Supreme Court Sounds Disinclined To Rubber Stamp 5th Circuit Extremism In CFPB Case

UNITED STATES - SEPTEMBER 7: Sen. Elizabeth Warren, D-Mass., established the CFPB (Tom Williams/CQ-Roll Call, Inc via Getty Images)
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The right-wing legal world has been salivating in advance of Tuesday’s Supreme Court oral arguments, eager for the conservative supermajority to get a chance to dismantle the Consumer Financial Protection Bureau. 

Gutting the agency’s funding would check two big boxes: (i) kill off an entity that is the brainchild of political enemy Sen. Elizabeth Warren (D-MA); and (ii) eliminate an important institution in the post-financial crisis regulatory landscape. 

They likely came away from the arguments dissatisfied. 

The liberal justices had a field day, engaging in many bruising colloquies with the attorney for the payday lender trade groups, Noel Francisco, the former solicitor general under Donald Trump. 

Justice Elena Kagan accused Francisco of making an argument “that has been decisively rejected by history.”

A very congested Justice Sonia Sotomayor lamented: “I’m trying to understand your argument, and I’m at a total loss.”

Francisco found little help from the conservative justices, with only Justice Samuel Alito as his constant defender. Justices Brett Kavanaugh and Amy Coney Barrett both sounded skeptical of the legal basis for the attack on the agency. 

The CFPB may ultimately be saved due to its challengers’ reliance on the rightward lean of the Court, hoping their ideological brethren will slide complacently into supporting an argument with the structural integrity of a doily. To do otherwise would require some especially awkward pretzeling after this morning’s argument.

Francisco struggled mightily with fielding questions about gaping holes in the argument, which boils down to a thesis that the CFPB is unconstitutionally funded. Rather than getting an annual appropriation from Congress, it gets its funding via requests from the agency’s director to the Federal Reserve (which is, in turn, funded by member bank fees) and is subjected to a cap of 12 percent of Federal Reserve’s 2009 operating expenses with annual adjustments. A Fifth Circuit panel, composed of three Trump appointees, found that the funding stream is unconstitutional and zeroed out the Payday Lending Rule, which the agency had passed in 2017 and began enforcing in 2020. 

On Tuesday, Francisco was faced with the task of explaining why that funding structure is unconstitutional, despite the fact that analogous funding mechanisms have persisted since the country’s founding. U.S. Solicitor General Elizabeth Prelogar leaned into the historical argument, increasingly framing her arguments in an originalist lens to appeal to the right-wing justices. 

Francisco also had to find some way to explain why it’s unacceptable for the CFPB to function this way, but fine for other, less Elizabeth Warren-y agencies — the Federal Reserve, the Federal Deposit Insurance Corporation — to get their funding outside the annual appropriations process. Or, as Prelogar put it, his attempt to “gerrymander a rule” to fit the CFPB and nothing else. 

Kagan pressed him on the Federal Reserve in particular: “You state a test and then an agency clearly fails under that test, you say ‘no I don’t mean that.’”

She emerged dissatisfied. 

“It’s just too important and whatever,” she said dismissively, continuing the pummeling until Alito stepped in with help. 

Justice Ketanji Brown Jackson also homed in on the absurdities of the argument, asking why Congress determining that, for the foreseeable future, an agency will get a certain amount of money to spend on general purposes is risking “tyranny.” 

Francisco pivoted to a separation of powers argument, saying that the CFPB’s structure imbues the executive with the legislature’s spending power. 

“You’re saying a provision of the Constitution is unconstitutional!” Jackson said incredulously. 

She dug in further, getting to the heart of not just this case, but the entire swath of cases like it, in which right-wing litigants have been eagerly handing the Supreme Court chances to unravel the regulatory state, with particular fervor since the conservative supermajority was installed.

“How do we avoid the judiciary becoming suddenly a super-legislator, just telling the Congress, agency by agency, whether it’s a thumbs up or thumbs down from our perspective about these things?” she asked. 

It’s the part of these arguments that goes unsaid. Litigants like Francisco on Tuesday argue that agencies have overstepped their bounds, that Congress erred in giving them too much power, or that Congress never meant to give them power in the first place. And the happy remedy to this intractable problem, which apparently infects agencies from the CFPB to the EPA to OSHA, is to send the question back to Congress, the people’s branch. 

The reality, with a Congress constrained from most major legislative action even during unified party control by the Senate filibuster, is that such decisions empower the Supreme Court to knock down regulation or even whole agencies it doesn’t like. 

It’ll get many more opportunities to do so this term — including with a case that would let the Court overturn the agency-empowering Chevron doctrine once and for all, a blow against the administrative state that’s been years in the making. 

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