Republicans have been trying for years to kill the Consumer Financial Protection Bureau (CFPB) — the brainchild of Senator Elizabeth Warren — an agency responsible for consumer protection in the financial sector.
Republicans were unsuccessful in killing the CFPB, but today the Supreme Court did give the president the freedom to fire the CFPB director. Donald Trump has been abusing the power of his office by engaging in a purge of every independent oversight board and the Inspectors General, anyone who could hold his administration accountable at law. The current CFPB director is an appointee of Donald Trump.
Let’s not lose sight of the bigger picture: after years of industry attacks and GOP opposition, a conservative Supreme Court recognized what we all knew: the @CFPB itself and the law that created it is constitutional. The CFPB is here to stay.
— Elizabeth Warren (@SenWarren) June 29, 2020
NBC News (AP) reports, Supreme Court makes it easier for president to fire CFPB head:
The Supreme Court on Monday made it easier for the president to fire the head of the Consumer Financial Protection Bureau.
The justices struck down restrictions Congress had written on when the president can remove the bureau’s director.
“The agency may … continue to operate, but its Director, in light of our decision, must be removable by the President at will,” Chief Justice John Roberts wrote.
The court’s five conservative justices agreed that restrictions Congress imposed on when the president can fire the agency’s director violated the Constitution. But they disagreed on what to do as a result. Roberts and fellow conservative justices Samuel Alito and Brett Kavanaugh said the restrictions could be stricken from the law. The court’s four liberals agreed, though they disagreed the restrictions were improper.
The decision doesn’t have a big impact on the current head of the agency. Kathy Kraninger, who was nominated to her current post by the president in 2018, had said she believed the president could fire her at any time.
Under the Dodd-Frank Act that created the agency in response to the 2008 financial crisis, the CFPB’s director is appointed by the president and confirmed by the Senate to a five-year term. The law had said the president could only remove a director for “inefficiency, neglect of duty or malfeasance in office.” That structure could leave a new president with a director chosen by the previous president for some or all of the new president’s time in office. The Trump administration had argued that the restrictions improperly limit the power of the president.
“We hold that the CFPB’s leadership by a single individual removable only for inefficiency, neglect, or malfeasance violates the separation of powers,” Roberts wrote.
Defenders of the law’s removal provision had argued the restrictions insulated the agency’s head from presidential pressure.
Justice Elena Kagan, writing for herself and three liberal colleagues, called the majority opinion simplistic.
“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.) The majority offers the civics class version of separation of powers—call it the Schoolhouse Rock definition of the phrase,” she said, referencing the educational, animated short films.
“Today’s decision wipes out a feature of that agency its creators thought fundamental to its mission—a measure of independence from political pressure. I respectfully dissent,” Kagan wrote.
The CFPB was the brainchild of Massachusetts senator and former Democratic presidential candidate Elizabeth Warren.
After the ruling, Warren wrote in a series of tweets that the Supreme Court had “handed over more power to Wall Street’s army of lawyers and lobbyists to push out a director who fights for the American people.” But, she said that even after the ruling the CFPB is “still an independent agency.”
“The director of that agency still works for the American people. Not Donald Trump. Not Congress. Not the banking industry. Nothing in the Supreme Court ruling changes that,” Warren wrote.
If Democrats succeed in winning the presidency and taking back the Senate and holding the House, legislation is needed to restore the independence of government oversight agencies and the Inspectors General from the whims of an abusive executive who believes that he or she is above the law, and the “Schoolhouse Rock version” of the separation of powers of the conservative majority on the U.S. Supreme Court.
The opinion is Seila Law v. CFPB. Here is a link: https://www.supremecourt.gov/opinions/19pdf/19-7_n6io.pdf.
UPDATE: Steve Benen notes a possible upside to today’s decision. There’s good news and bad news in the Supreme Court’s CFPB ruling (excerpt):
But for the proponents of the Consumer Financial Protection Bureau, there is a possible upside to the ruling: Kathy Kraninger, the Trump-appointed CFPB director, can now be fired if the incumbent president loses.
And for many consumer advocates, that would be a positive development, indeed. Politico had this report in May, highlighting Kraninger’s work during the coronavirus crisis:
The Consumer Financial Protection Bureau is relaxing rules designed to shield Americans from abuse during the coronavirus crisis, saying the moves are necessary to give businesses flexibility during the pandemic. But with the agency facing an unprecedented wave of consumer complaints as millions of laid-off workers deal with their creditors, lawmakers and consumer advocates charge that the bureau is exploiting the crisis to further a pro-industry agenda.
Senate Banking Committee ranking member Sherrod Brown (D-Ohio) said at the time, “The CFPB under President Trump has used this pandemic as an excuse to weaken protections for consumers — enabling predatory lending, watering down credit reporting protections and fair lending laws, and making it easier for credit card and debit card companies to rip off their consumers.”
If today’s ruling had gone the other way, Kraninger would maintain her position through December 2023, no matter who won this year’s presidential election. Now, if Joe Biden wins, he can fire her in January 2021 and replace her with an actual consumer advocate.
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Richard Cordray, the first director of the Consumer Financial Protection Bureau, explains in an op-ed “Why the CFPB’s loss at the Supreme Court is really a win”, https://www.washingtonpost.com/opinions/2020/06/29/why-cfpbs-loss-supreme-court-is-really-win/
If anything, this ruling is a sheep that comes in wolf’s clothing. Although the court did invalidate the independent tenure of the CFPB’s single director, seven of the nine justices stopped right there and refused to go further. By carefully slicing off the tenure protections for the director, they left all other aspects of the agency in place. In fact, Chief Justice John G. Roberts Jr. pointedly noted that “the CFPB’s structure and duties remain fully operative without the offending tenure restriction.”
At least for the foreseeable future, this “losing” verdict represents a big victory for consumers, in three respects. First, this case was the last gasp for the CFPB’s opponents, who had hoped to dismember it through the courts. No tenable constitutional challenges remain to the bureau’s considerable authority.
Second, the constitutional challenges had repeatedly impeded the bureau’s enforcement work in many cases … Now, with the constitutional issue definitively settled by the highest court in the land, those tactics will no longer be effective.
Third, and most ironically, the immediate effect of the court’s decision is to cut off protections for the one director currently affected by the case: President Trump’s appointee, Kathy Kraninger. [A]fter today’s ruling, she can be dismissed at any time — including Jan. 20, 2021, when a new president may take office. If that happens, the tenor of the agency’s work is sure to change once again, this time tipping back toward strongly protecting consumers and their families.
In the long run, the practical effects of the case are also likely to be limited: It means simply that each new president will likely appoint a new CFPB director, in much the same way he or she will appoint new Cabinet members.