Amicus Curiae Brief — Seila Law LLC, Petitioner v. Consumer Financial Protection Bureau
Supreme Court briefDec 16, 2019
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No. 19-7
IN THE
Supreme Court of the United States
____________________
SEILA LAW LLC,
Petitioner,
v.
CONSUMER FINANCIAL PROTECTION BUREAU,
Respondents.
____________________
On Writ of Certiorari
to the United States Court of Appeals
for the Ninth Circuit
____________________
BRIEF OF AMICI CURIAE
STATE NATIONAL BANK OF BIG SPRING,
THE COMPETITIVE ENTERPRISE INSTITUTE,
AND THE 60 PLUS ASSOCIATION
IN SUPPORT OF PETITIONER
____________________
SAM KAZMAN
GREGORY JACOB
COMPETITIVE ENTERPRISE (Counsel of Record)
INSTITUTE
gjacob@omm.com
1310 L St. NW, 7th Floor O’MELVENY & MYERS LLP
Washington, DC 20005
1625 Eye Street, N.W.
(202) 331-1010
Washington, D.C. 20006
(202) 383-5300
C. BOYDEN GRAY
ADAM R.F. GUSTAFSON
JAMES R. CONDE
T. ELLIOT GAISER
BOYDEN GRAY & ASSOCIATES
801 17th Street NW, Suite 350
Washington, DC 20006
Attorneys for Amicus Curiae
i
QUESTIONS PRESENTED
The questions presented are:
1. Whether the vesting of substantial executive
authority in the Consumer Financial Protection Bureau, an independent agency led by a single director,
violates the separation of powers.
2. Whether, if the Consumer Financial Protection Bureau is found unconstitutional on the basis of
the separation of powers, 12 U.S.C. 5491(c)(3) can be
severed from the remainder of the Dodd-Frank Wall
Street Reform and Consumer Protection Act.
ii
TABLE OF CONTENTS
Page(s)
QUESTIONS PRESENTED ...................................... i
STATEMENT OF INTEREST OF AMICi
CURIAE .......................................................... 1
INTRODUCTION AND SUMMARY OF
ARGUMENT................................................... 2
ARGUMENT ............................................................. 4
I.
Congress Vested The Director Of
The CFPB With Broad Executive
Authority But Placed Him
Outside The President’s
Authority And Control......................... 5
A. The CFPB Has Extremely Expansive
Executive Authority .................................... 5
B. The CFPB Is Not Answerable To Or
Restrained By The Chief Executive ........... 6
C. The CFPB Is Materially Unlike Other
“Independent” Executive Entities
Approved by the Courts .............................. 8
II.
The CFPB Enjoys “Full
Independence” From Congress .......... 12
A. The Dodd-Frank Act Frees The CFPB
From Congress’s “Power Of The
Purse” ........................................................ 12
iii
TABLE OF CONTENTS
(continued)
Page(s)
B. The Constitution’s Text, Structure,
And History Show That Congress
May Not Delegate Its “Power Of The
Purse” To Agencies ................................... 13
C. Congress’s Power Of The Purse
Remains Critical To Ensure Agency
Accountability ........................................... 15
III.
The CFPB’s Conduct
Demonstrates The Propensity
For Unchecked And
Unaccountable Power To Be
Abused ................................................ 17
IV.
Severing The CFPB’s Tenure
Protection Would Raise
Constitutional Questions The
Court Should Avoid ........................... 22
A. A Self-Funded Executive Agency
Subject to Presidential Control Would
Be Novel .................................................... 24
B. A Self-Funded Executive Agency
Would Relinquish To The President
Congress’s Core Legislative Power Of
The Purse .................................................. 27
C. The Court Must Avoid a Judicial
Rewrite That Would Raise These
Constitutional Questions .......................... 30
CONCLUSION ........................................................ 32
iv
TABLE OF AUTHORITIES
Page(s)
CASES
Alaska Airlines, Inc. v. Brock,
480 U.S. 678 (1987).......................................26, 27
Ass’n of Am. R.R. v. U.S. Dep’t of
Trans.,
721 F.3d 666 (D.C. Cir. 2013) ............................ 14
Bowsher v. Synar,
478 U.S. 714 (1986).......................................12, 13
Collins v. Mnuchin,
938 F.3d 553 (5th Cir. 2019).............................. 29
Free Enter. Fund v. Pub. Co. Accounting
Oversight Bd.,
537 F.3d 667 (D.C. Cir. 2008) ............................ 28
Free Enter. Fund v. Pub. Co. Accounting
Oversight Bd.,
561 U.S. 477 (2010)..................................... passim
Goldwater v. Carter,
444 U.S. 996 (1979)............................................ 36
Humphrey’s Ex’r v. United States,
295 U.S. 602 (1935)...................................9, 10, 20
Jennings v. Rodriguez,
138 S. Ct. 830 (2018).......................................... 35
L'Enfant Plaza Properties, Inc. v.
United States,
668 F.2d 1211 (Ct. Cl. 1982) .............................. 30
Mistretta v. United States,
488 U.S. 361 (1989)............................................ 33
Morrison v. Olson,
487 U.S. 654 (1988)............................................ 11
v
TABLE OF CONTENTS
(continued)
Page(s)
Murphy v. Nat’l Collegiate Athletic
Ass’n,
138 S. Ct. 1461 (2018)........................................ 26
Myers v. United States,
272 U.S. 52 (1926).......................................8, 9, 13
PHH Corp. v. CFPB,
881 F.3d 75 (D.C. Cir. 2018) ....................... passim
PHH Corp. v. Consumer Fin. Prot.
Bureau,
839 F.3d 1 (D.C. Cir. 2016) ...........................14, 21
Reeside v. Walker,
52 U.S. (11 How.) 272 (1850) ............................. 16
State Nat’l Bank of Big Spring v. Lew,
795 F.3d 48 (D.C. Cir. 2015) ...........................1, 24
United States v. Nat’l Treasury
Employees Union,
513 U.S. 454 (1995).......................................34, 35
Wayman v. Southard,
10 Wheat. 1 (1825) ............................................. 16
Whitman v. Am. Trucking Ass’ns,
531 U.S. 457 (2001)............................................ 15
STATUTES
12 U.S.C. § 1(b)(1) ................................................... 30
12 U.S.C. § 2 ............................................................ 30
12 U.S.C. § 241 ........................................................ 29
12 U.S.C. § 482 (1988) ............................................. 30
12 U.S.C. § 1452(a)(2)(A) ........................................ 29
12 U.S.C. § 1752 ...................................................... 29
vi
TABLE OF CONTENTS
(continued)
Page(s)
12 U.S.C. § 1812 ...................................................... 29
12 U.S.C. § 2277a-2(a) ............................................ 29
12 U.S.C. § 4511(a).................................................. 29
12 U.S.C. § 4512(b)(2) ............................................. 29
12 U.S.C. § 5481(12).................................................. 6
12 U.S.C. § 5481(14).................................................. 6
12 U.S.C. § 5491(a).................................................. 26
12 U.S.C. § 5491(c)(2) ................................................ 7
12 U.S.C. § 5491(c)(3) ...........................................7, 26
12 U.S.C. § 5492(a)(4) ............................................... 5
12 U.S.C. § 5492(a)(9) ............................................... 5
12 U.S.C. § 5492(a)(10) ............................................. 5
12 U.S.C. § 5492(a)(11) ............................................. 5
12 U.S.C. § 5492(c)(4) ................................................ 6
12 U.S.C. § 5497(a).............................................14, 15
12 U.S.C. § 5497(a)(2)(C) ........................................ 15
12 U.S.C. § 5497(a)(4)(E) .......................................... 7
12 U.S.C. § 5497(d).................................................. 31
12 U.S.C. § 5511 ........................................................ 6
12 U.S.C. § 5511(a).................................................... 6
12 U.S.C. § 5512(b)(4) ............................................... 7
12 U.S.C. § 5512(b)(4)(B) .......................................... 6
12 U.S.C. § 5531(a).................................................... 6
15 U.S.C. § 7211(e)(6) ............................................. 29
vii
TABLE OF CONTENTS
(continued)
Page(s)
16 U.S.C. § 6806 ...................................................... 31
18 U.S.C. § 4121 ...................................................... 31
18 U.S.C. § 4122 ...................................................... 31
31 U.S.C. § 303 ........................................................ 31
31 U.S.C. § 321(a)(4) ............................................... 31
39 U.S.C. § 2003 ...................................................... 31
44 U.S.C. § 3502(5).......................................26, 29, 30
Pub. L. 102–242, § 114(a), 105 Stat.
