Supreme Court Rules Against Consumer Financial Protection Bureau, Says Agency's Format 'Clashes With Constitutional Structure'

SCOTUS rules 5–4 in Seila Law v. Consumer Financial Protection Bureau.

When Congress created the Consumer Financial Protection Bureau (CFPB) in 2010, it gave control of the agency to a single federal official. Although appointed by the president to a five-year term, the director of the CFPB does not technically answer to the executive branch and may only be fired for "inefficiency, neglect of duty, or malfeasance." In other words, the president may not fire the director for political reasons.

Until today. Writing for a 5–4 majority in Seila Law v. Consumer Financial Protection Bureau, Chief Justice John Roberts declared the CFPB's single director structure unconstitutional. "The CFPB Director has no boss, peers, or voters to report to," Roberts wrote. "Yet the Director wields vast rulemaking, enforcement, and adjudicatory authority over a significant portion of the U. S. economy. The question before us is whether this arrangement violates the Constitution's separation of powers." Roberts held that it does.

To reach that conclusion, the chief justice had to first grapple with Humphrey's Executor v. United States (1935), a far-reaching New Deal–era case in which the Supreme Court ruled unanimously that President Franklin Roosevelt lacked the authority to fire a commissioner of the Federal Trade Commission (FTC) over political differences.

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."

So what's the difference between that case and the present one? Why did SCOTUS forbid the president from firing an FTC commissioner for political reasons yet allow the president to fire the CFPB director for political reasons?

The answer lies in part in the fact 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 director of the CFPB, by contrast, does not share power with any such panel and is not subject to any such political constraints.

In other words, while Humphrey's Executor did go far in terms of shielding certain federal officials, the Supreme Court said today that it did not go so far as to allow something like the current CFPB structure.

"While we need not and do not revisit our prior decisions allowing certain limitations on the President's removal power," Roberts wrote in Seila Law, "there are compelling reasons not to extend those precedents to the novel context of an independent agency led by a single Director. Such an agency lacks a foundation in historical practice and clashes with constitutional structure by concentrating power in a unilateral actor insulated from Presidential control."

Here's one potential real-world impact of today's decision: If Joe Biden wins the presidency in November, he will be free to fire the bureau's Donald Trump–appointed director for purely political reasons.

Comments

[Juice]

Isn't it the same structure as the NLRB? Or the Federal Reserve?

[Nonstopdrivel]

I'm at work, so I can't read the opinion. Did Roberts comment on the CFPG's bizarre funding structure, or did he not reach that point?

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[Rossami]

Those agencies have structures more like the FTC's and not at all like the CFPB's.

[Juice]

I guess I didn't realize that the entire decision hinges on the fact that there is a single director instead of a board with a chairman. I honestly don't see how this is such a huge distinction.

[The guy who broke sarc and chemjeff]

"I guess I didn’t realize that the entire decision hinges on the fact that there is a single director instead of a board with a chairman"

Probably because it didn't.

"I honestly don’t see how this is such a huge distinction."

Because it isn't. It's also not what the decision hinged on.

"The answer lies in part in the fact 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 director of the CFPB, by contrast, does not share power with any such panel and is not subject to any such political constraints

[Juice]

Again, I'm not seeing anything that makes one more constitutional than the other.

[Variant]

It's the lack of oversight. The agency effectively has no checks & balances.

[Procyon Rotor]

And the FTC does? I'm with Juice here, what the hell is the distinction?

[markm23]

If you don't see the difference between a dictatorship and a ruling committee...

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[Snipelee]

And like the NLRB and the Federal Reserve, the CFPG does't work for the people. They all work solely for Wall Street. Know anyone who had their mortgage forgiven or their home un-foreclosed upon? Me too...

[Diane Reynolds (Paul.)]

Today in forgotten history.

[Dillinger]

Dave Stewart and Fernando Valenzuela *both* threw no-nos on this day in 1990

[albo]

Elizabeth Warren and her troll army of nanny progressives take a hit. Thank God. Left-wing authoritarianism is as bad a right-wing.

[Unicorn Abattoir]

She was all for the CFPB having a single director that couldn't be removed, assuming, as all power-mad maniacs do, that the Dems would always be in power.

She was shocked about this arrangement when the presidency went R.

[Slocum]

"She was shocked about this arrangement when the presidency went R."

But ready to double-down and have the Dems hold onto the agency anyway. The initial CFPB director tried to appoint his own effing successor to prevent the incoming president from having any ability to do so. Have you forgotten the temporary 'two popes' situation we had until the courts smacked it down?

[Diane Reynolds (Paul.)]

Worse, because the fashion is uglier!

[Ken Shultz]

"The CFPB Director has no boss, peers, or voters to report to," Roberts wrote. "Yet the Director wields vast rulemaking, enforcement, and adjudicatory authority over a significant portion of the U. S. economy."

