Amicus Curiae Brief — Consumer Financial Protection Bureau, et al., Petitioners v. Community Financial Services Association of America, Limited, et al.
Supreme Court briefMay 12, 2023
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No. 22-448
In the
Supreme Court of the United States
CONSUMER FINANCIAL PROTECTION BUREAU, ET AL.,
Petitioners,
v.
COMMUNITY FINANCIAL SERVICES ASSOCIATION OF
AMERICA, LIMITED, ET AL.,
Respondents.
On Writ of Certiorari to the United States
Court of Appeals for the Fifth Circuit
BRIEF OF FARM ACTION, HEAL FOOD
ALLIANCE, INSTITUTE FOR AGRICULTURE
AND TRADE POLICY, RURAL COALITION,
AND PARTNERS FOR RURAL
TRANSFORMATION AS AMICI CURIAE IN
SUPPORT OF PETITIONERS
RACHEL L. FRIED
Counsel of Record
JEFFREY B. DUBNER
ORLANDO ECONOMOS
Democracy Forward
Foundation
P.O. Box 34553
Washington, DC 20043
(202) 448-9090
rfried@democracyforward.org
Counsel for Amici Curiae
i
TABLE OF CONTENTS
Page
TABLE OF AUTHORITIES ...................................... iii
INTERESTS OF THE AMICI CURIAE..................... 1
INTRODUCTION AND SUMMARY OF
ARGUMENT..................................................... 4
ARGUMENT ............................................................... 6
I. The FCS and CFPB both ensure and
improve access to credit for agricultural
businesses. ............................................................. 6
A. The FCS is critical to the long-term
health and stability of the agricultural
sector. ................................................................ 7
B. The CFPB protects farmers and rural
communities by studying and
addressing the problems they face. ............... 13
II. The Fifth Circuit’s extratextual reading of
the Appropriations Clause could threaten
the FCA, which is funded pursuant to
enabling legislation, not annual
appropriations legislation. .................................. 18
A. The CFPB’s funding structure comports
with the Appropriations Clause. ................... 18
B. Congress has chosen to fund the FCA
outside the annual appropriations
process............................................................. 20
C. The extratextual reading of the
Appropriations Clause advanced by the
Fifth Circuit could threaten the Farm
Credit Administration. ................................... 24
ii
1. The Fifth Circuit’s extratextual
reading of the Appropriations Clause
has no basis in the Constitution or
precedent. .................................................. 25
2. The Fifth Circuit’s decision could
threaten the FCA. ..................................... 29
CONCLUSION .......................................................... 32
iii
TABLE OF AUTHORITIES
Page(s)
Cases
Bureau of Consumer Fin. Prot. v. Citizens Bank,
N.A., 504 F. Supp. 3d 39 (D.R.I. 2020) ............... 20
CFPB v. L. Offs. of Crystal Moroney, P.C., 63 F.4th
174 (2d Cir. 2023) .......................................... 20, 24
Comm. Fin. Servs. Assoc. of Am., Ltd.v. CFPB,
51 F.4th 176164 (5th Cir. 2022) ................ 6, 25–31
Cincinnati Soap Co. v. United States, 301 U.S. 308
(1937) ...................................................... 4–5, 18, 19
Harper v. Fed. Land Bank of Spokane, 878 F.2d 1172
(9th Cir. 1989) ................................................ 10, 31
OPM v. Richmond, 496 U.S. 414 (1990) .......... 5, 6, 18
PHH Corp. v. CFPB, 881 F.3d 75 (D.C. Cir. 2018),
abrogated on other grounds by Seila L. LLC v.
CFPB, 140 S. Ct. 2183 (2020) ................. 20, 26, 30
Seila L. LLC v. CFPB, 140 S. Ct. 2183 (2020) ... 20, 28
United States v. Wells Fargo & Co., 943 F.3d 588 (2d
Cir. 2019) .............................................................. 31
Constitutional Provisions
U.S. Const.:
Art. I:
§ 8, cl. 12 .......................................................... 25
§ 9, cl. 7 (Appropriations Clause)......... 2, 3, 4, 11,
18–20, 24–32
iv
Statutes
Agricultural Credit Act of 1987, Pub. L. No. 100-233,
§ 201, 101 Stat. 1568 ........................................... 23
Consumer Financial Protection Act of 2010,
12 U.S.C. 5301 ........................................................5
12 U.S.C. 5496(c)(2) ............................................. 28
12 U.S.C. 5496a ................................................... 28
12 U.S.C. 5497(a)(1)............................................. 19
12 U.S.C. 5497(a)(2)(A)........................................ 19
12 U.S.C. 5497(a)(2)(B)........................................ 19
12 U.S.C. 5497(a)(2)(C).................................. 27, 28
12 U.S.C. 5497(b)(1)................................. 19, 23–24
12 U.S.C. 5497(b)(3)............................................. 19
12 U.S.C. 5497(c)(1) ............................................. 20
12 U.S.C. 5497(c)(2) ....................................... 21, 31
12 U.S.C. 5497(e)(1) ............................................. 19
12 U.S.C. 5511 ..................................................... 20
Emergency Farm Mortgage Act of 1933, Pub. L. No.
73-10, 48 Stat. 41 (May 12, 1933) ................... 8, 23
Farm Credit Act of 1933,
ch. 98, 48 Stat. 257 (12 U.S.C. 1131 et seq.):
ch. 98, 48 Stat. 257 .................................................8
12 U.S.C. 2153 .................................................... 22
12 U.S.C. 2160(b) ................................................ 22
12 U.S.C. 2207(a) ................................................ 10
12 U.S.C. 2207(b) ................................................ 10
v
12 U.S.C. 2249 .............................................. 21, 22
12 U.S.C. 2250(a)(1) ............................................ 21
12 U.S.C. 2250(a)(2) ............................................ 21
12 U.S.C. 2250(b)(1) ............................................ 21
12 U.S.C. 2250(b)(2) .................................. 6, 21, 31
12 U.S.C. 2250(3) .......................................... 22, 27
12 U.S.C. 2252 .......................................................9
12 U.S.C. 2252(a)(3) ............................................ 22
12 U.S.C. 2261(a) ................................................ 10
12 U.S.C. 2267 .................................................... 10
12 U.S.C. 2267a .................................................. 10
12 U.S.C. 2268(a) ................................................ 10
12 U.S.C. 2269 .................................................... 10
12 U.S.C. 2271 .................................................... 10
12 U.S.C. 2277a-1 ............................................... 22
12 U.S.C. 2277a-4 ............................................... 23
12 U.S.C. 2277a-4(a) ........................................... 23
12 U.S.C. 2277a-4(c) ........................................... 23
12 U.S.C. 2277a-9 ............................................... 22
Farm Credit Act of 1971, Pub. L. 92-181, 85 Stat.