2236, 2248 (1991) ............................................... 30
OTHER AUTHORITIES
1 Annals of Cong. 463 (1789) .................................... 8
1 Principles of Federal Appropriations
Law (3d ed. 2004) ............................................... 32
1 Works of Alexander Hamilton 218
(Henry Cabot Lodge, ed., 1904) ......................... 17
Alexander Hamilton, Convention of
New York, in 2 The Works of
Alexander Hamilton 61 (Henry
Cabot Lodge ed., 1904) ...................................... 32
Alexander Hamilton, Explanation, in 8
The Works of Alexander Hamilton
122 (Henry Cabot Lodge ed., 1904) ................... 16
An Act Making Appropriations for the
Service of the Present Year, 1 Stat.
95 (1789) ............................................................. 33
viii
TABLE OF CONTENTS
(continued)
Page(s)
Arthur W. Macmahon, Congressional
Oversight of Administration: The
Power of the Purse I, 58 Pol. Sci. Q.
161 (1943) ........................................................... 19
Baron de Montesquieu, The Spirit of
the Laws, bk. XI, ch. VII (1748) ........................ 20
C. Boyden Gray, Extra Icing on an
Unconstitutional Cake Already
Frosted” A Constitutional Recipe for
the CFPB, 24 Geo. Mason L. Rev.
1213 (2017) ......................................................... 37
Charles Kruly, Self-Funding and
Agency Independence, 81 Geo. Wash.
L. Rev. 1733 (2013) ............................................ 28
Consumer Financial Protection Bureau
Strategic Plan: FY 2013-FY 2017 36
(Apr. 2013),
http://files.consumerfinance.gov/f/str
ategic-plan.pdf .................................................. 24
Dep’t of the Treasury, A Financial
System that Creates Economic
Opportunities: Banks and Credit
Unions 82 (2017) ................................................ 23
Federalist No. 58 (Madison) ..............................17, 32
Federalist No. 78 (Hamilton) .................................. 17
Federalist No. 9 (Hamilton) ...................................... 4
Fiscal Year 2020 Budget of the U.S.
Government 185 ................................................ 34
ix
TABLE OF CONTENTS
(continued)
Page(s)
How Will The CFPB Function Under
Richard Cordray, Hrg. before the
House Oversight Committee,
Subcomm. on TARP, Financial
Servs., and Bailouts of Public and
Private Programs, 112th Cong. 69
(Jan. 24, 2012).................................................... 23
Jennifer L. Selin & David E. Lewis,
Sourcebook of United States
Executive Agencies 110 (Oct. 2018),
https://www.acus.gov/sites/default/fil
es/documents/ACUS%20Sourcebook
%20of%20Executive%20Agenices%2
02d%20ed.%20508%20Compliant.pd
f ......................................................................28, 31
Jim Puzzanghera, CFPB chief Mick
Mulvaney says he could just ‘twiddle
my thumbs’ before Congress to
highlight agency’s flaws, Los
Angeles Times (April 11, 2018) ......................... 25
John Hudak, Presidential Pork 3 (2014)................ 34
Joseph Story, Commentaries on the
Constitution of the United States
1833) ................................................................... 33
Letter from Rep. Randy Neugebauer,
Chairman, H.R. Comm. on Fin.
Servs., Subcomm. on Oversight and
Investigations, et al. to Richard
Cordray, Director of the CFPB (May
2, 2012),
https://www.consumerfinancemonito
r.com/wpcontent/uploads/sites/14/2012/05/DO
C.pdf ................................................................... 25
x
TABLE OF CONTENTS
(continued)
Page(s)
Letter from Sen. Rob Portman, et al. to
Richard Cordray, Director of the
CFPB (Oct. 30, 2013),
https://ourfinancialsecurity.org/wpcontent/uploads/2014/01/Oct-30Senate-Letter.pdf ............................................... 25
Robert E. Cushman, The Independent
Regulatory Commissions 674 (1972) ................. 19
S. Comm. on Gov’t Operations, 95th
Cong. 1st Sess., 2 Study on Federal
Regulatory Agencies 42 (1977)........................... 18
S. Rep. No. 111-176 (2010)...................................... 15
St. George Tucker, Views of the
Constitution of the United States
298 (1803) (Clyde N. Wilson ed.
1999) ................................................................... 33
Stith, Congress’ Power of the Purse, 97
Yale L.J. 1343 (1988) ..............................18, 31, 34
Strauss, The Place of Agencies in
Government: Separation of Powers
and the Fourth Branch, 84 Colum.
L. Rev. 573 (1984) .............................................. 12
U.S. House of Representatives,
Committee on Financial Services,
“Committee Pushes for
Accountability and Transparency at
the CFPB” (Mar. 6, 2015),
https://www.youtube.
com/watch?v=jQx_IMHfjDo ............................... 25
CONSTITUTIONAL PROVISIONS
U.S. Const. art. I, § 1............................................... 15
xi
TABLE OF CONTENTS
(continued)
Page(s)
U.S. Const. art. I, § 9, cl. 7 ...................................... 16
U.S. Const. Art. II, § 1, cl. 1 ...................................... 6
U.S. Const. Art. II, § 4, cl. 4 ...................................... 6
STATEMENT OF
INTEREST OF AMICI CURIAE 1
Amici State National Bank of Big Spring, the
Competitive Enterprise Institute, and the 60 Plus
Association, Inc. were plaintiffs in the first lawsuit
challenging the constitutionality of the Consumer
Financial Protection Bureau (“CFPB”). State Nat’l
Bank of Big Spring v. Lew, 795 F.3d 48, 54 (D.C. Cir.
2015).
State National Bank is a community bank that
has served Big Spring, Texas and other communities
for over a century, and is directly subject to numerous CFPB regulations. The Bank offers many consumer financial services, including remittance transfers, checking accounts, and agricultural and vehicle
loans.
The Competitive Enterprise Institute (“CEI”) is
a nonprofit organization dedicated to advancing the
principles of individual liberty, limited government,
and free enterprise. Towards those ends, CEI engages in research, education, and advocacy efforts
involving a broad range of regulatory, trade, and legal issues. CEI also has participated in federal court
cases involving important separation of powers issues. See, e.g., Pet. Br., Free Enter. Fund v. Pub. Co.
1 No counsel for a party authored this brief in whole or in
part, and no counsel or party made a monetary contribution
intended to fund the preparation or submission of this brief.
