The Daily Dish
May 17, 2024
CFPB, Constitutional But Not Sensible
The Supreme Court ruled yesterday that the funding structure for the Consumer Financial Protection Bureau (CFPB) was constitutional. When the CFPB was founded in 2010, Congress authorized it to request desired funding from the Federal Reserve, up to an (inflation-adjusted) cap of $785.4 million. The plaintiffs in the case argued this was unconstitutional because of an Article I clause providing that money could be drawn from the Treasury only “in Consequence of Appropriations made by Law” – seemingly implying the need for an appropriations act. Justice Clarence Thomas, writing the opinion for a 7-2 majority, said that Congress has wide discretion in structuring the way federal agencies are funded.
The future existence of the CFPB is now assured. Previously, the Court had ruled that the provision stating that the CFPB director could only be removed “for cause” was an unconstitutional violation of the separation of powers. The director can now be removed at the president’s discretion.
Any observer of the CFPB’s creation knows that the attempts to insulate the director (in whom all the CFPB powers are vested) from removal and the funding from Congress were intended by Democrats to preclude a future Republican president or Congress from reining in the CFPB. While its constitutionality is now affirmed, the original funding structure simply makes no sense.
A first principle of budgeting is that all demands for funding be on a level playing field. Exempting CFPB from the appropriations process provides a favored status superior to that of the other financial regulators. There is no compelling reason for that preference and it should be eliminated. A second principle is that Congress should use its oversight powers to ensure that agencies are using funds in the pursuit of their legislated missions and as efficiently as feasible. The CFPB funding structure precludes this, something that should even make Democrats uneasy in 2024.
Together, these indicate that it is time for Congress to reassert itself and reform the funding for the CFPB. This is not going to happen in 2024, but it ought to be a bipartisan objective in the years to come.
Fact of the Day
Since January 1, the federal government has published rules that imposed $1.22 trillion in total net costs and 40.6 million hours of net annual paperwork burden increases.