584, as amended (Dec. 10, 1971) ......................... 10
Federal Farm Loan Act of 1916,
ch. 245, 39 Stat. 360 ...............................................7
7 U.S.C. § 1988 ........................................................... 12
7 U.S.C. 2003(e) ........................................................ 16
vi
12 U.S.C. 243 ...................................................... 19, 26
12 U.S.C. 244 ............................................................ 31
12 U.S.C. 355 ............................................................ 27
12 U.S.C. 1823(a)(1) ................................................. 27
12 U.S.C. 4516(f)(6) .................................................. 27
15 U.S.C. 1691c-2 (Section 1071 Rule) ............... 15, 17
42 U.S.C. 301 ....................................................... 25–26
42 U.S.C. 401(b) .................................................. 25–26
Other Materials
2 Commentaries on the Constitution of the United
States § 1348 (3d ed. 1858) ........................... 18–19
92 Cong. Rec. 38532 (Nov. 1, 1971) (remarks of Rep.
James Broyhill (R-NC) ........................................ 11
92 Cong. Rec. 38532 (Nov. 1, 1971) (remarks of Rep.
Richard Ichord (D-MO) .................................. 13–14
92 Cong. Rec. 42260 (Nov. 19, 1971) (remarks of Rep.
John McMillan (D-SC) ................................... 13–14
Appropriations, About the Committee, https://appropriations.house.gov/about ................................... 28
Brief of Plaintiffs-Appellants at 46–50, Collins v.
Dep’t of the Treasury, No. 22-20632 (5th Cir. Feb.
1, 2023) ................................................................. 29
CFPB, CFPB Finalizes Rule to Create a New Data
Set on Small Business Lending in America (Mar.
30, 2023),
https://www.consumerfinance.gov/aboutus/newsroom/cfpb-finalizes-rule-to-create-a-newdata-set-on-small-business-lending-in-america/ 15
vii
CFPB, Data Spotlight: Challenges in Rural Banking
Access (Apr. 2022),
https://files.consumerfinance.gov/f/documents/cfpb
_data-spotlight_challenges-in-ruralbanking_2022-04.pdf ........................................... 15
CFPB, Statement of CFPB Director Rohit Chopra,
FDIC Board Member, on the Notice of Proposed
Rulemaking Regarding the Community
Reinvestment Act, (May 5, 2022),
https://www.consumerfinance.gov/aboutus/newsroom/statement-of-cfpb-director-rohitchopra-fdic-board-member-on-the-notice-ofproposed-rulemaking-regarding-the-communityreinvestment-act/ ........................................... 15–16
Consolidated Appropriations Act, H.R. 2617–36,
117th Cong (2023) .......................................... 21–22
Congressional Research Service, Farm Credit
Administration and Its Board Members (Mar. 3,
2023), https://crsreports.congress.gov/product/pdf/IF/IF10767 ............................................... 21
Drew Dahl & Michelle Franke, Banking Deserts
Become a Concern as Branches Dry Up, Federal
Reserve Bank of St. Louis (July 25, 2017),
https://www.stlouisfed.org/publications/regionaleconomist/second-quarter-2017/banking-desertsbecome-a-concern-as-branches-dry-up ............... 14
Economic Research Service, Socially Disadvantaged,
Beginning, Limited Resource, and Female
Farmers and Ranchers, U.S. Dep’t of Agriculture,
https://www.ers.usda.gov/topics/farmeconomy/socially-disadvantaged-beginninglimited-resource-and-female-farmers-andranchers/ (last updated Mar. 22, 2023) ........ 16–17
viii
Exec. Order No. 6084 (Mar. 27, 1933), reprinted in 12
U.S.C. prec. 2241 ....................................................8
Farm Credit, Our Structure, https://farmcredit.com/our-structure ...................................... 22
Farm Credit Funding Corporation, What is the credit
rating of the farm credit debt securities?,
https://www.farmcreditfunding.com/
ffcb_live/faq.html ....................................................9
FCA, 2021 Annual Report (July 2022)
https://www.fca.gov/template-fca/about/
2021AnnualReport.pdf .............................. 8, 10, 12
FCA, FY 2022 Performance and Accountability
Report, (Nov. 8, 2022),
https://www.fca.gov/templatefca/about/FCAPerformanceAndAccountabilityRep
ortFY2022.pdf ................................................ 21, 22
FCA, Description of FCS institution types,
https://www.fca.gov/bank-oversight/description-offcs-institution-types ................................................8
FCA, Reports and Publications–FCA Annual Reports,
https://www.fca.gov/about/reports-publications . 12
FCA, Reports and Publications–FCA Performance
and Accountability Reports, https://www.fca.
gov/about/reports-publications ............................ 13
Federal Farm Credit Banks Funding Corporation,
Farm Credit System,
https://www.farmcreditfunding.com/
ffcb_live/aboutUs/farmCreditSystem.html........ 22
FSA, Funding, USDA https://www.fsa.usda.
gov/programs-and-services/farm-loanprograms/funding/index ...................................... 12
ix
GAO, Agricultural Lending: Information on Credit
and Outreach to Socially Disadvantaged Farmers
and Ranchers Is Limited,
GAO-19-539 (July 11, 2019),
https://www.gao.gov/products/gao-19-539 .......... 17
Julie Anderson Hill, Bailouts and Credit Cycles:
Fannie, Freddie, and the Farm Credit System,
2010 Wis. L. Rev. 1 (2010) ................................... 23
Jared Hutchins, The US farm credit system and
agricultural development: Evidence from an early
expansion, 1920–1940, 105 Am. J. of Agr. Econ. 3
(Jan. 2023), https://onlinelibrary.wiley.com/doi/
10.1111/ajae.12290 .................................................9
Marc G. Quintyn & Michael W. Taylor, Regulatory
and Supervisory Independence and Financial Stability, International Monetary Fund, (Mar. 1,
2002), https://www.imf.org/external/pubs/ft/wp/
2002/wp0246.pdf .................................................. 11
Shawn Sebastian, New effort focused on financial
issues facing rural communities, CFPB (Mar. 10,
2022), https://www.consumerfinance.gov/aboutus/blog/new-effort-focused-on-financial-issuesfacing-rural-communities/ ............................. 14, 16
United States Senate, Appropriations Committee
Created, https://www.senate.gov/about/originsfoundations/committee-system/appropriationscommittee-created.htm........................................ 28
USDA, Budget Summary, https://www.usda.