Counsel for Amicus Curiae provided notice to counsel for parties of its intention to file this brief, and the parties have consented to the filing. No person other than Amicus Curiae, its
members or its counsel made a monetary contribution to its
preparation or submission.
2
Accounting Oversight Bd., 561 U.S. 477 (2010) (No.
08-861).
The 60 Plus Association is a non-profit, nonpartisan seniors advocacy group devoted to advancing free markets.
INTRODUCTION AND
SUMMARY OF ARGUMENT
The CFPB was designed to be—and operates
as—a government unto itself. It is vested with
sweeping executive authority to make and enforce
rules that affect virtually every sector of the U.S.
economy. This authority is entrusted to a single individual, the Director, who serves a five-year term
that is longer than the President’s. But the Director
does not answer to the President, who is prohibited
from removing him from office except for cause. To
the contrary, the Director stands above the President, as by statute the Director’s view of consumer
financial protection law prevails over the President’s
if the two disagree.
Further, unlike the President, who is checked in
the exercise of his executive authority by his dependence on congressional appropriations to fund
the government he runs, the CFPB is exempted from
Congress’s power of the purse and accompanying
congressional oversight. Indeed, the CFPB is entirely self-perpetuating, empowered to designate at will
hundreds of millions of dollars from the Federal Reserve System for its own use, without any approval
or review from the legislative or executive branches.
Nor did Congress stop at freeing the CFPB from external restraints; in the interest of fostering efficien-
3
cy and independence, Congress also eschewed the
creation of any internal checks or balances within
the CFPB, such as those afforded by a deliberative
multi-member commission structure.
The Constitution does not permit the creation of
such an entity. Rather, to protect individual liberty,
the Constitution mandates a separation of powers
that imposes checks, balances, and accountability on
the exercise of governmental authority. Congress
was clear in creating the CFPB that it deliberately
removed these restraints in the interest of expediency, efficiency, and what it perceived to be the virtues
of unaccountability in the enforcement of consumer
financial protection law. The CFPB’s short existence, however, provides numerous concrete examples
of its unaccountable power being abused, bearing out
the wisdom of the Framers in establishing a separation of powers that requires that the exercise of government power be checked and bounded.
Whatever the merits of Congress’s policy objectives in creating the CFPB, the Constitution does not
permit the amalgamation of such sweeping and unchecked authority in a single executive entity. Certain features of the CFPB viewed in isolation may or
may not be constitutionally permissible, but the
combination most definitely is not. Fidelity to the
Constitution requires that the CFPB’s novel structure be invalidated.
Furthermore, faithfulness to the Constitution,
and to the appropriate role of the judiciary, requires
that the Court refrain from implementing a jerryrigged and inadequate fix to the CFPB’s unconstitutionality by simply striking Title X’s for-cause re-
4
moval provision. Rewriting statutes is a legislative
function that does not lie within the judicial power.
And this particular cure to the CFPB’s unconstitutionality would be worse than the disease, because
severing the CFPB’s tenure protection would place a
fully self-funded enforcement agency under the President’s direction and control. Congress could never
have intended such a result. Such a regulatory
agency—answerable to the President yet immune to
Congress’s power of the purse—is unknown to our
republic and completely at odds with the Constitution’s system of checks and balances. It would grant
to the Executive both the sword and the purse and
“destroy,” in Hamilton’s words, “that division of powers on which political liberty is founded.”
ARGUMENT
Our constitutional system of government does
not permit Congress to create self-perpetuating executive authorities that exist outside of, and are unanswerable to, both the Executive and Legislative
Branches. See, e.g., Federalist No. 9 (Hamilton)
(“The regular distribution of power into distinct departments [and] the introduction of legislative balances and checks … are means, and powerful means,
by which the excellences of republican government
may be retained and its imperfections lessened or
avoided.”). Yet the Dodd-Frank Act vests the CFPB
with vast executive authority, exempts it from accountability to the political branches, provides no
mitigating internal checks and balances, and allows
it to make and execute law on its own indefinitely
without further involvement or oversight by Con-
5
gress or the President. Unsurprisingly, the CFPB’s
unaccountable and unchecked structure has resulted
in not merely theoretical, but actual examples of
abuse of power that threaten the liberty of all who
are subject to its unprecedentedly concentrated power. The CFPB is unconstitutionally constituted, and
only Congress can remedy the separation-of-powers
violation.
I.
Congress Vested The Director Of The
CFPB With Broad Executive Authority
But Placed Him Outside The President’s
Authority And Control
A.
The CFPB Has Extremely Expansive Executive Authority
The CFPB is vested by statute with broad authority to exercise executive power in its designated
domain. The CFPB has the power to “establish the
general policies of the [CFPB] with respect to all executive and administrative functions,” including “implementing the Federal consumer financial laws
through rules, orders, guidance, interpretations,
statements of policy, examinations, and enforcement
actions”; deciding on the appropriate “use and expenditure of funds” for those purposes; “coordinat[ing] and oversee[ing] the operation of all administrative, enforcement, and research activities of the
[CFPB];” and “performing such other functions as
may be authorized or required by law.” 12 U.S.C.
§ 5492(a)(4), (9), (10), (11) (emphasis added). Among
these broad powers, Dodd-Frank grants the CFPB
exclusive jurisdiction to administer eighteen “Federal consumer financial law[s]” previously administered by other agencies, id. §§ 5481(12) & (14), 5511,
6
and gives the Director’s statutory interpretations
priority over Executive Branch interpretations for
the purpose of assigning Chevron deference. See id.
§ 5512(b)(4)(B). Dodd-Frank further vests the CFPB
with newly created authority to regulate and prosecute “unfair, deceptive, or abusive” consumer lending
practices. Id. § 5531(a). In sum, the core purpose of
the CFPB is “to implement and, where applicable,
enforce Federal consumer financial law,” id.
§ 5511(a)—that is, to “take Care that the [Federal
consumer financial laws] be faithfully executed,” see
U.S. Const. Art. II, § 4, cl. 4—a clear executive responsibility.
B.
The CFPB Is Not Answerable To Or
Restrained By The Chief Executive
“But where, in all this, is the role for oversight
by an elected President?” Free Enter. Fund, 561 U.S.
at 499. Because the CFPB performs a role constitutionally committed to the Executive Branch, it must
remain ultimately accountable to the President as
the Chief Executive. See U.S. Const. Art. II, § 1, cl.
1; see also Free Enter. Fund, 561 U.S. at 484. Yet
Congress took pains to ensure this was not the case.
The CFPB and its Director have been thoroughly insulated from the President’s control.
In its day-to-day operations, the CFPB operates
entirely outside the President’s sphere of influence.
And the Director of the CFPB is not required to coordinate with any other Executive Branch official
regarding “legislative recommendations, or testimony or comments on legislation.”
12 U.S.C.
§ 5492(c)(4). Likewise, the Director is independent
from the President’s financial oversight. Though he
7
must provide the Director of the Office of Management and Budget (“OMB”) copies of certain financial
reports, he need not “obtain the consent” of the OMB
Director, and OMB lacks “any jurisdiction or oversight over the affairs or operations of the [CFPB].”
Id. § 5497(a)(4)(E).
