Supreme Court’s Decision Preserving Senator Warren’s Consumer Finance Regulator Sets ‘Dangerous’ Path for Expansion of Administrative State

The Supreme Court’s decision on Thursday in shooting down a challenge that could have upended the Consumer Financial Protection Bureau signals that the conservative majority may not be as likely to challenge Congress’s delegation of power to federal agencies as some conservative critics had hoped.The majority, in a seven-two decision this week, ruled that the riders of the Fifth Circuit of the U.S. Court of Appeals erred when it held that the way Congress funded the consumer watchdog agency — by authorizing the Bureau to draw funding it deemed “reasonably necessary” from the Federal Reserve System — was unconstitutional. The decision casts doubt on how the Supreme Court will rule on other pending cases involving the scope of government and the power of the executive branch versus the Congress. These include cases that will weigh whether Congress improperly delegated its authority to the Securities and Exchange Commission, and whether the agency’s use of administrative courts to try regulatory violations is valid under the Constitution.The court is also slated to rule on the question of “Chevron Deference,” under which courts have tended to defer to the interpretation of executive branch officials in legal disputes. Conservative critics contend the legal doctrine has tended to empower the federal bureaucracy as opposed to the elected representatives in the legislature.“This court seems to be interested in administrative law and administrative agencies,” a senior attorney at Pacific Legal Foundation specializing in constitutional separation of powers, Oliver Dunford, tells the Sun. “But this decision shows there’s no guarantee that the conservative majority is going to rule in the way that most conservatives or libertarians would expect.” The Fifth Circuit had held that Congress’s decision when funding the agency abdicated its appropriations authority, essentially ceding “its power of the purse to the Bureau” and thus violating the Constitution’s separation of powers. In a reversal, the Supreme Court held that Congress had broad power to delegate its spending authority. “Under the Appropriations Clause, an appropriation is simply a law that authorizes expenditures from a specified source of public money for designated purposes,” Justice Clarence Thomas wrote for the majority. “The statute that provides the Bureau’s funding meets these requirements.” In a charge led by Senator Warren in response to the 2008 financial crisis, Congress passed the Dodd–Frank Wall Street Reform and Consumer Protection Act in 2010, creating the CFPB as an independent agency, funded by the Federal Reserve, and giving it broad authority to enforce consumer financial protection laws. “In addition to vesting the Bureau with sweeping authority, Congress shielded the Bureau from the influence of the political branches,” Justice Thomas wrote. The Court’s decision is a “resounding victory,” the CFPB said in a statement provided to the Sun, and means that the agency “is here to stay.” The lending group bringing the challenge, the Community Financial Services Association of America, tells the Sun it is “disappointed” with the Supreme Court’s decision and that it continues to believe that the “challenged CFPB rule is legally flawed.” Justices Neil Gorsuch and Samuel Alito dissented, noting that Congress’s “power over the purse” has, since its earliest days, been its “‘most complete and effectual weapon’ to ensure that the other branches do not exceed or abuse their authority.” “Unfortunately, today’s decision turns the Appropriations Clause into a minor vestige,” Justice Alito wrote. “The Court upholds a novel statutory scheme under which the powerful Consumer Financial Protection Bureau (CFPB) may bankroll its own agenda without any congressional control or oversight,” he said, adding that the “Framers would be shocked, even horrified, by this scheme.”“I’m certainly surprised it was a seven-two vote and Justice Thomas wrote the opinion,” Mr. Dunford says. “One interesting thing is that Justice Thomas in the majority and Justice Alito in the dissent, both relied on originalism. They both looked at history and context and they just came to opposite conclusions.” In the leadup to Thursday’s decision, a series of amicus briefs — or friend of the court filings — on each side displayed a fierce legal debate about the appropriations clause and the extent Congress can delegate its spending authorities. Backers of the Bureau argued that the appropriations clause was intended to be about “legislative supremacy” and giving elected representatives “exclusive control over federal spending” while making them “politically accountable for their choices.”Others argued that Congress doesn’t have the authority to delegate its “exclusive power of appropriation” to federal agencies as that violates “the Constitution’s finely tuned structure of separation of powers.”“By creating a forever appropriation, Congress created a new branch of government that is not answerable to the people’s representatives,” a partner with the Constitutional Counsel Group, Anthony Caso — who filed an amicus brief arguing that the Bureau’s funding is unconstitutional — tells the Sun. “That is quite dangerous — but for the moment it is limited to this one agency.”There are upcoming decisions that “will have broader applicability to the nature of the administrative state,” he says, but this one “should be seen as a caution to Congress against a rush to implement a new administrative agency without sufficient consideration or thought.”Other legal analysts agree that the case could set a “dangerous precedent.”“CFPB’s structure and funding is unprecedented and untethered to the constitution’s original design,” the New Civil Liberties Alliance’s senior litigation counsel, Peggy Little, tells the Sun. “The dissent is correct that the founders would indeed be horrified by an agency that basks in its own fiscal fantasy island, free from the fiscal checks and balances that are essential to our liberties.” The majority opinion departs from the legislative appropriations process that has long served as an “important check on executive power,” she adds. “This sets a dangerous precedent — but I also think that it is unlikely that the current Congress will repeat this error by setting up a similar scheme,” Ms. Little says. “Should it be unwise enough to try, the dangers inherent in such dangerous government financing could prompt the Court to revisit the question in that new context.”

Supreme Court’s Decision Preserving Senator Warren’s Consumer Finance Regulator Sets ‘Dangerous’ Path for Expansion of Administrative State

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