gov/obpa/budget-summary .................................. 13
BRIEF OF FARM ACTION, HEAL FOOD ALLIANCE, INSTITUTE FOR AGRICULTURE AND
TRADE POLICY, RURAL COALITION, AND
PARTNERS FOR RURAL TRANSFORMATION
AS AMICI CURIAE IN SUPPORT OF PETITIONERS
INTERESTS OF THE AMICI CURIAE1
Amici curiae are groups representing the interests
of farmers, ranchers, rural communities, food system
workers, and anyone who eats.
Farm Action is a non-profit organization that
serves as a network builder for farmers and ranchers,
food chain workers, consumers, organizations, and
policymakers up and down the food supply
chain. Farm Action works to build a fair, inclusive,
and competitive food and agriculture system that respects our land, natural resources, and neighbors
around the world.
HEAL (Health, Environment, Agriculture, Labor)
Food Alliance is a national multi-sector, multi-racial,
member-led coalition of 45 organizations who represent over 2 million rural and urban farmers, ranchers,
fishers, farm and food chain workers, indigenous
groups, scientists, public health advocates, policy experts, community organizers, and activists. Together,
these groups are organizing for food systems that
nourish our families, are accessible and affordable for
all communities, and are fair to the working people
who grow, process, distribute, prepare, and serve our
Pursuant to Rule 37.6, no party’s counsel authored this brief
in whole or in part, no party or party’s counsel contributed money
intended to fund this brief, and no person other than Amici, their
members, and their counsel contributed money to fund this brief.
1
2
food - while protecting the air, water, soil and biodiversity we all depend on. Many of the BIPOC growers
represented by HEAL have been directly affected by
discriminatory lending practices and continue to
struggle to access sufficient credit and loans to enable
land ownership, land tenure, and for their businesses
to thrive.
Institute for Agriculture and Trade Policy is a
non-profit advocacy organization that works locally
and globally at the intersection of policy and practice
to ensure fair and sustainable food, farm, and trade
systems. IATP analyzes policy and global trade developments, collaborates with coalitions of agricultural
advocates, and works to ensure a strong regulatory
framework that protects public health, the environment, workers and farmers. IATP is a member of the
Credit Policy Committee of the National Sustainable
Agriculture Coalition, which recently released its
Farm Bill Platform 2023, including a Credit Title developed by our committee. IATP has submitted comments on the Farm Credit Administration’s most recent Strategic Plan and on FCA’s proposed rule to
strengthen the structure of its bank liquidity reserve.
The Rural Coalition is an alliance of over 60 diverse, community-based member organizations that
have worked for 45 years to advance the interests of
the historically underserved producers, workers and
rural communities they represent. Since 1978, the Rural Coalition has developed and secured passage of
over 45 key federal policies to strengthen rural agriculture, with a critical focus on equitable access and
building a new generation of diverse producers—producers whose very future in farming is inextricably
linked to the outcome of this case. Our member organizations are deeply familiar with the barriers that
3
small scale, limited-resource or socially disadvantaged producers face, including discrimination in
lending. CFPB’s Payday Lending Rule helps protect
those farmers forced into payday loans as their only
option to make it to harvest in the unpredictable conditions they face in an agricultural system that is both
volatile and unfair.
The Partners for Rural Transformation is a collective of six Community Development Finance Institutions, all who live in and serve regions with higher
concentration of persistent poverty counties. PRT is
interested in this case because the CFPB protects and
serves the most underbanked and unbanked populations, including our regions of rural persistent poverty
America.
Amici have an acute interest in the preservation
of the Farm Credit System (FCS, or System) and the
institutions it comprises, including the Farm Credit
Administration (FCA), which oversees and administers the FCS. The FCS is the single largest provider of
credit to the agricultural sector, and it ensures farmers and ranchers can get the loans necessary to sustain America’s food system. Amici also have an interest in the continued operations of the Consumer Financial Protection Bureau (CFPB or Bureau). The
CFPB provides critical insight into the difficulties the
agricultural sector faces in accessing credit, and it
combats discrimination and a lack of transparency by
regulating consumer financial products and collecting
data regarding the availability of those products. The
CFPB’s activities are critical to the people Amici represent.
Like the CFPB, certain FCS institutions—most
notably, the FCA—are not funded through annual appropriations legislation. Amici submit this brief to
4
explain why both the FCA’s and CFPB’s funding
structures are constitutional.
INTRODUCTION AND
SUMMARY OF ARGUMENT
This Court should reverse the judgment of the
Fifth Circuit because, as the Respondents explain in
depth, Br. for Pet’rs 13–38, it conflicts with the text of
the Constitution and disregards this Court’s precedent. This brief focuses on an additional reason to reverse: the Fifth Circuit’s opinion could undermine the
funding structures of myriad federal agencies, including the FCA, in which Amici have a particular interest.
Both the FCS and the CFPB are critical to the
health of the agricultural sector. The FCS provides
crucial support to America’s farmers, including by
supplying much-needed loans. The FCA—the FCS’s
administrative arm—helps insulate our nation’s food
system from economic shocks through careful management of the FCS. For its part, the CFPB analyzes
and addresses issues related to the financial products
and credit markets on which agricultural producers
rely. A threat to either agency, or to the financial stability indispensable to their respective missions, is a
threat to American agriculture. By finding a constitutional violation in features of the CFPB’s funding
structure that are shared by that of the FCA, the Fifth
Circuit’s decision did just that.
The funding structure of the CFPB is constitutional. The Appropriations Clause provides that
money may only “be drawn from the Treasury . . . in
Consequence of Appropriations made by Law.” U.S.