Most significantly, the Director of the CFPB is
protected from removal and, as a result, from ultimate accountability to the Chief Executive. Once
appointed, the Director serves a five-year term and
can be removed only for “inefficiency, neglect of duty,
or malfeasance in office.” Id. § 5491(c)(3). This term
can extend indefinitely, until a successor is appointed. Id. § 5491(c)(2). The Director therefore cannot
be removed by the President merely for failing to execute the law in a manner consistent with the President’s policies and directives. See Free Enter. Fund,
561 U.S. at 496. And if the President and the Director disagree in the field of consumer finance, by
statute the Director’s view prevails. See 12 U.S.C.
§ 5512(b)(4).
In effect, the Dodd-Frank Act establishes the Director as a mini-President of consumer finance, vested with sweeping executive authority within his prescribed domain, yet entirely unaccountable in its exercise to the Chief Executive (or to the Congress).
This structure cannot be reconciled with the constitutionally prescribed separation of powers, as explained by the Supreme Court in Free Enterprise
Fund, 561 U.S. 477, and in what the Court there described as its “landmark” decision in Myers v. United
States, 272 U.S. 52 (1926). Those cases establish
that the President’s constitutional responsibilities
8
require that he have the authority to remove appointed executive officers, and that only “under certain circumstances” can even “limited restrictions”
be imposed on the removal power. Free Enter. Fund,
561 U.S. at 483, 495. These holdings recognize that
the removal power is “perhaps the key means” that
the President has for “appointing, overseeing, and
controlling those who execute the laws.’” Id. at 501
(quoting 1 Annals of Cong. 463 (1789)). Yet as is discussed in more detail below, none of the “certain circumstances” the courts have deemed sufficient to
warrant even “limited restrictions” on the removal
power are present in the CFPB. Its executive authority is not minor or narrow. It has no internal
checks and balances. And it is accorded a perpetual
funding supply outside the appropriations process
that exempts it from Congress’s power of the purse.
This combination of features has produced a “novel
structure [that] does not merely add to the [CFPB’s]
independence, but transforms it.” Id. at 496.
C.
The CFPB Is Materially Unlike
Other “Independent” Executive Entities Approved by the Courts
In a constitutional system that separates power
among the legislative, executive, and judicial
branches, “independent” agencies exist as a limited
exception to that fundamental structural rule. The
President has general power to “keep [agencies] accountable” by “removing them from office, if necessary.” Free Enter. Fund, 561 U.S. at 483 (citing Myers v. United States, 272 U.S 52 (1926)).
This case is materially unlike others in which
this Court has upheld restrictions on the President’s
9
removal power. In Humphrey’s Executor v. United
States, the Court upheld a for-cause removal requirement on members of the Federal Trade Commission (“FTC”) in substantial part because the
Commission was statutorily created as a “nonpartisan” entity and had almost no role in setting executive policy. 295 U.S. at 624. 2 The FTC was structured to ensure a degree of political impartiality: By
statute, no more than three of the five commissioners serving on the FTC could come from the same
political party. Id. at 620, 624. And the FTC commissioners were intended to act primarily “as a legislative or … judicial aid[],” using their expertise to
carry out predominately ministerial and adjudicative
tasks, rather than functioning as “arm[s] or … eye[s]
of the executive.” Id. at 628. Because the FTC, as it
existed in 1935, ultimately served “as a means of
carrying into operation legislative and judicial powers” and ultimately acted “as an agency of the legislative and judicial departments,” Congress could impose a good-cause removal requirement to preserve
some of the agency’s independence from the President.
In Morrison v. Olson, this Court upheld a statute that insulated a special “independent counsel”
from Presidential oversight and removal. Unlike the
FTC, the office of the independent counsel was run
by a single individual who was plainly exercising
purely executive power. The Court nevertheless up2 Amici agree with Petitioner that Humphrey’s Executor’s
continued validity is called into question by the reasoning of
Free Enterprise Fund.
10
held the applicable removal restriction on the
grounds that the independent counsel had only “limited jurisdiction and tenure and lack[ed] policymaking or significant administrative authority.” 487
U.S. 654, 691, 696 (1988). Because the independent
counsel had limited enforcement powers and no policy-setting role, the Court did not think that restrictions on the President’s ability to remove him
“unduly intefer[ed] with the role of the Executive
Branch.” Id. at 693.
The courts have not allowed the narrow exceptions of Humphey’s Executor and Morrison to swallow the general rule that checks, balances, and accountability are necessary elements of governance
under our constitutional structure. In Free Enterprise Fund v. PCAOB, the Supreme Court stressed
that Humphrey’s Executor represents the outermost
limit on agency independence. 561 U.S. 477, 514
(2010) (“While we have sustained in certain cases
limits on the President’s removal power, the Act before us imposes a new type of restriction[.]”). Thus,
the Sarbanes-Oxley Act violated the Constitution by
creating an agency with two layers of independence
from the President.
The Dodd-Frank Act crosses the constitutional
line yet again. It does so not by giving an independent agency an extra layer of protection from the
President, but rather by creating an independent
agency headed by a single Director who has substantially broader executive powers than those at issue
in Humphrey’s Executor, yet has been structured to
remove all meaningful executive, legislative, and internal checks. As a result, the CFPB is far more un-
11
accountable and unchecked than the FTC of Humphrey’s Executor.
Indeed, by design, the CFPB was created with
no mitigating internal checks and balances at all. At
the time of Justice Breyer’s Free Enterprise Fund
dissent, it could be said that independent agencies
“are all subject to presidential direction in significant aspects of their functioning.” Free Enter. Fund,
561 U.S. at 524 (Breyer, J., dissenting) (emphasis is
Breyer, J.’s), quoting Strauss, The Place of Agencies
in Government: Separation of Powers and the Fourth
Branch, 84 Colum. L. Rev. 573, 583 (1984). After the
creation of the CFPB, that is no longer true. It is as
though when drafting Title X of Dodd-Frank, Congress used Justice Breyer’s dissent as a checklist of
independent agency features that permit a President
to exert some modicum of policy influence, and then
undertook to systematically eliminate each.
Congress lauded the CFPB’s structural “independence” as a praiseworthy feature that it hoped
would make it more energetic and effective. But
“[c]onvenience and efficiency are not the primary objectives—or the hallmarks—of democratic government,” and thus “[t]he fact that a given law or procedure is efficient, convenient, and useful in facilitating functions of government, standing alone, will not
save it if it is contrary to the Constitution.” Free Enter. Fund, 561 U.S. at 499 (alteration in original)
(quoting Bowsher v. Synar, 478 U.S. 714, 736
(1986)).
12
II.
The CFPB Enjoys “Full Independence”
From Congress
The CFPB’s independence from the Executive
Branch is matched by its independence from the
Legislative Branch: the Dodd-Frank Act frees the
CFPB from Congress’s constitutional power of the
purse. 12 U.S.C. § 5497(a). The courts, the Framers, and myriad scholars have warned that Congress’s “power of the purse” is key to its constitutional responsibility of overseeing the execution of
the laws. The CFPB’s conduct—repeatedly defying
Congress’s authority—validates those warnings.
The CFPB’s independence from Congress is not
“just extra icing on an unconstitutional cake already
frosted.” PHH Corp. v. CFPB, 839 F.3d 1, 36 n.16
(D.C. Cir. 2016) (quotation omitted). It must be
viewed in combination with all of the other features
of the agency that distinguish it from independent
agencies that have been upheld against constitutional challenges in the past. See Ass’n of Am. R.R.
v. U.S. Dep’t of Trans., 721 F.3d 666, 673 (D.C. Cir.
