for the CFPB.

NEXT: Brickbat: Professional Courtesy

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  1. If Warren’s for it, I’m against it.

    1. That is a pretty good way to see it.

      See, here’s the thing: The Team D electorate weighed Fauxahontas’ ideas and found them wanting. They rejected her.

      1. Educated people recognize the same thing about society’s rejection of conservatives’ ideas for more than a half-century. Getting stomped in the culture war — by their betters — is what makes right-wingers so cranky, resentful, and disaffected.

        1. Curl up and die already worthless bitch troll.

        2. One lone partisan hack in charge of executive duties that is unaccountable and not replaceable. What could possibly go wrong? The only good idea Elizabeth Warren ever had was to drop out of the presidential race. Although it would’ve been nice to see the first Native American/women of color/Asian/Polynesian/transgender/poverty-stricken young boy from the Chicago streets as President.

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  2. “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?”

    Congress is the only entity to which the Constitution delegates a power to remove executive branch officials (through impeachment).

    The Constitution empowers the president to appoint such officials, if the Senate approves of his picks. And it empowers the president to require the opinions of such officials in writing.

    But on a plain reading of the Constitution, EVERY executive branch official is “essentially untouchable by the head of the executive branch” when it comes to firing.

    1. That’s not how SCOTUS saw it. The Constitution provided for the advice and consent of the Senate in appointing officers but was silent on the issue of removal of officers. (Giving Congress the sole power of impeachment does not establish that impeachment is the sole method of removing an officer.) Congress itself had anticipated the issue by passing the Tenure of Office Act – a law which established that officers could not be removed by the President without the consent of Congress – over Andrew Johnson’s veto, the violation of which was the basis of Johnson’s impeachment. If the Constitution had already established this, why would Congress feel the need to pass such a law? When the issue next arose, in Myers v US, the Supreme Court ruled that it was implied in the Constitution that the President was allowed to remove members of his staff as the powers of the Executive were vested solely in the President.

    2. Article II section 4 says civil officers shall be removed form office on impeachment, but not that they shall only be removed on impeachment.

  3. The statists are going to scream bloody murder because they’re used to the ratchet only going in one direction but let us hope that SCOTUS starts step-by-step expanding the contraction of the powers of the Administrative State. We didn’t get here in one fell swoop, it was a constant pressure to go one more inch and then one more inch and then one more inch, we need that same constant pressure to reverse course.

    1. Here’s a good overview of the issue of the Administrative State.

      The arguments basically come down to the issue of what the purpose of government is. Thomas Jefferson said governments were established to secure the certain inalienable rights with which Man was endowed by his Creator, the more accepted expansive view of government is a nebulous and unlimited power to, as the Preamble has it, “form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity”.

      In my opinion, it’s a plain fact that the Preamble to the Constitution was simply stating the reason for the Constitution, not the reason for government. Government most definitely goes not have a broad mandate to do “good things” as good things are defined by the Preamble. To use the Preamble as a justification for any and all government action would be analogous to a museum hiring security guards to patrol the grounds of the museum in order to protect their valuables from being stolen and the security guards taking all the valuables and locking them in the basement vault with the argument that the valuables would be much better protected there rather than on display. No, the security guards weren’t hired to protect the valuables by any means necessary, they were hired to patrol the grounds. The purpose of patrolling the grounds is to protect the valuables, the purpose of the security guards is to patrol the grounds. Same with government – government was given certain powers in order to do good things, it can’t argue that doing good things gives them unlimited power.

  4. For anyone keeping score, yes, the stupidest thing government has done in my lifetime was to make it illegal to open a business or go to work during the COVID-19 epidemic–ahead of an impending recession. Before that, however, the reigning champ was making it harder for homeowners to refinance out of variable interest loans in the aftermath of the great recession–in the name of consumer protection!!!

    Just a hint for any government employee retards out there: The solution to stopping bailouts isn’t to cut people off from credit for their own good–especially not when they’re desperate to refinance and save the equity in their homes. If progressive politicians want to prevent bailouts, rather, what they should do is light themselves on fire. The appropriate way to prevent bailouts is for politicians to refuse to pass legislation approving bailouts.

    This was when I first noticed Liz Warren, by the way, and to the extent that she was responsible for the Consumer Financial Protection Bureau is the extent to which she has no business being the president of the United States. Her rhetoric since then has only suggested she’d do more of the same only more so if she had been elected president. I don’t believe Warren only lost because even progressives voters were disgusted by her . . . um . . . cultural appropriation, but regardless of the reason she lost, America dodged a bullet with that one.

    1. to the extent that she was responsible for the Consumer Financial Protection Bureau is the extent to which she has no business being in any position of responsibility at any level.

  5. The thing to remember about the constitutional cases for or against this stuff . . .

    There’s a credit cycle, something which most libertarians are probably familiar with, at least if they know anything about Austrian economics, etc. Fewer of them realize that there is a lagging cycle I’d call the regulation cycle, which follows the credit cycle.

    It’s sort of like the old stupid bus driver analogy of the Fed. The bus goes up a hill and it gets steeper, it becomes harder and harder to gain momentum, so the stupid bus driver hits the gas–typically, just as the bus is about to go over the top of the hill. Now the stupid bus driver is hitting the gas as the bus goes down the steepest part of the hill, and he hits the breaks. Of course, the stupid bus driver hits the breaks just as the bus starts climbing the hill–when what it really needs is more acceleration.

    That analogy is used for raising and lowering interest rates, but there’s a similar effect with regulation. When there are so many bad loans in the system that it inspires a recession, the government throws all kinds of regulation and laws in place–typically, just as the economy is already suffocating for lack of credit. Eventually, when the American consumer comes back and wants to buy a home, they see all these antiquated restrictions on their ability to get a loan, and it makes them furious. Congress responds because standing between borrowers and home loans they want is a stupid place to be if you want to win elections. So regulatory imposed credit standards come down and the cycle repeats.

