In addition to announcing what is basically a "stay" on abortion rights on Monday, the Supreme Court also released a mixed opinion on the constitutionality of one of the key post-Great Recession reforms included in the Dodd-Frank Wall Street reform law. The constitutionality of the Consumer Financial Protection Bureau (CFPB) was at issue, and the court decided to split the difference in a decision that is both good and bad for the agency. In short, it still exists. That's good. But it's also at the mercy of the president. That's mixed.
The challenge to the law was brought by the California-based firm, Seila Law, sparked by a demand from the CFPB that the firm provide information and documents as part of an investigation into whether in its debt relief service violated consumer financial law. The firm refused to comply, the CFBP asked a court to enforce compliance and Selia Law challenged that petition arguing that the structure of the CFPB violated the constitution's separation of powers doctrine and thus should be entirely invalidated. It wound around the courts and here we are. The Supreme Court didn't embrace the radical idea that the entire agency was invalid, but decided that its structure was problematic, with a single director that could not be removed at will by the president. In the short-term, this is good. President Biden can fire Trump's very bad CFPB director.
The bad part is that it undermines Congress's ability to shape new independent agencies, shielding them from executive power, and could give a president more power over not just the CFPB, but other independent agencies including the Federal Reserve, the FCC, the Securities and Exchange Commission, and the Federal Trade Commission. That is a potential threat to those agencies that should remain independent from the executive. Imagine Donald Trump deciding he doesn't like what Federal Reserve Chairman Jerome Powell has to say about the lack of coherency in responding to the coronavirus, or China and trade, or anything else. Actually, you don't have to imagine it. Trump has already asserted his right to can Powell, and unfortunately he now has a Supreme Court decision to back him. The danger is clear—these directors who should be independent could be more susceptible to political pressure from a president if that president could fire them at will.
The former director of the CFPB, Richard Cordray, is all about the upsides of the ruling, in an op-ed at the Washington Post. "If anything," he writes, "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," he continued, "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.'" For the CFPB itself, looked at narrowly, it's a good decision.
But in the long run it could mean dangerous new executive authority. You need look no further than the last two Republican presidents to see how very damaging that can be.