2013) (“[J]ust because two structural features raise
no constitutional concerns independently does not
mean Congress may combine them in a single statute.”). And critically, preserving a self-appropriating
agency like the CFPB within the Executive Branch
would raise its own significant separation-of-powers
problems. See infra Part IV.
A.
The Dodd-Frank Act Frees The
CFPB From Congress’s “Power Of
The Purse”
The CFPB is not funded by appropriations. In-
13
stead, the Dodd-Frank Act gave the CFPB a perpetual, annual entitlement to hundreds of millions of
dollars from the Federal Reserve.
12 U.S.C.
§ 5497(a). The President and Congress included this
provision in the Dodd-Frank Act in order to free the
CFPB from oversight by future Congresses. S. Rep.
No. 111-176, at 163 (2010)). They characterized this
as a salutary feature, viewing such funding as “absolutely essential” to ensuring the agency’s “independent operations.” Id. at 163. Independent, that is,
from future Congresses. But, as shown below, the
Framers would characterize it quite differently.
B.
The Constitution’s Text, Structure,
And History Show That Congress
May Not Delegate Its “Power Of
The Purse” To Agencies
The Constitution commits “[a]ll legislative powers herein granted” to a “Congress of the United
States.” U.S. Const. art. I, § 1. “This text permits no
delegation of those powers.” Whitman v. Am. Trucking Ass’ns, 531 U.S. 457, 472 (2001). Accordingly,
this Court has long recognized that “Congress may
not “delegate ... powers which are strictly and exclusively legislative.” Wayman v. Southard, 10 Wheat.
1, 42–43 (1825). The Constitution’s text, structure,
and history show that no power is more strictly and
exclusively legislative than the power to decide how
to spend public money.
The Constitution entrusts taxpayers’ money to
Congress, granting it the power to tax and spend and
requiring that “[n]o Money shall be drawn from the
Treasury, but in Consequence of Appropriations
made by Law.” U.S. Const. art. I, § 9, cl. 7. This
14
means that “not a dollar of [public funds] can be
used in the payment of any thing not ... previously
sanctioned” by a congressional appropriation. Reeside v. Walker, 52 U.S. (11 How.) 272, 291 (1850). Or
as Alexander Hamilton put it, “no money can be expended, but for an object, to an extent, and out of a
fund, which the laws have prescribed.” Alexander
Hamilton, Explanation, in 8 The Works of Alexander
Hamilton 122, 128 (Henry Cabot Lodge ed., 1904)
(emphasis omitted).
On this point, the Framers were emphatic.
James Madison stressed that “[t]his power over the
purse may, in fact, be regarded as the most complete
and effectual weapon with which any constitution
can arm the immediate representatives of the people, for obtaining a redress of every grievance, ... for
carrying into effect every just and salutary measure,” and for “reducing ... all the overgrown prerogatives of the other branches of the government.” Federalist No. 58 (Madison).
Alexander Hamilton was all the more blunt:
“[T]hat power which holds the purse-strings absolutely, must rule.” Letter to James Duane, 1 Works
of Alexander Hamilton 218-19 (Henry Cabot Lodge,
ed., 1904). Thus, while the Executive Branch “holds
the sword,” Congress “prescribes the rules by which
the duties and rights of every citizen are to be regulated” and, to that end, also “commands the purse.”
Federalist No. 78 (Hamilton).
Given this text, structure, and history, there can
be no doubt that the power to appropriate funds is a
core legislative power vested exclusively in Congress.
It follows that Congress may not divest itself of this
15
power by granting to an executive agency (even one
that is nominally designated “independent”) a perpetual right to spend public money. “Congress abdicates, rather than exercises, its power of the purse if
it creates permanent or other open-ended spending
authority that effectively escapes periodic legislative
review and limitation.” Kate Stith, Congress’ Power
of the Purse, 97 Yale L.J. 1343, 1345 (1988).
C.
Congress’s Power Of The Purse
Remains Critical To Ensure Agency
Accountability
Two centuries of political experience have proven the Framers right: the power of the purse is a
critical tool to restrain and control the Executive
Branch. Indeed, it is more important than ever given Congress’ broad delegations of regulatory and enforcement authority in recent decades.
Modern Congresses have often recognized the
significance of its “power of the purse,” not merely as
an end in itself, but as a means for ensuring that the
other parts of government conduct their work in a
manner consistent with the law, the public interest,
and the public will. “The appropriations process is
the most potent form of congressional oversight, particularly with regard to the federal regulatory agencies.” S. Comm. on Gov’t Operations, 95th Cong. 1st
Sess., 2 Study on Federal Regulatory Agencies 42
(1977) (emphasis added).
Many modern legal scholars have highlighted
the fact that the power of the purse is the foundation
for “most of the oversight that Congress exercises
over administration.” Arthur W. Macmahon, Con-
16
gressional Oversight of Administration: The Power of
the Purse I, 58 Pol. Sci. Q. 161, 173 (1943). This is
no less true with respect to the independent regulatory agencies not subject to direct presidential oversight: “The most constant and effective control
which Congress can exercise over an independent
regulatory commission is financial control.... Viewed
broadly, the financial control exercised by Congress
over the [independent] commissions is a necessary
and desirable form of supervision.” Robert E. Cushman, The Independent Regulatory Commissions 67475 (1972).
The Court’s recognition of these principles is
more than merely theoretical. In Humphrey’s Executor itself, for example, the Supreme Court justified
the FTC’s independence from the President on the
basis that Congress remained the agency’s “master.”
295 U.S. at 630; see also id. (describing the FTC as
“wholly disconnected from the executive department”
but “an agency of the legislative ... department[]”).
Freed from Congress’s power of the purse, the FTC
would have been no such agent, and Congress no
such master.
The entire point of the Appropriations Clause
would be defeated if Congress could simply vest
agencies with a perpetual right to fund their own operations. For, as the Baron de Montesquieu recognized, “[i]f the legislative power was to settle the
subsidies, not from year to year, but forever, it would
run the risk of losing its liberty, because the executive power would be no longer dependent; and when
once it was possessed of such a perpetual right, it
would be a matter of indifference whether it held it
17
of itself or of another.” Baron de Montesquieu, The
Spirit of the Laws, bk. XI, ch. VII (1748).
III.
The CFPB’s Conduct Demonstrates The
Propensity For Unchecked And Unaccountable Power To Be Abused
The danger that Congress’s deliberate stripping
away of all traditional checks when it created the
CFPB would result in tyrannical abuse of power is
not merely theoretical, but rather is now an historical fact. And nothing is more emblematic of that
abuse than the manner in which the CFPB pursued
enforcement action against mortgage lender PHH
Corporation in PHH Corp. v. CFPB, 881 F.3d 75
(D.C. Cir. 2018).
PHH attracted the CFPB’s ire by referring its
customers to insurance companies that had entered
into reinsurance contracts with PHH’s affiliates, a
widespread practice known as captive reinsurance.
Acting as investigator, prosecutor, and judge, the
CFPB found PHH to be in violation of the Real Estate Settlement Procedures Act (RESPA), which
prohibits mortgage companies from accepting “kickbacks” in exchange for referrals. PHH Corp., 839
F.3d at 10–11. The chief problem with the CFPB’s
novel theory was that RESPA expressly states that
mortgage services that are provided for “reasonable
market value” are not prohibited, and the Department of Housing and Urban Development had long
interpreted that statutory safe harbor to allow captive reinsurance arrangements so long as they are
contracted for reasonable market value. Id. at 11.