Const. art. I, § 9, cl. 7. Consistent with this text and
this Court’s precedent, the Appropriations Clause
5
“means simply that no money can be paid out of the
Treasury unless it has been appropriated by an act of
Congress.” Cincinnati Soap Co. v. United States, 301
U.S. 308, 321 (1937). The CFPB’s funding structure is
“authorized by a statute,” OPM v. Richmond, 496 U.S.
414, 424 (1990), namely the Consumer Financial Protection Act of 2010, 12 U.S.C. 5301 (CFPA or Act).
Congress thus authorized the CFPB’s funding structure by statute, and the CFPB’s funding structure is
constitutionally sound.
The Fifth Circuit imposed additional requirements onto the CFPB’s funding structure that have no
basis in the text of the Appropriations Clause. For example, the court identified Congress’s decision to fund
the CFPB in a manner other than through annual or
time-limited appropriations legislation as problematic, even though nothing in the Constitution imposes
a time limit on appropriations. Indeed, Congress has
long found annual appropriations unnecessary and
undesirable for certain federal agencies. Compounding the problem, the Fifth Circuit did not clarify which
features, or combinations of features, of the CFPB’s
funding structure it considered dispositive to the constitutional question. Nor did that court indicate the
weight it attributed to each feature in its analysis.
The consequence is a novel, indeterminate test for
whether a federal agency’s funding structure violates
the Appropriations Clause that threatens the existence of all agencies Congress has chosen to fund in
ways other than through annual appropriations legislation.
The Fifth Circuit’s erroneous decision casts a
cloud over the FCA. Several of the features of the
CFPB’s funding structure that the Fifth Circuit identified as problematic are shared by the FCA. Similar
6
to the CFPB, Congress decided to fund the FCA, as
well as another System institution—the Farm Credit
System Insurance Corporation (FCSIC)—not through
annual appropriations legislation, but by authorizing
them to levy assessments on institutions within the
FCS. In addition to being funded outside the annual
appropriations process, for example, the FCA’s funds
“shall not be construed to be Federal Government
funds or appropriated moneys.” 12 U.S.C. 2250(b)(2).
The Fifth Circuit took issue with substantively
identical language with respect to the CFPB’s funds.
Comm. Fin. Servs. Assoc. of Am., Ltd. v. CFPB, 51
F.4th 616, 639 (5th Cir. 2022). Yet the FCA’s funding
structure, too, is “authorized by a statute,” Richmond,
496 U.S. at 424, so it satisfies the Appropriations
Clause.
The Fifth Circuit’s decision is unbounded by the
text of the Appropriations Clause, by precedent, and
by practical consideration of its potential ripple effects. If affirmed, that decision could threaten not only
the existence of administrative agencies like the FCA,
but also the sources of the food that feeds our nation.
For those reasons, this Court should reverse the decision of the Fifth Circuit and reaffirm that the Appropriations Clause does not bind Congress to funding
agencies only through annual appropriations legislation.
ARGUMENT
I.
The FCS and CFPB both ensure and improve
access to credit for agricultural businesses.
The FCS is vital to the health of the American agricultural sector. Any risk to the continuing operations of the FCS posed by the Fifth Circuit’s decision
threatens the stability of the System, to say nothing
7
of the devastation that would be wrought were the
funding structure of the FCA to be found unconstitutional. Even if this Court cabins the Fifth Circuit’s
opinion to the CFPB, the harm to the agricultural
community would be severe because the CFPB is also
vital to the vibrancy and stability of our agricultural
sector.
A. The FCS is critical to the long-term
health and stability of the agricultural
sector.
The FCS is a complex farm loan regulatory system
designed to protect our nation’s farmers and food
system. The FCS is an interlocking network of
borrower-owned lending institutions, regulators, and
insurers that includes the FCA, an independent
federal agency that regulates and oversees the FCS;
the FCSIC, which insures the debt obligations of
System lending institutions; the lending institutions
themselves,
composed
of
four
regional
Farm/Agricultural Credit Banks (FCBs/ACBs, or
System banks) and their subsidiary Agricultural
Credit Associations (ACAs); and the Federal Farm
Credit Banks Funding Corporation (Funding
Corporation), which is owned by and issues debt
securities on behalf of the FCBs and ACBs to generate
revenue to fund the loans those banks make to
farmers through their subsidiary ACAs. The System
also includes the Federal Agricultural Mortgage Corporation, or Farmer Mac, which operates a secondary
market for agricultural credit.
The FCS dates to the Federal Farm Loan Act of
1916, which established federal land banks, farm loan
associations, and a farm loan board within the Treasury to ensure farmers had access to credit during a
farming recession. Ch. 245, 39 Stat. 360. President
8
Roosevelt established the FCA—the regulatory arm of
the FCS—in Depression-Era 1933. Exec. Order No.
6084 (Mar. 27, 1933), reprinted in 12 U.S.C. prec.
2241. That same year, Congress enacted sweeping
reforms to the FCS, which included giving the FCA
oversight powers. See Emergency Farm Mortgage Act
of 1933, Pub. L. No. 73-10, 48 Stat. 41; Farm Credit
Act of 1933, ch. 98, 48 Stat. 257 (June 16, 1933).
The FCS collectively holds the largest share of the
nation’s agricultural debt, amounting to $441 billion
and representing 44.4% of total agricultural lending.
FCA,
2021
Annual
Report
(July
2022)
https://www.fca.gov/templatefca/about/2021AnnualReport.pdf [hereinafter, FCA
2021 Annual Report]. The FCS plays a particularly
important role in helping farmers secure long-term
credit to buy the land necessary for agriculture. For
most of its history, “the FCS has had the largest
market share of farm business debt secured by real
estate.” Id. at 16.
The FCS also provides critical short-term
financing to help farmers weather the time between
sowing and selling their product. The Farm Credit Act
of 1933 authorized the introduction of a new kind of
credit cooperative, called a Production Credit
Association (PCA), designed to provide short-term
credit to help farmers get their product to market.2
Pub. L. 73–75, 48 Stat. 257. The short-term credit
PCAs provided fueled a measurable increase in corn
2 PCAs have since been folded into the umbrella ACA institutions
that provide credit at a broad range of maturities. FCA,
Description of FCS institution types, https://www.fca.gov/bankoversight/description-of-fcs-institution-types (last accessed May
5, 2023) (“All present-day PCAs are now subsidiaries of ACAs.”).