It should be noted that this was considered a feature and not a bug--just like it is today in so many ways. Progressives don't want people making choices for themselves, and they don't want politicians being responsible to the desires of voters either. People and their desires are racist, xenophobic, homophobic, misogynistic, and, maybe worst of all, greedy.

The market found a way to extend home loans to poorer and poorer Americans, and the progressives blamed their own decision to bail out the banks who lent to them for that. They also used their own willingness to bail out the banks as an excuse to create the CFPB, which wasn't looking for a way to help American consumers anywhere near as much as it was looking for a way to prevent markets from extending credit to poorer and poorer Americans.

There is something I'd call a regulation cycle that trails the credit cycle. As the economy grows, it makes more and more sense to extend more and more credit to poorer and poorer consumers. When the economy takes a turn for the worse, the lenders who were servicing the poorest Americans tend to go belly up. It happened with subprime mortgages in 2007; it happened with the S&Ls circa 1990; and it will happen again and again in the future.

In the aftermath of those busts, the government bails out a certain portion of the biggest players, and then they use that as a justification to regulate the hell out of lending. The economy generally suffers as a result. Once the economy starts picking up steam again, borrowers get more and more antsy about wanting to buy a new home. As lenders become more and more eager to service that growing market, the regulations start to subside again as politicians don't want to stand between voters and the homes they want to buy. And the cycle repeats.

The idea that regulation can prevent future downturns in the economy is so stupid not even the Obama administration believed it. They knew that as soon as the lenders were eager to lend again and the borrowers were eager to borrow again, elected politicians would get rid of the regulation standing between average Americans and their ability to finance the American dream of home ownership--as sure as the sun would rise tomorrow.

That's why the Obama administration made the CFPB unaccountable and unconstitutional.

The solution to bailouts is not regulation. The solution to bailouts is not unconstitutional accountability either. There are two legitimate solutions to bailouts: 1) Politicians who refuse to authorize bailouts and will just let the lenders disappear like Lehman and Bear Stearns did and 2) Throwing the politicians out on their asses through elections if they authorize bailouts.

[Tony]

Not only do Democrats believe that economic regulations can mitigate economic crises, they're right and have been proven so for a century. Who hasn't been proven right about anything? Those who argue that an unfettered market will magically produce the best outcomes for most people.

They walled-off the directorship from the president because in a nod to the proven value of technocratic function separated from politics. It wasn't a psych out or conspiracy. It may be unconstitutional, but the much bigger problem, imo, is that our constitution uniquely puts the entire responsibility of the executive function of the government on one person. It's a dumb way of doing things any way you slice it.

[The guy who broke sarc and chemjeff]

"Those who argue that an unfettered market will magically produce the best outcomes for most people."

Funny since no one argues that.

They DO argue that the market produces the best outcomes for freedom and personal choice, which it does, and is why you have to lie constantly.

[Tony]

So what I said except you staple an over-arching ethic to it that hilariously doesn't include things like the basic needs of humans.

You argue that an unfettered market does produce the best outcomes for the most people, but you define best outcomes as the most unfettered market possible. It's all so mind-numbingly circular and limited.

[The guy who broke sarc and chemjeff]

"So what I said "

Lol you bad at reading bruh.

I realize getting shut the fuck up by the troll hurts, but you did.

except you staple an over-arching ethic

No actually you did that

Those who argue that an unfettered market will magically produce the best outcomes for most people.

I just pointed out how stupid and wrong you were. And then you cried.

[Tony]

I realize you don't want to be seen as a utilitarian, but you are one. You are making a case for a structure of society. You can't make that case without arguing how it benefits human beings. You don't even technically have to refer to the things human beings actually need (which include freedom, yes, but also clean water and healthcare). But when you say maximum individual freedom is the best outcome for your structure, you are making the same calculation any utilitarian is, you're just defining what's good in a radically limited way.

[The guy who broke sarc and chemjeff]

I realize you

Your stupid fucking ass doesn't even understand what "they" means lolololl

But for some retarded reason you think it means the se thing as "I" lolol

Oh that's right you legit think you can read minds lololol THATS NOT CRAZY AT ALL LOLOLOLOL

[Sarah Palin's Buttplug]

You are making a case for a structure of society.

It's literally the exact opposite you moron. Freely interacting humans unfettered by regulation is literally the exact opposite of a structured society.

This is why people laugh at you.

[The guy who broke sarc and chemjeff]

It's Tony, he knows he's wrong so he lies.

[BigT]

We all know Tony is stupid and yet you all argue with him as if he could learn.

[Tony]

No, I’m critiquing your assertion that your form of society is somehow of a different kind, morally, from mine just because yours is structured more simply. So you have a policy of maximum individual liberty at the expense of most other considerations. My mix of liberties and responsibilities is somewhat different. We’re both trying to sell a form of society to people on the basis that it is better for them. There is no point whatsoever of talking about it otherwise.