Yet CFPB Director Cordray elected not only to break
from this venerable agency interpretation—on which
18
an entire industry had long relied—but to do so both
without warning and retroactively, imposing more
than $109 million in penalties on PHH in the process.
The en banc D.C. Circuit unanimously held that
the CFPB’s retroactive penalties violated due process, and all but three judges voted to reinstate in
full the prior panel decision on the subject of the enforcement action against PHH, which had “rejected:
the Director’s new interpretation of the antikickback provision of [RESPA]; his attempt to apply
that interpretation retroactively to PHH; his construction of RESPA’s limitations provision; and his
theory that the CFPB is bound by no limitations period in any administrative enforcement action under
any of the laws the agency administers.” PHH
Corp., 881 F.3d at 150 (Henderson, J., dissenting)
(citation omitted). As Judge Henderson put it, “[t]he
issues were ‘not a close call’: the CFPB flunked ‘Rule
of Law 101’ and was called out for ‘gamesmanship’
and ‘absurd’ reasoning.” Id. (alteration omitted).
The historical record further shows that the
CFPB’s abusive treatment of PHH was not an aberration, but rather is a symptom of the CFPB’s unaccountable structure. From its inception, the CFPB
has openly declared that it would pursue precisely
the kind of “gotcha” enforcement policy that was visited upon PHH, which—rather than announcing the
rules of acceptable conduct in advance—informs regulated parties of the agency’s views of legality for the
first time when it serves them with a complaint. For
example, in a January 24, 2012 hearing before a
subcommittee of the U.S. House Committee on Over-
19
sight and Government Reform, CFPB Director
Cordray stated that the Act's use of the term “abusive” is “a little bit of a puzzle because it is a new
term.” How Will The CFPB Function Under Richard
Cordray, Hrg. before the House Oversight Committee, Subcomm. on TARP, Financial Servs., and
Bailouts of Public and Private Programs, 112th
Cong. 69 (Jan. 24, 2012). The Director elaborated
that the CFPB has “been looking at it, trying to understand it, and we have determined that that is going to have to be a fact and circumstances issue; it is
not something we are likely to be able to define in
the abstract. Probably not useful to try to define a
term like that in the abstract; we are going to have
to see what kind of situations may arise where that
would seem to fit the bill under the prongs.” Id.
The Treasury Department has similarly noted
the CFPB’s penchant for adopting new policies retroactively, which it does through an “unusual degree” of “enforcement actions and guidance documents, which the CFPB has consistently issued
without opportunity for public comment.” Dep’t of
the Treasury, A Financial System that Creates Economic Opportunities: Banks and Credit Unions 82
(2017).
And the rules that the CFPB has seen fit to
promulgate have inflicted substantial harm even on
those institutions that have not been targeted for enforcement.
For example, under the CFPB’s
rules, Amicus State National Bank of Big Spring has
been forced (1) to limit its remittance transfers to no
more than 99 annually, losing substantial business;
(2) to change its mortgage servicing practices in
20
ways that increase lending risks to the Bank and
make foreclosure more likely; and (3) to exit the consumer-mortgage lending business entirely. Opening
Brief of Private Plaintiffs-Appellants 9–11, Nos. 135247, 5248 (D.C. Cir., Feb. 11, 2014). More broadly,
the Bank “must incur costs to ensure” compliance
with the CFPB’s evolving interpretations of the law.
State Nat’l Bank of Big Spring v. Lew, 795 F.3d 48,
53 (D.C. Cir. 2015).
Moreover, the CFPB’s cavalier flaunting of its
unaccountable independence is not limited to enforcement policy:
•
The CFPB proudly proclaims in publications
that its legal entitlement to hundreds of millions of dollars in “funding outside the congressional appropriations process” ensures its
“full independence” from Congress. Consumer
Financial Protection Bureau Strategic Plan:
FY
2013-FY
2017
36
(Apr.
2013),
https://files.consumerfinance.gov/f/strategicplan.pdf.
•
At a hearing in 2015, a Congresswoman asked
the CFPB’s first Director for information concerning who at the agency was responsible for
directing renovation projects that cost hundreds of millions of dollars. The Director declined to answer her question; instead, he
asked her bluntly, “why does that matter to
you?” See U.S. House of Representatives,
Committee on Financial Services, “Committee
Pushes for Accountability and Transparency
at the CFPB” (Mar. 6, 2015) (emphasis added),
21
https://www.youtube.
com/watch?v=jQx_IMHfjDo at 3:33:19.
•
Last year, the CFPB’s Acting Director told the
House Financial Services Committee that the
CFPB “[i]s not accountable to you. It’s not accountable to the public. It’s not accountable to
anybody but itself.” He further informed the
Committee “I believe it would be my statutory
right to just sit here and twiddle my thumbs
while you all ask questions.” Jim Puzzanghera, CFPB Chief Mick Mulvaney Says He Could
Just ‘Twiddle My Thumbs’ Before Congress To
Highlight Agencys Flaws, Los Angeles Times
(April 11, 2018).
•
Congressmen and Senators recurrently complain that the CFPB is unresponsive to requests to explain the basis for its more controversial policies. See, e.g., Letter from Rep.
Randy Neugebauer, Chairman, H.R. Comm.
on Fin. Servs., Subcomm. on Oversight and
Investigations et al. to Richard Cordray, Director of the CFPB, at 1 (May 2, 2012),
https://www.consumerfinancemonitor.com/wpcontent/uploads/sites/14/2012/05/DOC.pdf;
Letter from Sen. Rob Portman et al. to Richard Cordray, Director of the CFPB, at 1 (Oct.
30, 2013), https://ourfinancialsecurity.org/wpcontent/uploads/2014/01/Oct-30-SenateLetter.pdf.
The taxpayers expect Congress to be accountable for
the expenditure of public funds. But having yielded
its power of the purse to the CFPB, Congress’s ability even to secure answers to basic questions has
22
been all but lost.
IV.
Severing The CFPB’s Tenure Protection
Would Raise Constitutional Questions
The Court Should Avoid
This Court may not sever Title X’s for-cause removal provision, 12 U.S.C. § 5491(c)(3), while preserving the other provisions of Title X, because “it is
evident that the [Congress] would not have enacted
those provisions ... independently of” § 5491(c)(3)’s
tenure protection. Alaska Airlines, Inc. v. Brock, 480
U.S. 678, 685 (1987), quoted in Murphy v. Nat’l Collegiate Athletic Ass’n, 138 S. Ct. 1461, 1482 (2018).
A CFPB retrofitted with a presidentially removable
Director would violate Congress’s express intention
to create an “independent bureau” free from presidential control. 12 U.S.C. § 5491(a). 3 And as Judge
Henderson noted in dissent, such a “mutant CFPB”
would “transfer to the executive branch far-reaching
new powers that, before Title X, resided with several
non-executive agencies.” PHH Corp., 881 F.3d at
163, 162.
Bringing the CFPB’s vast and discretionary enforcement apparatus under presidential control
would effect a “delegation[] of power to the Executive
3 Excising § 5491(c)(3) would not erase Congress’s “independent bureau” label or its designation of the CFPB as an “independent regulatory agency” under the Paperwork Reduction
Act (PRA). 44 U.S.C. § 3502(5). The Court should be especially
reluctant to tinker with Congress’s deliberate and consistent
treatment of the CFPB as an independent agency when the
tinkering would make such an incongruous mess of the statutory scheme.