9
yield, crop revenue, and tractor use in the years
following their introduction.3
The FCA ensures the safety and soundness of
System institutions by conducting oversight,
enforcing liquidity and leverage requirements, and
providing technical assistance. 12 U.S.C. 2252. It also
oversees the FCSIC, which, as discussed above,
insures FCS investors against the risk of default by
borrowers. Thanks in large part to the FCA’s
oversight, the System’s debt securities issued by the
Funding Corporation have excellent credit ratings.4
These credit ratings in turn make System institutions
attractive investment opportunities and help increase
the capital available for financing farm loans.
The FCS and FCA also play a critical role in
ensuring the long-term health of our agricultural
workforce by helping young, beginning, and small
3 Jared Hutchins, The US farm credit system and agricultural
development: Evidence from an early expansion, 1920–1940, 105
Am.
J.
of
Agr.
Econ.
3
(Jan.
2023),
https://onlinelibrary.wiley.com/doi/10.1111/ajae.12290
(“Counties within 30 km from their serving PCA had 9% higher
corn yield and 7% to 14% higher crop value per acre,” as well as
“small but statistically different levels of tractor use,” “as
compared to counties 45–100 km away from their PCA.”).
4 See Farm Credit Funding Corporation, What is the credit rating
of the farm credit debt securities?, https://www.farmcreditfunding.com/ffcb_live/faq.html.
Credit Rating
Agency
Long-Term
Credit Rating
Short-Term
Credit Rating
Moody’s
Aaa
P-1
AA+
A-1+
AAA
F1+
Standard
Poor’s
Fitch
and
10
(“YBS”) farmers. The FCS is responsible for
“furnishing sound and constructive credit and related
services to young, beginning, and small farmers and
ranchers.” 12 U.S.C. 2207(a). The FCA pursues this
mission by studying and reporting on the issues YBS
farmers face.5 The FCS and FCA are investing more
money in more young, small startup farms year over
year, ensuring the vibrancy, diversity, and stability of
our agricultural workforce; in 2021, for example,
System institutions increased lending to all three YBS
categories both in terms of new lending and
outstanding loans, on both a dollar-volume and loanvolume basis. FCA 2021 Annual Report, at 31.
The FCA also has “extensive enforcement
powers.” Harper v. Fed. Land Bank of Spokane, 878
F.2d 1172, 1176 (9th Cir. 1989); see also Farm Credit
Act of 1971, Pub. L. 92-181, § 1.9, 85 Stat. 584, as
amended. The FCA may issue cease and desist orders,
enforceable in the courts, against any institutions or
persons who violate the Farm Credit Act or
regulations it has promulgated thereunder. 12
U.S.C. 2261(a), 2267. The FCA is further empowered
to assess civil and criminal sanctions to enforce the
statute. Id. 2268(a), 2269. As recently as 2018,
Congress expanded the FCA’s jurisdiction to
institution-affiliated parties, id. 2267a, which include
independent contractors of System institutions and
any other person who participates in the conduct or
affairs of System institutions, id. 2271.
5 The FCA partnered with universities to produce symposia on
YBS farmers in 2022, see FCA 2021 Annual Report, at 29–30, and
annually reports on the System’s loans to YBS producers, as
required by statute. 12 U.S.C. 2207(b); FCA 2021 Annual Report,
at 30.
11
The fact that FCA funds are not annually
appropriated is critical both to its mission and
continued viability, and to the general health of the
federal fisc.6 This durable funding structure ensures
the stability necessary to carry out the agency’s
mission: because the FCA’s funds come from fee
assessments and not annual appropriations bills, the
agency can plan and implement long-term initiatives
to support the viability of American agriculture
without regard to whether Congress is able to
annually budget federal dollars toward those
activities. Without the ability to ensure multi-year
budgetary stability, the FCA would be unable to plan
regulatory programs on the long-term basis that
financial systems need. See Marc G. Quintyn &
Michael W. Taylor, Regulatory and Supervisory Independence and Financial Stability, International Monetary
Fund,
at
21
(Mar.
1,
2002),
https://www.imf.org/external/pubs/ft/wp/2002/
wp0246.pdf (explaining that short-term budgetary dependence may result in budgets being “cut at times of
fiscal austerity” when “mounting problems” require
“greater supervisory attention”).
Consider the difference between the programs of
the FCA and the Department of Agriculture (USDA).
Both the FCA and the USDA oversee agricultural
loans, through the FCS and the Farm Service Agency
(FSA), respectively. As discussed above, the FCS loans
are financed by the sale of debt securities. FSA loans,
though, whether direct or government-guaranteed,
6 92 Cong. Rec. 38532 (Nov. 1, 1971) (remarks of Rep. James
Broyhill (R-NC)) (“Because the farm credit system is a farmerowned and financially self-sustaining credit institution, it is estimated that there will be no cost incurred by the Federal Government as a result of the passage of this bill.”).
12
are financed by the federal government through
annual appropriations legislation. 7 U.S.C. 1988. The
FCA’s financial stability allows it to provide more
loans, more consistently, than the USDA. Since 2016,
the FSA loaned, on average, $6.2 billion per year.7 But
this figure is inconsistent, varying by up to $5 billion,
and fluctuating annually by billions of dollars; for
example, FSA loans dropped from $7.5 billion in 2020
to $5.8 billion in 2022, and then nearly doubled to
$10.8 billion of available funds in 2023. See FSA
Program Data, supra note 7; FSA, Funding, USDA
https://www.fsa.usda.gov/programs-andservices/farm-loan-programs/funding/index
(last
visited May 8, 2023). By contrast, in 2021 alone (the
most recent year for which data is available), the FCS
made $136.4 billion in new loans, see FCA 2021
Annual Report, at 30, and that figure has reliably
risen year over year.8 The same is true of the
administrative budgets of each agency: while the
FCA’s budget—which has traditionally been capped
by Congress but independently sourced—has
increased every year over the period discussed, the
FSA’s
budget—which
derives
from
annual
appropriations bills—has fluctuated from year to
7 This was calculated using the Executive Summaries for Farm
Loan Programs from 2017 through 2022, available through the
USDA’s
website.