You are making the crass, lame assertion that you’re morally better—no, a moral white hat to my black hat—because you say so. But we’re both doing exactly the same thing: proposing a series of actions to take with respect to the legal status quo. We both figuratively submit our ideas to, say, Congress, in the hopes that it will make a bunch of changes (or keep the status quo—no moral difference) for the sake of what we think other people should value. And unquestionably, you’d be doing a shit ton more legislating than I would to make things how you want them.

[The guy who broke sarc and chemjeff]

You argue that an unfettered market does produce the best outcomes for the most people

No Tony you're just shitty at reading.

They DO argue that the market produces the best outcomes for freedom and personal choice,

Also, you'll notice the "they" you should try reading for comprehension because you are baaaaaad at it.

[Sometimes a Great Notion]

You mean regulations that created Fanny and Freddie Mac?

[Tony]

Do you have anything else you'd like to contribute, or is the extent of your knowledge of the 2008 crisis literally the names (but not the functions, role, or history) of two agencies?

[JFree]

I think you're right about the one-person executive. And I suspect that if wise people (meaning roughly founders - not anyone in politics today) were redoing our constitution today, they would do what Switzerland did when they rewrote our constitution for their own implementation in 1848. To remove the possibility/temptation of factional victory upending executive (their constitutional crisis was the outcome of a religious civil conflict in 1847), they carried over their 'Federal Council' instead of a President. Seven people - each one in charge of a particular exec dept for that year - rotating thru them all with one as Council President in their last year before they are replaced with someone new (by the legislature instead of direct election - though I could easily see a 'confirm/deny' type election as a workable alternative). And where they maintain a party balance among those seven - FDP (classical liberal) 2 seats, SDP (socialist) 2 seats, SVP (conservative populist) 2 seats, CVP (Xian democrat) 1 seat.

Too collegial and boring to work in the US. eg - During WW2 when Switzerland was threatened with invasion by Germany, that year's Prez said something like 'No one knows who I am. So if I personally am forced to surrender, it won't mean that Switzerland surrenders.' Can't happen in the US where we prize charisma and ego and personality in that Prez.

[Tony]

The fact that bureaucracies are ultimately accountable to one head of government and thus subject to political whim instead of what is done in every other modern democracy is a big problem.

But you can't knock it entirely, because America did become the world's biggest superpower and wealthiest society in history, and I'd argue that the visibility and accountability of the president is not a negligible part of that.

[JFree]

thus subject to political whim instead of what is done in every other modern democracy is a big problem

Ok so what you're really arguing for is some bullshit backdoor to a parliamentary system. Which is in fact NOT universal. Is entirely subject to electoral whim. Has serious problems re the separation of power. And in our current system where we have frozen our legislature size for 100 years so that we now have the LEAST representative legislature in the world is simply a formula for imposing a form of dynastic oligopoly.

[JFree]

As an aside - I think the solution to a bureaucratic/administrative state not being accountable is more along the lines of what Hayek talked about - Rechtsstaat. In Sweden it's called 'ministerial rule' and is likewise protected against.

It all postdates our constitution so our constitution can't handle it. Can't even fathom the problem because the regulatory state didn't exist then. But in effect, it creates a JUDICIARY to check the bureaucrats/regulators and hold them to the constitution (esp re infringements on individuals) where said judiciary is in the judicial branch not the executive branch. And is separate from other judiciary in being entirely focused on 'administrative law' cases. So doesn't have to be deferential due to lack of specific knowledge and isn't deferential merely because it is also in the executive branch.

Has nothing to do with a unitary executive though

[JesseAz]

The last few collapses, sans covid, were the result of regulatory issues and extending credit loosely based on rules largely implemented by democrats.

In fact most historians will point that government interference has made depressions and recessions longer, not shorter. Prior to the 1920s they happened more frequently but recovered much more quickly. That is the democrats legacy. Longer recession periods.

[ThatSkepticGuy]

“ Not only do Democrats believe that economic regulations can mitigate economic crises, they’re right and have been proven so for a century. ”

This is such bullshit that even you don’t believe it.

[Squirrelloid]

When was that, exactly? FDR's new deal made the great depression last *longer*. Worse, the political 'solutions' always set up the next crisis, if for no other reasons than the government never turns off the money spigot fast enough - this creates the bubbles that burst years later.

[Nonstopdrivel]

Do you mean "unconstitutional unaccountability"? If not, what do you mean by "unconstitutional accountability"?

[Ken Shultz]

Yes, that was a typo.