23
... so controversial or so broad that Congress would
have been unwilling to make the delegation without
a strong oversight mechanism.” Alaska Airlines, 480
U.S. at 685. And Congress would have no recourse
to its most important oversight mechanism—the
power of the purse—because the CFPB is funded
outside the appropriations process through direct
payments from the Federal Reserve.
Such an Executive Branch agency could not
“function in a manner consistent with the intent of
Congress.” Id. at 685. And there is no reason to
think Congress would have brought it into existence
if given the option. For this reason, Amici agree
with Petitioner that this Court must invalidate Title
X in its entirety—if it reaches the severability question at all. See Brief of Petitioner at 41–45.
*
*
*
*
*
But Amici write separately to offer an additional
reason why this Court must not rewrite the statute
to place the CFPB under presidential control while
preserving the agency’s other structural features.
Such an agency would turn a new page in the annals
of the administrative state: it would be the first entirely self-funded law-enforcement agency that is
subject to the President’s direction and control. That
novel entity would aggrandize the President at Congress’ expense, and it would raise difficult questions
about the compatibility of the CFPB’s funding mechanism with the Appropriations Clause. See generally
Free Enter. Fund v. Pub. Co. Accounting Oversight
Bd., 561 U.S. 477, 505 (2010) (“Perhaps the most
telling indication of the severe constitutional problem with the PCAOB is the lack of historical prece-
24
dent for this entity.” (quoting Free Enter. Fund v.
Pub. Co. Accounting Oversight Bd., 537 F.3d 667,
699 (D.C. Cir. 2008) (Kavanaugh, J., dissenting))).
The Court should decline to create such a novel and
arguably unconstitutional entity by judicial fiat.
A.
A Self-Funded Executive Agency
Subject to Presidential Control
Would Be Novel
“Until the CFPB ... Congress ha[d] utilized selffunding in only a limited number of ‘narrowly focused’ independent agencies.” Charles Kruly, SelfFunding and Agency Independence, 81 Geo. Wash. L.
Rev. 1733, 1735 (2013) (citing examples); see also
PHH Corp., 881 F.3d at 95 (discussing examples).
The Administrative Conference of the United States
identifies eleven agencies that are entirely selffunded, 4 but none offers a legislative precedent for
turning the CFPB into an Executive Branch agency.
At least eight of the eleven fully self-funded
agencies are financial regulatory agencies designed
by Congress to possess some or all of the traditional
hallmarks of independence that insulate them from
presidential control—multi-member boards, partisan
balance requirements, and tenure protection. See 12
U.S.C. § 241 (Board of Governors of the Federal Reserve System); id. § 1812 (Board of Directors of the
4 Jennifer L. Selin & David E. Lewis, Sourcebook of United
States Executive Agencies 110, Tbl. 14 (Oct. 2018),
https://www.acus.gov/sites/default/files/documents/ACUS%20So
urcebook%20of%20Executive%20Agenices%202d%20ed.%20508%20
Compliant.pdf.
25
Federal Deposit Insurance Corporation); id.
§§ 4511(a), 4512(b)(2) (Federal Housing Finance Authority) 5; id. § 1752 (National Credit Union Administration Board); id. § 2242 (Farm Credit Administration Board); 15 U.S.C. § 7211(e)(6) (Public Com12
pany
Accounting
Oversight
Board) 6;
U.S.C. § 2277a-2(a) (Farm Credit System Insurance
Corporation); id. § 1452(a)(2)(A) (Federal Home Loan
Mortgage Corporation). The Paperwork Reduction
Act lists the first six of these as “independent regulatory agencies,” 44 U.S.C. § 3502(5), and they “are
considered independent whether or not for-cause
removal protection is specified by statute,” PHH
Corp., 881 F.3d at 92.
A ninth self-funding financial regulatory agency,
the Office of the Comptroller of the Currency, is ostensibly a bureau within the Treasury Department,
but has several features of independence. 7
The Federal Housing Finance Authority is a recentlycreated agency with structural features similar to the CFPB’s
that was held unconstitutional in Collins v. Mnuchin, 938 F.3d
553 (5th Cir. 2019).
5
6 The Public Company Accounting Oversight Board was established as an independent agency, and remains under the
control of an independent agency after this Court severed one
layer of its for-cause removal protection. See Free Enter. Fund
v. PCAOB, 561 U.S. 477, 495 (2010).
7 If the President removes the Comptroller of the Currency,
he must send the Senate his “reasons” for removing him. 12
U.S.C. § 2; see PHH Corp., 881 F.3d at 91–92 (“Whatever type
of reason it requires, the statute without question constrains
the presidential removal power.”). The Treasury Secretary is
forbidden from interfering with the Comptroller’s regulatory
functions. 12 U.S.C. § 1(b)(1). Moreover, the OCC’s self-funding
26
Only two fully self-funding agencies are clearly
under presidential control, but neither possesses any
enforcement authority. The board of Federal Prison
Industries serves at the pleasure of the President, 18
U.S.C. § 4121, but it performs an exclusively commercial function, see 18 U.S.C. § 4122. And the Director of the Bureau of Engraving and Printing
serves at the pleasure of the Secretary of the Treasury, 31 U.S.C. § 303, but the Bureau merely designs
and prints currency and other government documents on behalf of the Secretary, id. § 321(a)(4).
Amici are aware of no presidentially accountable
law-enforcement agency that is entirely funded outside of the congressional appropriations process. 8 If
mechanism (assessments on the financial institutions it regulates) is of relatively recent vintage. Until 1947, the Comptroller was funded by congressional appropriations. See L'Enfant
Plaza Properties, Inc. v. United States, 668 F.2d 1211, 1212 (Ct.
Cl. 1982), abrogated by Slattery v. United States, 635 F.3d 1298
(Fed. Cir. 2011). The Comptroller did not acquire broad selffunding authority until 1991. Compare 12 U.S.C. § 482 (1988)
(authorizing Comptroller to assess banks to pay only “[t]he expense of [bank] examinations”), with Federal Deposit Insurance
Corporation Improvement Act of 1991. Pub. L. 102–242,
§ 114(a), 105 Stat. 2236, 2248 (1991) (“The Comptroller of the
Currency may impose and collect assessments, fees, or other
charges as necessary or appropriate to carry out the responsibilities of the duties of the Comptroller.”). The Paperwork Reduction Act identifies the OCC as an “independent regulatory
agency.” 44 U.S.C. § 3502(5).
8 Congress has often authorized agencies that are subject to
the regular appropriations process to maintain “revolving
funds” that reduce or supplement their appropriated funds.
See Stith, 97 Yale L.J. at 1366–67; Selin & Lewis, supra note 8,
at 109, Tbl. 13. Whether funded by receipts from the agencies’
own commercial activities, see, e.g., 39 U.S.C. § 2003; user fees
27
this Court were to sever the CFPB’s for-cause removal protection it would create a hybrid never before witnessed in our republic: a self-funded executive agency with enforcement powers.
B.
A Self-Funded Executive Agency
Would Relinquish To The President
Congress’s Core Legislative Power
Of The Purse
It is for good reason that Congress has never
seen fit to create such an agency: It would raise
grave constitutional questions.
The Appropriations Clause exists not simply to
reserve fiscal power to Congress in the abstract, but
to keep it out of the hands of the President. Indeed,
“[t]he Appropriations Clause has been described as
‘the most important single curb in the Constitution
on Presidential power.’ ” GAO, 1 Principles of Federal Appropriations Law, at 1-4 to 1-5 (3d ed. 2004).