FSA,
Program
Data,
https://www.fsa.usda.gov/programs-and-services/farm-loanprograms/program-data/index.
8 In 2017, the FCA oversaw $76.8 billion in new loans made; in
2018, $85.7 billion; in 2019, $90.9 billion; in 2020, $119.7 billion.
See FCA, Reports and Publications–FCA Annual Reports,
https://www.fca.gov/about/reports-publications (data collected
from FCA Annual Reports from 2017-2021).
13
year.9 Congress thus maintains oversight and control
of the administrative budgets of both the FCA and the
FSA, but designates different sources for each based
on whether it prioritizes long-term stability or shortterm elasticity. As discussed below, under the Appropriations Clause, that choice is within the discretion
of Congress.
The FCS, administered by the FCA, thus plays a
crucial role in supporting agricultural businesses,
particularly for the young, small, and new businesses
that sustain our rural middle class. The FCA’s
budgetary stability is vital to that mission.
B. The CFPB protects farmers and rural
communities by studying and addressing
the problems they face.
Because farmers and rural Americans participate
in the broader financial market, using many of the
same financial products as other Americans, every
action the CFPB takes to protect financial consumers
protects farmers and rural citizens.10 The CFPB
9 The FCA’s budget has risen from $66.2 million in 2016 to $84.8
million in 2022. See FCA, Reports and Publications–FCA
Performance
and
Accountability
Reports,
https://www.fca.gov/about/reports-publications (data collected
from Performance and Accountability reports from the years
2016–2022). By contrast, the FSA’s budget has fluctuated by
more than $130 million within the same period, dropping from
$1.51 billion in 2016 to $1.38 billion in 2019. See USDA, Budget
Summary, https://www.usda.gov/obpa/budget-summary (data
collected from archived USDA budget summaries from 2016–
2023).
10 Although rural and agricultural communities do not overlap
completely, the legislative history of the Farm Credit Act of 1971
reveals that lawmakers recognized the deep connection between
the two communities and the importance of both to the United
14
regulates financial products not otherwise regulated
by the FCA, ensuring that farmers and rural
Americans are protected whether their borrowing is
regulated by the FCA or the CFPB.
In addition, the CFPB collects and publishes data
on issues facing the agricultural sector and rural
communities. See, e.g., Shawn Sebastian, New effort
focused on financial issues facing rural communities,
CFPB
(Mar.
10,
2022),
https://www.consumerfinance.gov/about-us/blog/neweffort-focused-on-financial-issues-facing-ruralcommunities/ [hereinafter New effort focused on
financial issues facing rural communities]. The CFPB
recognizes that poverty levels are rising in many rural
areas. Id. It has therefore invited testimony from
rural and agricultural voices, and has gathered
evidence regarding rural banking deserts and
discriminatory and predatory agricultural credit
practices. Id.11 For example, in April 2022, the CFPB
States. 92 Cong. Rec. 42260 (Nov. 19, 1971) (remarks of Rep.
John McMillan (D-SC)) (The FCA was intended to “provide for
the farmer-owned cooperative system of making credit available
to farmers and ranchers and their cooperatives, for rural
residences, and to associations and other entities upon which
farming operations are dependent, to provide for an adequate
and flexible flow of money into rural areas, and to modernize and
consolidate existing farm credit law to meet current and future
rural credit needs.”); 92 Cong. Rec. 38532 (Nov. 1, 1971) (remarks
of Rep. Richard Ichord (D-MO)) (“[T]he future of this country is
directly related to the development of rural America.”).
11 A “banking desert” is a census tract with no bank within ten
miles of its center. Rural areas are ten times more likely than
urban areas to be banking deserts. Drew Dahl & Michelle
Franke, Banking Deserts Become a Concern as Branches Dry Up,
Federal Reserve Bank of St. Louis (July 25, 2017),
https://www.stlouisfed.org/publications/regional-
15
released a report presenting data on “Challenges in
Rural Banking Access.” CFPB, Data Spotlight:
Challenges in Rural Banking Access (Apr. 2022),
https://files.consumerfinance.gov/f/documents/cfpb_d
ata-spotlight_challenges-in-rural-banking_202204.pdf.
The CFPB has also used its rulemaking authority
to collect better lending data that can ultimately be
used to improve rural credit access. The CFPB
recently finalized a long-awaited rule mandated by
Congress in section 1071 of the Dodd-Frank Act, 15
U.S.C 1691c-2, which will “create our nation’s first
consistent and comprehensive database regarding
lending to small businesses, including small farms.”
Small Business Lending under the Equal Credit Opportunity Act (Regulation B), 12 C.F.R. Part 1002,
RIN 3170-AA09 (Mar. 30, 2023), https://files.consumerfinance.gov/f/documents/cfpb_1071-final-rule.pdf
(Section 1071 Rule). This will allow “enforcement
agencies to assess potential areas for fair lending enforcement.” Id. This rule is intended to “work in
concert with the Community Reinvestment Act, which
requires certain financial institutions to meet the
needs of the communities they serve.” CFPB, CFPB
Finalizes Rule to Create a New Data Set on Small
Business Lending in America (Mar. 30, 2023),
https://www.consumerfinance.gov/aboutus/newsroom/cfpb-finalizes-rule-to-create-a-newdata-set-on-small-business-lending-in-america/. This
rulemaking reflects the CFPB’s attention to
agricultural credit and rural banking deserts, as the
agency recognizes that “the loss of local banks means
the loss of local knowledge of the rhythms of rural
economist/second-quarter-2017/banking-deserts-become-aconcern-as-branches-dry-up.
16
communities, small businesses, and small farms—
three groups that rely on in-person banking services.”
CFPB, Statement of CFPB Director Rohit Chopra,
FDIC Board Member, on the Notice of Proposed
Rulemaking Regarding the Community Reinvestment
Act,
(May
5,
2022),
https://www.consumerfinance.gov/aboutus/newsroom/statement-of-cfpb-director-rohitchopra-fdic-board-member-on-the-notice-of-proposedrulemaking-regarding-the-community-reinvestmentact/.
Finally, the CFPB’s efforts to combat
discriminatory and predatory lending practices
benefit rural and agricultural communities. Farmers
sometimes rely on payday loans to help repay
agricultural loans to avoid foreclosure of their farms.