[Overt]

I sat through a lecture at caltech once by a "Historical Economist" (the idea such a person exists, AND that they would have a place at caltech was shocking to me). He walked through several of the big real estate busts, and basically saw the cycle as- 1) Lending starts sparse with lenders being very careful about who they loan to (back in the 1800, it wasn't uncommon for loans to take months to go from the midwest to the east). 2) As money is made by lenders, more capital moves into the market, and "good" borrowers start to get bought up. 3) Intermediaries try to find borrowers for the lenders, promising to offset risk with sophisticated "balancing" portfolios. 4) Eventually everyone is leveraged and the whole system collapses.

His recommendation to fixing this was simple: 20% down. If the government held firm on its 20% down regulations, and never allowed these other mechanisms for working around that requirement (80/20 loans, FHA, Urban Improvement Grants, etc), such boom/bust cycles in real estate would not occur because there would always be a limit on the pool of available borrowers.

Another interesting point that isn't discussed is the role that the Fed pays in giving people confusing signals about how much money there is to borrow/lend (interest rates).

[JFree]

20% down really isn't enough since it still creates the incentive for too much overall leverage - and hence the political desire to pay off debt via weakening/inflating the currency. Further, residential subsidies/deductions divert capital from non-residential to residential.

[Sevo]

Who was holding RBG upright and guiding her hand?

[Tony]

Who was wishing death on an innocent old woman so he can score a point for his team in a political game, the prize for which you can't even describe because it's not about achieving anything anymore, just winning for its own sake?

You! You're the psychopath!

[The guy who broke sarc and chemjeff]

Death? We are wishing her a happy retirement.

"Who was wishing death on an innocent old woman"

You bro. And you did it for nothing but a weak bifchy politcal jab, that's straight up monstrous.

[Tony]

Sevo is wishing death upon her. I know it as certainly as I know anything.

She's not going to retire until there's a D in the White House, which you should well know, so forgive me if I find that disingenuous.

[The guy who broke sarc and chemjeff]

Sevo is wishing death upon her

Oh yeah?

I know it as certainly as I know anything.

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BUT YOU'RE A FUCKING IDIOT!!!!

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YOU SAID IT BUT HE IS THE ONE WISHING IT AHAHAHAHAHJAAJAHAHAHAH

GO WITH THAT!!!!

[Tony]

Oh, it's you. Did I say disingenuous? I meant disingenuous and how the hell aren't you back on your meds by now?

[The guy who broke sarc and chemjeff]

you legit think you can read minds lololol THATS NOT CRAZY AT ALL LOLOLOLOL

[WuzYoungOnceToo]

Sevo is wishing death upon her. I know it as certainly as I know anything.

That makes a point for sure...but it's the opposite of the one you were going for.

[ThatSkepticGuy]

“ Who was wishing death on an innocent old woman so he can score a point for his team in a political game”

You, any time anyone brings up Bill Clinton’s rape victims, psychopath.

[Tony]

Meanwhile “Donald Trump’s only flaw is I wish he wouldn’t tweet so much.”

[Affluentblog]

RBG

[Jasmine]

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[Vandalia]

The flaw in the majority opinion is, appropriately, the "opinions clause." Their interpretation of Executive Power renders the clause superfluous, which Scalia's Rules of Interpretation rejects. So we know their theory is invalid.

If the President had the absolute authority over subordinate personnel that the majority opinion holds that he does, then there would be no need to give him the additional power to demand a "written opinion" from the heads of departments.

How would Presidential power under this theory be different WITHOUT the "opinion's clause"? If the answer is that it wouldn't be different, then your theory has a problem.

[JFree]

Good comment

[GKHoffman]

The decision should not have been this close. I am continually amazed by how precisely the leftist Justices goose step in unison. It's as if they shared a single mind.

[WuzYoungOnceToo]

It’s as if they shared a single mind.

I wonder which one was using it this time.

[Dillinger]

>>"Yet the Director wields vast rulemaking, enforcement, and adjudicatory authority over a significant portion of the U. S. economy.

only I get that much power. ~~ CJ John Roberts

[Uncle Jay]

This would be a moot point if the masses would just give all their money to the ruling elites in power.
That way, people smarter than us will decide if we need something, if it is useful to us and the collective, if it works properly, and if so, why.
Americans need adult supervision, and the only way to do that is to have a socialist slave state like Stalin, Mao and Castro had.
We're nothing but a bunch of spoiled, selfish children.

[Rufus The Monocled]

Good. A loss for Warren is a win for America.

[Variant]

Exit question: if Biden did fire the director, would he then forget who he fired and re-nominate the same person?

[Squirrelloid]

He doesn't remember.

[TJJ2000]

I see no "independent agency" in the Constitution.

Where the heck did they come from? You mean to tell me Congress passed a law to enact a secondary congress (government) or what??? One would think the very concept of using a law to create an entirely secondary legislation (government) would be way-far out of context of the republic.

Yet here we are today. Over 20+ secondary governments at work now actually going to court over if the 'original' government can fire the secondary one. What a mess...