The British experience taught the Founders that
legislative control over the Executive’s spending was
essential to liberty. As James Madison observed, legislative control of the purse was the “powerful instrument by which ... an infant and humble representation of the people”—namely Parliament—
for the services they provide, see, e.g., 16 U.S.C. § 6806; or fines
for violations of the laws they enforce, see, e.g., 12 U.S.C.
§ 5497(d), such arrangements are a far cry from the CFPB’s
authority to draw over $600 million every year directly from
the Federal Reserve to carry out all its law-enforcement activities.
28
triumphed over the “overgrown prerogatives” of the
English King. The Federalist No. 58 (James Madison). As Alexander Hamilton put it, a government
that vested the power of the purse and of the sword
in a single branch “would destroy that division of
powers on which political liberty is founded, and
would furnish one body all the means of tyranny.”
Alexander Hamilton, Convention of New York, in 2
The Works of Alexander Hamilton 61 (Henry Cabot
Lodge ed., 1904).
Early commentators continued to justify Congress’s exclusive power of the purse as a limit on the
Executive. In his influential commentaries, Justice
Joseph Story observed that the Appropriations
Clause preserves “in full vigor the constitutional
barrier between each department,” giving Congress
“controlling influence over the executive power, since
it holds at its own command all the resources by
which a chief magistrate could make himself formidable.” Joseph Story, Commentaries on the Constitution of the United States § 531 (1833). Congress’s
“power to control, and direct appropriations,” Story
observed, “constitutes a most useful and salutary
check ... upon corrupt influence and public peculation.” Id. § 1342. It is what distinguishes our system
of coordinate branches from “arbitrary governments”
in which “the prince levies what money he pleases
from his subjects, disposes of it, as he thinks proper,
and is beyond responsibility or reproof.” Id. § 1348.
St. George Tucker agreed. He characterized the
Appropriations Clause as “a salutary check against
any misappropriation, which a rapacious, ambitious,
or otherwise unfaithful executive might be disposed
29
to make.” St. George Tucker, Views of the Constitution of the United States 298 (1803) (Clyde N. Wilson
ed. 1999).
In light of the dangers posed by presidential
control of the purse strings, it is no surprise that
Congress has traditionally funded executive departments controlled by the President through a periodic, typically annual, appropriations process. See,
e.g., An Act Making Appropriations for the Service of
the Present Year, 1 Stat. 95 (1789). This “200 year”
tradition should “ ‘give meaning’ to the Constitution.” Mistretta v. United States, 488 U.S. 361,
401 (1989).
The effects of breaking with this tradition would
be especially grave in a context like this one “where
the Executive has significant authority to define
government policy and has significant discretion in
deciding the means of policy implementation.” Stith,
97 Yale L.J. at 1383. An opportunistic President
could force the CFPB to radically increase spending
to advance the President’s electoral or personal interests, instead of the agency’s law-enforcement mission. See John Hudak, Presidential Pork 3 (2014)
(discussing “the executive branch’s desire to use
spending in politically and electorally expedient
ways.”). Another President, hostile to the CFPB’s
mission, could unilaterally starve the agency of
funds. See Fiscal Year 2020 Budget of the U.S. Government 185 (proposing to dramatically lower Federal Reserve transfers to the CFPB). And all of this
could happen without any meaningful check from
Congress.
It would be an even greater affront to the Con-
30
stitution for a self-funded executive agency to come
about from the remedial action of this Court rather
than Congress. In the first place, the constitutionality of a court’s statutory revision is doubtful indeed.
See Nat’l Treasury Employees Union, 513 U.S. at
478–79 (“[O]ur obligation to avoid judicial legislation
also persuades us to reject” a suggested remedy that
would require the Court to “tamper with the text of
the statute, a practice we strive to avoid.”). Moreover, if this Court rewrote the statute in a manner
that aggrandized the President by handing him
Congress’s power of the purse, the President could
veto any attempt by Congress to restore its power of
the purse to its rightful place.
Finally, whatever claim Congress may have to
be able to delegate its own power of the purse to the
Executive, surely it lies beyond the Judiciary’s authority to grant to the Executive what the Constitution vests in Congress—especially where Congress
has expressed a clear intention to keep the agency’s
power out of the President’s hands.
C.
The Court Must Avoid a Judicial
Rewrite That Would Raise These
Constitutional Questions
In selecting among various potential remedies
for a constitutional violation, the Court should avoid
any remedy that would raise constitutional questions. See Nat’l Treasury Employees Union, 513 U.S.
at 478–79 (rejecting a broad remedy that would have
reached parties not before the court because of “[o]ur
policy of avoiding unnecessary adjudication of constitutional issues”). It is an accepted canon of statutory
construction that a court should “shun an interpreta-
31
tion that raises serious constitutional doubts,” if it
can do so without “rewrit[ing]” the statute. Jennings
v. Rodriguez, 138 S. Ct. 830, 836 (2018). By the
same token, the Court should shun a remedy that
would resolve one constitutional defect only to raise
a novel constitutional question, especially where the
remedy involves putting the Court in the unsuitable
role of a remedial legislature.
Severing 12 U.S.C. § 5491(c)(3) from Title X of
the Dodd-Frank Act would have just that effect: It
would raise difficult constitutional questions about
an executive agency’s exercise of the power of the
purse, placing this Court’s imprimatur on a novel
government structure never adopted by Congress
and in stark tension with the text, structure, and
history of the Constitution. Such an action could
have the unintended effect of encouraging Congress
to create new self-funded Executive Branch agencies,
empowering an ever more powerful presidency and
shirking the legislative accountability that comes
with the appropriations process. Such a decision
would also raise serious questions about the judiciary’s exercise of the legislative power to repeal or
“sever” unconstitutional line items.
This case is not the occasion to answer such
questions. See Goldwater v. Carter, 444 U.S. 996,
997 (1979) (Powell, J., concurring in judgment) (“The
Judicial Branch should not decide issues affecting
the allocation of power between the President and
Congress until the political branches reach a constitutional impasse.”). Instead of attempting to restructure the CFPB by judicial fiat, the Court should
let the political branches fix the agency through the
32
ordinary legislative process that the Constitution
prescribes. Members of Congress have introduced
several bills that would restructure the CFPB in a
constitutional manner. See C. Boyden Gray, Extra
Icing on an Unconstitutional Cake Already Frosted”
A Constitutional Recipe for the CFPB, 24 Geo. Mason
L. Rev. 1213, 1231 (2017) (discussing bills to reform
or abolish the CFPB). Severing the offending statutory provision here would only discourage the political branches from resolving the agency’s constitutional defects as they see fit.
CONCLUSION
This Court should hold that the CFPB violates
the separation of powers, and it should leave for
Congress the task of rewriting Title X of the DoddFrank Act.
33
Respectfully submitted,
SAM KAZMAN
COMPETITIVE ENTERPRISE
INSTITUTE
1310 L St. NW, 7th Floor
Washington, DC 20005
(202) 331-1010
GREGORY JACOB
(Counsel of Record)
gjacob@omm.com
O’MELVENY & MYERS LLP
1625 Eye Street, N.W.
Washington, D.C. 20006
(202) 383-5300
C. BOYDEN GRAY
ADAM R.F. GUSTAFSON
JAMES R. CONDE
T. ELLIOT GAISER
BOYDEN GRAY &
ASSOCIATES
801 17th St., NW
Suite 350
Washington, DC 20006
(202) 955-0620
gustafson@boydengrayassociates.com
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.