    I don’t see the Constitution as being more powerful than the forces that drive this regulation cycle. Rather, they use the Constitution to rationalize whatever they want to do at any given point in the cycle. If not even the Constitution is powerful enough to resist the forces that are driving the regulation cycle, then we should probably look at the forces driving the cycle–which ultimately is the desires and opinions of the American people. The ultimate solution is to persuade our fellow Americans to oppose bailouts and let lenders and borrowers suffer the consequences of their poor choices.

    1. “The ultimate solution is to persuade our fellow Americans to oppose bailouts and let lenders and borrowers suffer the consequences of their poor choices.”

      —-Ken Shultz

      I suppose it may need to be said that the Consumer Financial Protection Bureau is in opposition to the ultimate solution.

      1. Not going to happen. Consider the GM bailout – GM was a failed company, producing products at a price consumers were not willing to pay such that GM could be profitable. They were bailed out largely on the premise that the job losses their bankruptcy would entail would be unacceptable. Except, aside from the fact that GM’s employees were producing shit nobody wanted and why the hell would we want to keep people employed making shit nobody wants, GM wouldn’t suddenly just disappear if they declared bankruptcy. Their creditors would take over the company and they would have to re-organize their business, making vehicles at a price people were willing to pay such that GM could actually make a profit, and perhaps they might have to close down some of their least-efficient facilities, but I’m pretty sure Chrysler and Ford and every other automaker on the planet weren’t exactly horrified that one of their competitors who was screwing up their market by selling vehicles at below-cost prices was going to stop that shit.

        1. I’m going to mention one thing here.

          The reason GM was producing mostly gigantic SUVs that no one wanted back when oil was hovering near $150 a barrel was because those SUVs have higher margins than everything else.

          When you added in the legacy costs of retired UAW workers into GM’s cost basis, their automobiles needed to make thousands of dollars more in profit per car than Nissan or Toyota. The profit margin on a Nissan or Toyota sedan or pickup was less than the cost of a GM car per vehicle to pay the pension costs of people–who don’t even work for GM anymore because they were retired.

          The reason Nissan, Toyota, and others could thrive on low margin small pickups and sedans was because they manufacture in non-unionized plants in right to work states in the South.

          The reason GM had to make expensive cars that no one wanted was because they couldn’t make low margin cars that consumers wanted. If there’s anything that makes less sense than building SUVs with high profit margins that no one wants, it’s building “budget” sedans that cost several thousands more than the competition–because they come baked in with outrageous pension costs courtesy of the UAW.

          And people did not take the GM “bailout” laying down. Obama didn’t use that TARP money to nationalize GM because it was popular. He did it to pay off his campaign donors and grass roots “volunteers” in the UAW. The UAW was given some 40% of the company. It was outrageous and was part of the reason why the Tea Party sprang up to oppose TARP.

          1. “G.M. acknowledged in its most recent annual report that from 1993 to 2007 it spent $103 billion “to fund legacy pensions and retiree health care–an average of about $7 billion a year–a dramatic competitive and cash-flow disadvantage.” During those 15 years, G.M. paid only $13 billion or so in shareholder dividends. The company has been sending far more money to its retirees than to its owners.

            After falling $20 billion behind on its pension earlier this decade, G.M. doggedly put money into its plan to catch up. It has also agreed to invest more than $30 billion in a fund to cover future health-care expenses. But these efforts have starved its business.

            —-New York Times, July 10, 2008


            Even the New York Times gets it!

            Barack Obama did not bail out GM or its shareholders.

            Barack Obama bailed out the UAW and their pension fund using the future paychecks of working Americans.

            That Barack Obama and the UAW would do that, even as they presented themselves as the champions of working Americans, who make far less than the average UAW worker or UAW retiree is part of the reason why both Barack Obama and the UAW are evil.

            1. Exactly! Well put!

          2. To be fair, GM did that to itself. It caved to UAW demands virtually every time contract negotiation came up, because it couldn’t stomach dealing with a strike to keep worker compensation reasonable.

            So as competition from Japan increased in the car market, GM’s margins evaporated because it had voluntarily signed away its ability to keep prices low.

            A little bit of backbone from GM CEOs decades earlier would have saved them a lot of pain later.

  6. nothing Elizabeth Warren concocts can be a benefit to liberty.

  7. The Constitutional Case Against the Consumer Financial Protection just about every Bureau

    Now that I’d like to see.

  8. This is a meaningless story. The constitution doesn’t matter. It’s a peice of paper. The only thing that matters is that us woke betters will force rules down the necks of you clingers.

    1. I quote Sevo in saying:

      “Go die somewhere decent people won’t have to smell you.”

      1. That’s the parody account, not Kirkland. You’ve been successfully trolled.

        … unless of course you want to defend Kirkland’s honor, or something.

        1. Well shit; that’s not the first time I’ve taken “Kuck” hook line and stinker. The real asshole posted at the top of this thread, and I must have just defaulted.

          Sounds just like the real Rev. though. Parody that it is.

    2. It’s a piece of parchment.

  9. All I want for Christmas [before the end of 2020] is just ONE MORE GORSUCH.

    And the end of the administrative state; Congress actually has to write and take responsibility for its legislation and can no longer delegate most of it’s responsibility to said administrative state; the courts judge according to the Constitution and judges can not behave like legislators with a lifetime appointment; and the executive branch is so limited in power that it won’t fucking matter who the president is.

    1. What, no unicorn? More likely.

      1. Hey dream big or go home.

      2. Justice Unicorn?

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