The Consumer Financial Protection Bureau, or CFPB, will live to fight another day. Monday, a divided Supreme Court upheld the legality of the CFPB itself but struck down a key provision of the law that protected the independence of the agency. This ruling not only will affect the work of the CFPB, but more importantly, it also threatens to undermine Congress' ability to fashion executive agencies free of presidential influence.
Depending on what happens next, the court's ruling could be one of the most consequential of this Supreme Court term.
Depending on what happens next, the court's ruling could be one of the most consequential of this Supreme Court term, as it could lead to the dismantling of the administrative state, which refers to executive agencies and the power they have to enact and enforce their own rules.
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Congress created the CFPB in 2010, in the wake of the 2008 recession. The CFPB is designed to protect consumers from companies that engage in illegal, misleading or unfair behavior. The agency can do this by, among other things, conducting investigations, writing rules and filing civil actions in federal court to enforce consumer financial laws. The CFPB has one director who is appointed by the president and confirmed by the Senate and can serve a five-year term.
Congress acknowledged that the CFPB should have some independence from presidential influence. Congress and Elizabeth Warren, who spearheaded the creation of the agency before she was elected to the Senate, recognized that a president unhappy with the activities of the agency might want to fire its director. (Indeed, we happen to have a president with a habit of trying to protect friends and family members.) For this reason, Congress decided that the president should be allowed to remove the director of the CFPB only for "inefficiency, neglect of duty, or malfeasance in office." Hence a president has to be able to show that the director of the CFPB is somehow failing to perform her job, not that the president just simply doesn't like whoever the director is.
The Supreme Court eliminated much of that independence by instead saying the president must be able to fire the director of the CFPB "at will." But here is the important part. This is a blow not just to the important work that the CFPB does to protect consumers from companies behaving badly, but also to congressional power and the administrative state more generally. The court hobbled Congress' power to create executive agencies that are relatively independent, meaning free of presidential influence.
Let's take a moment to think about the other independent executive agencies whose directors can be fired only for cause. They include the Securities and Exchange Commission, the Federal Communications Commission and the Federal Trade Commission. Although those agencies are not identical to the CFPB, under the court's decision, many will argue that the Constitution requires that the president be able to fire their directors at will.
In the end the public loses when Congress lacks the power to create watchdog agencies that are independent of presidential influence. Remember, the CFPB is an agency created to protect the public from predatory behavior by businesses.
In the end the public loses when Congress lacks the power to create watchdog agencies that are independent of presidential influence.
So how does Chief Justice John Roberts, writing for a thin majority opinion, decide to undermine the independence of executive agencies? Four words: the separation of powers. Roberts concludes that because the president has the duty to ensure that "laws are faithfully executed," the president must have the authority to fire the director of the CFPB at will.
In a dissent, Justice Elena Kagan reminds us that the words "separations of power" appear nowhere in the Constitution. In a made-for-social-media passage, she writes: "What does the Constitution say about the separation of powers — and particularly about the President's removal authority? (Spoiler alert: about the latter, nothing at all.)"
In the short term, liberals may have some cause for celebration. If, and this is a big if, former Vice President Joe Biden wins the presidential election, he will be able to fire President Donald Trump's chosen head of the CFPB come January. But this is a thin silver lining. The bigger picture is cloudy, at best.