The Supreme Court has agreed to hear arguments in the case against the Consumer Financial Protection Bureau (CFBP) that could knock the legs out from under the agency that has been a thorn in the side of Republicans since Elizabeth Warren helped create it after the 2008 market crash.
The issue before the court is how the CFPB is funded – the financial watchdog agency bypasses typical congressional appropriations and simply requires the CFPB director to make requests of the Treasury Department for funds as needed. The banking industry parties challenging the CFPB say that is unconstitutional, citing the Appropriations Clause of the Constitution.
Last October, a lower court in the Fifth Circuit ruled that the mechanism was “double-insulated” from congressional oversight and therefore unconstitutional.
The Biden administration appealed to the Supreme Court to hear its arguments to undo that decision, which the Court announced on Monday it would do, but not on the expedited timeline for which the administration asked. Oral arguments will likely be this fall, meaning a decision in the case would not come until mid-2024.
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The Obama-era CFPB was formed in the aftermath of the 2008 market crash in an effort to protect consumers from financial schemes, with authority to regulate banking and lending agencies via federal rules. Warren, now a Democrat senator from Massachusetts, is credited for creating the agency, although she never led it.
Warren’s 2020 presidential campaign website says she “came with the idea for the CFPB before the crisis even began and then fought successfully to turn her idea into a reality.”
“This agency was Elizabeth’s idea, and through sheer force of will, intelligence, and a bottomless well of energy, she has made, and will continue to make, a profound and positive difference for our country,” President Obama said in July 2011.
Trump’s former acting CFPB Director Mick Mulvaney even called the agency “Elizabeth Warren’s baby.”
On Monday, Warren rejected the push to find it unconstitutional.
“Despite years of desperate attacks from Republicans and corporate lobbyists, the constitutionality of the CFPB and its funding structure have been upheld time and time again,” she said.
“If the Supreme Court follows more than a century of law and historical precedent, it will strike down the Fifth Circuit’s decision before it throws our financial markets and economy into chaos.”
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The CPFB has already sustained a blow to its autonomy from the Supreme Court in 2020 through a Trump administration challenge, in which the nine justices ruled that a president could fire an CPFB director at will. Prior to that decision, a CFPB director, after appointment by the Senate, would serve five years and could only be fired for malfeasance, inefficiency or neglect of duty.
Republicans have long criticized the agency for what they say is lack of transparency and oversight. Rep. Patrick McHenry, R-N.C., chairman of the House Financial Services Committee sent a warning shot to CFPB Director Rohit Chopra in December that upon Republicans taking the in the new Congress, Chopra will wish he had “tried harder to play by the rules.”
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“You can look forward to much more thorough oversight next year when Republicans are in charge of this committee,” McHenry said.