See New effort focused on financial issues facing rural
communities (“Farmers described the downstream
consumer finance impacts of trying to subsist and hold
onto their families’ homes and farms under these arrangements by cobbling together off-farm income, taking out credit card debt, personal loans, and other
forms of credit just to make ends meet.”). Those
farmers would be directly benefited by the protections
of the Payday Lending Rule at issue in this case.
Additionally, socially disadvantaged farmers and
ranchers (SDFRs), who are agricultural workers who
“have been subjected to racial, ethnic, or gender prejudice,” 7 U.S.C. 2003(e), face barriers to inclusion in
credit markets. See Economic Research Service,
Socially
Disadvantaged,
Beginning,
Limited
Resource, and Female Farmers and Ranchers, U.S.
Dep’t
of
Agriculture,
https://www.ers.usda.gov/topics/farmeconomy/socially-disadvantaged-beginning-limited-
17
resource-and-female-farmers-and-ranchers/
(last
updated Mar. 22, 2023). SDFRs represent “17 percent
of primary producers,” but account for only “8 percent
of outstanding total agricultural debt.” GAO,
Agricultural Lending: Information on Credit and
Outreach to Socially Disadvantaged Farmers and
Ranchers Is Limited, GAO-19-539 (July 11, 2019),
https://www.gao.gov/products/gao-19-539 [hereinafter
GAO Study on Agricultural Lending]. SDFRs “face a
number of challenges that hamper their ability to
obtain private agricultural credit” and “face actual or
perceived unfair treatment in lending.” Id. Black
farmers in particular face discrimination and
exclusion: the proportion of Black farmers dropped
from 14% of all farmers in 1920 to less than 2% today.
New effort focused on financial issues facing rural
communities. “Black farmers have lost more than 12
million acres of farmland over the past century,
mostly since the 1950s.” Id.
At present, “comprehensive data on SDFRs’
outstanding agricultural debt are not available
because regulations generally prohibit lenders from
collecting data on the personal characteristics of
applicants for loans.” GAO Study on Agricultural
Lending. Congress charged the CFPB with filling that
gap. The recently promulgated Section 1071 Rule,
discussed above, will “require financial institutions to
compile, maintain, and submit to the Bureau certain
data on applications for credit for women-owned,
minority-owned, and small businesses.” Section 1071
Rule. The rule will thus ameliorate the data deficit
currently obscuring the discrimination SDFRs face
and make the agricultural credit market more fair
and free.
18
II. The Fifth Circuit’s extratextual reading of
the Appropriations Clause could threaten
the FCA, which is funded pursuant to
enabling
legislation,
not
annual
appropriations legislation.
The Appropriations Clause requires all money
paid from the Treasury to be disbursed pursuant to an
act of Congress. The funding structures of both the
CFPB and the FCA were enacted by acts of Congress;
they both therefore comport with the Appropriations
Clause. But the Fifth Circuit concluded that the
Appropriations Clause requires more than an act of
Congress to approve an expenditure, even though the
factors the court considered relevant do not appear in
the Constitution. The Fifth Circuit’s erroneous
consideration of these extratextual factors calls into
question the funding structures of agencies that had
never before been in dispute, including the FCA.
A. The CFPB’s funding structure comports
with the Appropriations Clause.
The Constitution’s Appropriations Clause provides that “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by
Law . . . .” U.S. Const. art. I, § 9, cl. 7. The clause
“means simply that no money can be paid out of the
Treasury unless it has been appropriated by an act of
Congress.” Cincinnati Soap Co., 301 U.S. at 321. Or,
put conversely, “the payment of money from the
Treasury must be authorized by a statute.” Richmond,
496 U.S. at 424.
The Appropriations Clause mandates that Congress alone may determine how “all the taxes raised
from the people, as well as revenues arising from
other sources,” should be spent. Id. (quoting 2
19
Commentaries on the Constitution of the United
States § 1348 (3d ed. 1858)). It thereby protects the
public from Executive overreach. It “was intended as
a restriction upon the disbursing authority of the Executive department.” Cincinnati Soap Co., 301 U.S. at
321. Its underlying aim is to ensure that Congress,
and not the Executive Branch, decides how the public’s money should be spent. As Petitioners explain,
the Appropriations Clause has never before been interpreted to restrict Congress’s discretion in crafting
the funding structures of Executive agencies. Br. for
Pet’rs 24–25.
Congress authorized the funding of the CFPB
when it passed the CFPA. The Act directs the Director
of the CFPB to determine the amount of money
“reasonably necessary” to carry out the CFPB’s
authorities and to obtain those funds from the Federal
Reserve System, 12 U.S.C. 5497(a)(1), subject to a cap
of 12% of the total operating expenses of the Federal
Reserve System, adjusted for inflation, id.
5497(a)(2)(A)-(B). The Federal Reserve System, in
turn, pursuant to another act of Congress, obtains its
funds from fees it assesses against the financial
institutions it regulates. See id. 243. The CFPB may
seek additional funds from Congress if necessary by
requesting an appropriation from the Committee on
Appropriations of both Houses of Congress. Id.
5497(e)(1). Congress further provided for the CFPB’s
funds to be maintained in the Bureau Fund in the
Federal Reserve System. Id. 5497(b)(1). The CFPB
may invest portions of its funds not currently needed.
Congress again directed what would happen to those
funds: the interest and earnings on investments are
credited to the Bureau Fund. Id. 5497(b)(3). Congress
also specified that the Bureau Fund should be used “to
pay the expenses of the Bureau in carrying out its
20
duties and responsibilities,” id. 5497(c)(1), which
Congress outlined at 12 U.S.C. 5511. This congressional authorization satisfies the Appropriations
Clause.
Consistent with the constitutional text, historical
practice, and this Court’s precedents, the vast majority of courts to have considered whether the CFPB’s
funding structure comports with the Appropriations
Clause have properly concluded it does. The Second
Circuit recently held that “[b]ecause the CFPB’s funding structure was authorized by Congress and bound
by specific statutory provisions, . . . [it] does not offend
the Appropriations Clause.” CFPB v. L. Offs. Of Crystal Moroney, P.C., 63 F.4th 174, 181 (2d Cir. 2023).
