A legal showdown looms against Elizabeth Warren’s Wall Street Police Agency


The Supreme Court has been invited into a thorny debate over whether Elizabeth Warren’s idea of ​​a Wall Street police agency is legal, potentially adding another major case to an already-filled docket. affirmative action, voting and LGBTQ issues.

US Solicitor General Elizabeth Prelogar has asked judges to overturn a lower court ruling that the executive branch’s Consumer Financial Protection Bureau (CFPB) is stealing power from Congress by having its own independent funding.

Ms Prelogar asked the judges to speed up the case on their schedule and hear it this quarter, which would likely mean the court would issue an answer by June.

Independent funding of the CFPB was central to the idea of ​​an agency to control Wall Street in the wake of the 2008 financial meltdown. Ms. Warren, at the time a law professor at Harvard University, promoted the idea as a way to have a regulator free from political pressure from Congress. (She is now a Democratic senator from Massachusetts.)

But the United States Court of Appeals for the 5th Circuit said last month, whatever the merits of the idea, the Constitution requires the government to be accountable to Congress, which means agencies must submit their financing to the scrutiny of legislators.

The circuit court struck down the CFPB’s payday lender rule as illegally tied to the CFPB’s funding program, creating a clash with the Biden administration.

“No other court has ever found that Congress violated the appropriations clause by passing a law authorizing the spending,” Ms. Prelogar said as she asked judges to overturn the appeals court’s decision.

Created by a Democratic Congress and signed into law by President Barack Obama in 2010, the CFPB was intended to be isolated from both branches of government.

It was given a single director who is appointed and confirmed by the Senate but who cannot be removed from office unless the president can show cause. And it draws its funding directly from the Federal Reserve, putting it beyond the reach of the annual appropriations process on Capitol Hill.

The Supreme Court has already struck down the dismissal provision, ruling it violates the Constitution. Now the opponents of the CFPB are back for another funding crack.

The 5th Circuit’s decision contrasts with other federal appeals courts that have upheld the agency’s arrangement. These other courts noted that other federal agencies, such as the Federal Reserve and the Federal Housing Finance Agency, also enjoyed budgetary autonomy.

But the 5th Circuit said the CFPB is “double insulated” from Congress and its regulatory power far exceeds that of the other agencies in question.

Ms. Prelogar says Congress did answer the question of appropriations when it created the CFPB.

The 5th Circuit ruling did not shut down the agency. This invalidated the payday loan rule, which came into effect in 2018 under the Trump administration, despite being issued by a director installed by Mr Obama. The rule limited the ability of lenders to make loans to consumers unless they determined they could repay them under certain conditions; it also restricted lenders’ access to accounts.

This policy was intended to combat what the bureau considered predatory lending practices by payday lenders.

The 5th Circuit said that because this rule may be tied to the CFPB’s unconstitutional funding structure, the rule should be struck down.

It would take at least four judges to vote in favor of reviewing the 5th Circuit’s decision for the motion to be granted.

Devin Watkins, a barrister at the Competitive Enterprise Institute, said he believed the High Court would accept the invitation to review the case, saying the 5th Circuit’s ruling ensures that “Congress cannot create a funding mechanism not responsible”.

He said it would be worth the court’s time.

“Ultimately, if the payday loan rule were invalidated, everything the CFPB has done could end up being invalidated until Congress decides to fund the CFPB,” Watkins said.


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