WASHINGTON — During oral arguments here, the Supreme Court signaled it may not support the leadership structure of the Consumer Financial Protection Bureau but it has no intention of ruling against the agency’s existence.
The Supreme Court heard the arguments in the case Seila Law vs. the CFPB at which the constitutionality of the Bureau’s single director status and the ability of the president to appoint and remove the director was argued. The case created a unique situation with the administration choosing not to defend the structure of the Bureau, which was created by the Dodd-Frank Act. Both CUNA and NAFCU filed briefs in the case and have advocated for the Bureau to move to a five-person board.
At issue is language in the Dodd-Frank Act that created the CFPB and which created an executive director who serves a five-year term and who may only be removed by the president for “inefficiency, neglect of duty, or malfeasance in office.”
“The justices sparred…over whether that removal provision placed an unconstitutional burden on the president’s ability to exercise his executive power and, if so, whether the provision could be severed from the rest of the legislation while leaving the CFPB otherwise in place,” reported CNBC in its analysis.
A decision is expected by the end of June.
View From Chief Justice
Chief Justice John Roberts, who CNBC noted is viewed as the swing justice in the case, largely avoided the question of severability and suggested that for-cause removal wasn’t that high a bar to meet, according to the report.
“Just take inefficiency,” Roberts said during the hearing. “The president might determine that a particular approach of the agency to consumer protection was not as efficient as another approach. And I don’t know why you couldn’t say that’s a ground of efficiency.”
Roberts did take aim at the agency’s funding, which largely comes from the Federal Reserve System rather than Congress, another element of the Bureau’s independence which had come under scrutiny, CNBC reported.
The news outlet added the CFPB case is being closely watched in part because of potential implications it could have for other independent agencies such as the FTC, SEC and NLRB.
Kavanaugh’s View
Justice Brett Kavanaugh, who wrote as a federal appeals court judge that he believed the agency director had too much independence, did not give any hints that his view had changed. While on the U.S. Court of Appeals for the D.C. Circuit, Kavanaugh once said that the director of the CFPB was, except for the president, the “single most powerful official in the entire U.S. Government, at least when measured in terms of unilateral power,” CNBC noted.
“But Kavanaugh also seemed to maintain his view that the for-cause removal provision could be stripped from the legislation without crippling the agency entirely,” CNBC said. “Kavanaugh noted that the legislation that created the Bureau included a clause that indicated that the rest of the law should remain standing if any part of it is found to be unconstitutional.
Justice Neil Gorsuch and Samuel Alito, conservatives who have expressed skepticism of the power of federal agencies, seemed particularly disposed to weakening or doing away with the CFPB, CNBC said.
Liberal Justices’ View
The court’s four liberals seemed inclined to side with the CFPB, according to CNBC.
Justice Elena Kagan compared removal to a “nuclear bomb,” and said there were many mechanisms outside of removal with which a president could control an independent agency.
“Kagan seemed to direct some of her remarks at Roberts, with whom she sharply disagreed last term in a case over partisan political gerrymandering,” NCBC said. “Roberts, writing for the court, wrote that such gerrymandering could not be resolved by federal courts but was instead better left to the political branches.”
Justice Ruth Bader Ginsburg called the for-cause removal provision a “very modest restraint.”
Justice Sonia Sotomayor added that “for over 200 years” the court has waited for disputes between the president and a department head whom he or she wants to fire in order to resolve questions about removal standards, according to CNBC.