On Thursday, the Supreme Court ruled that the funding mechanism for the Obama-era Consumer Financial Protection Bureau (CFPB) is constitutional.
In the 7-2 decision, which was authored by Justice Clarence Thomas, the high court maintained Congress authorized the Bureau uniquely to pull its funding directly from the Federal Reserve System and bypass the mechanisms for usual funding specified by the Appropriations Clause of the Constitution.
“For most federal agencies, Congress provides funding on an annual basis. This annual process forces them to regularly implore Congress to fund their operations for the next year. The Consumer Financial Protection Bureau is different. The Bureau does not have to petition for funds each year. Instead, Congress authorized the Bureau to draw from the Federal Reserve System the amount its Director deems ‘reasonably necessary to carry out’ the Bureau’s duties, subject only to an inflation-adjusted cap,” wrote Thomas.
“In this case, we must decide the narrow question of whether this funding mechanism complies with the Appropriations Clause. We hold that it does,” states the opinion.
Launched in 2008, the CFPB, along with the help of Democrat Senator Elizabeth Warren of Massachusetts, in the market crash’s aftermath, with the ability to regulate lending and banking agencies with federal rules.
A group of banking associations, represented by Noel Francisco, former solicitor general, sued the CFPB, arguing that because the agency, not Congress, decides the annual funding amount and draws it from the Federal Reserve, it violates the Appropriations Clause.
Supreme Court majority disagreed with the banking associations
The Supreme Court majority disagreed and said, “Although there may be other constitutional checks on the authority of Congress to create and then fund an administrative agency, specifying the purpose and source is all the control required by the Appropriations Clause.
“The statute that authorizes the Bureau to draw money from the combined earnings of the Federal Reserve System to carry out its duties satisfies the Appropriations Clause,” states the opinion.
Justice Neil Gorsuch, along with Justice Samuel Alito, dissented from the decision, with Alito saying, “The Court upholds a novel statutory scheme under which the powerful [CFPB] may bankroll its agenda without any congressional control or oversight.”
“According to the Court, all that the Appropriations Clause demands is that Congress ‘identify a source of public funds and authorize the expenditure of those funds for designated purposes,” wrote Alito.
“Under this interpretation, the Clause imposes no temporal limit that would prevent Congress from authorizing the Executive to spend public funds in perpetuity,” he stated.
“In short, there is apparently nothing wrong with a law that empowers the Executive to draw as much money as it wants from any identified source for any permissible purpose until the end of time,” Alito said. “That is not what the Appropriations Clause was understood to mean when it was adopted. Steeped in English constitutional history, the Framers placed the Appropriations Clause in the Constitution to protect this hard-won legislative power.”
“There are times when it is our duty to say simply that the law that blatantly attempts to circumvent the Constitution goes too far. This is such a case,” Alito continued. “Today’s decision is not faithful to the original understanding of the Appropriations Clause and the centuries of history that gave birth to the appropriations requirement, and I therefore respectfully dissent.