The D.C. Circuit has likewise rejected constitutional
challenges to the CFPB’s funding structure. See PHH
Corp. v. CFPB, 881 F.3d 75, 95–96 (D.C. Cir. 2018),
abrogated on other grounds by Seila L. LLC v. CFPB,
140 S. Ct. 2183 (2020). Indeed, the Fifth Circuit
stands alone in its determination otherwise. See Bureau of Consumer Fin. Prot. v. Citizens Bank, N.A.,
504 F. Supp. 3d 39, 57 (D.R.I. 2020) (“Over the past
decade, both before and after Seila Law, litigants have
argued that the CFPB’s funding structure is unconstitutional. None has succeeded.”) (footnote omitted). As
all other courts correctly concluded, the CFPB’s funding structure was authorized by an act of Congress
and therefore comports with the Appropriations
Clause.
B. Congress has chosen to fund the FCA
outside the annual appropriations process.
Like the CFPB, Congress has chosen to fund the
FCA—a key component of the FCS—from a source
other than annual appropriations legislation.
21
Congress directed the FCA to determine how much
money it will need each fiscal year, much like it
instructed the CFPB. 12 U.S.C. 2250(a)(1). Similar to
the Federal Reserve System, the FCA collects that
amount through assessments from the institutions it
regulates in the proportions it deems appropriate.
Id. 2250(a)(2). These assessments are then deposited
into the Farm Credit Administration Administrative
Expense Account, which is maintained in the
Treasury. Id. 2250(b)(1). Like the CFPB’s funds, the
funds in the FCA’s expense account “shall not be
construed to be Federal Government funds or
appropriated moneys.” Id. 2250(b)(2); see also 12
U.S.C. 5497(c)(2) (“Funds obtained by or transferred
to the Bureau Fund shall not be construed to be Government funds or appropriated monies.”).
Congress may limit the administrative expenses
of the FCA, see 12 U.S.C. 2249, which it “usually” does
through annual appropriations legislation, FCA, FY
2022 Performance and Accountability Report, at 15
(Nov.
8,
2022),
https://www.fca.gov/templatefca/about/FCAPerformanceAndAccountabilityReport
FY2022.pdf [hereinafter FCA FY 2022 Performance
and Accountability Report]; see also Congressional
Research Service, Farm Credit Administration and Its
Board Members, at 1 (Mar. 3, 2023), https://crsreports.congress.gov/product/pdf/IF/IF10767
(“Even
though FCA is not funded by congressional appropriation, the annual Agriculture appropriations act
places a limit on FCA’s administrative expenses.”).
Congress capped the FCA’s expenditures at $88.5
million for fiscal year 2023. Consolidated
Appropriations Act, H.R. 2617–36, 117th Cong
22
(2023).12 The FCA may direct the Secretary of the
Treasury to invest and reinvest any unused amounts
in the expense account; all income earned is deposited
in the expense account. 12 U.S.C. 2250(3). Although
Congress can and does cap the annual administrative
expenses of the FCA, it has not limited the amount of
money the FCA may accumulate in investments or in
its expense account. In fiscal year 2022, the FCA’s
budgetary resources totaled $110,059,470, about $25
million more than its administrative budget. See FCA
FY 2022 Performance and Accountability Report, at
15, 17. Congress requires the FCA to submit annual
reports to it “on the condition of the System and its
institutions,” and “on the manner and extent to which
the purposes and objectives of [the Farm Credit
Administration Act] are being carried out.” 12 U.S.C.
2252(a)(3).
The FCSIC, another System institution, is
likewise not funded through annual appropriations
bills. The Funding Corporation funds the loans of all
System banks by issuing debt securities to investors.
See 12 U.S.C. 2160(b), 2153.13 The FCSIC insures the
obligations of all System banks, thereby protecting
the investment of those who bought the bonds issued
by the Funding Corporation. See 12 U.S.C. 2277a-1.
The FCSIC holds its funds in the Farm Credit
Insurance Fund. Id. 2277a-9. The FCSIC replenishes
12 The FCA may exceed this limit by up to 10 percent with notice
to the Committees on Appropriations of both Houses of Congress.
12 U.S.C. 2249.
13 See also Federal Farm Credit Banks Funding Corporation,
Farm Credit System, https://www.farmcreditfunding.com/ffcb_live/aboutUs/farmCreditSystem.html (last accessed May 5, 2023); Farm Credit, Our Structure, https://farmcredit.com/our-structure (last accessed May 5, 2023).
23
its funds by assessing premiums from the insured
System banks according to a statutory formula. Id.
2277a-4. Basically, the FCSIC charges premiums to
the insured System banks in proportion to their
exposure, id. 2277a-4(a), maintaining a minimum
“secure base amount” that is itself a percentage of the
aggregate exposure of the System banks, id. 2277a4(c).
Finally, throughout the System’s history,
Congress has authorized government funding for, or
has guaranteed the obligations of, System institutions
through legislation other than annual appropriations
bills and sometimes for time periods exceeding one
year. For example, the Emergency Farm Mortgage
Act of 1933 permitted the Federal Land Banks to issue
up to $2 billion in bonds, over the course of two years,
with interest guaranteed by the federal government.
Pub. L. No. 73-10, 48 Stat. 41, at 41–42. During the
1980s, our nation faced a severe agricultural recession
during which many farmers defaulted on loans and
the FCS lost billions of dollars. Julie Anderson Hill,
Bailouts and Credit Cycles: Fannie, Freddie, and the
Farm Credit System, 2010 Wis. L. Rev. 1, 4–5 (2010).
Congress responded by passing the Agricultural
Credit Act of 1987, Pub. L. No. 100-233, § 201, 101
Stat. 1568, which created the Farm Credit System
Financial Assistance Corporation to provide
necessary
funds
to
the
failing
System
institutions. Congress permitted the Financial
Assistance Corporation to issue, over a multi-year
period, up to $4 billion in fifteen-year bonds with
principal and interest guaranteed by the Treasury.
101 Stat. at 1597. Congress’s ability to tailor its
spending to contemporaneous needs—including by
authorizing spending for years into the future—has
24
been and continues to be crucial to ensuring the
vitality of the agricultural sector of our economy.
C. The extratextual reading of the
Appropriations Clause advanced by the
Fifth Circuit could threaten the Farm
Credit Administration.
To Amici’s knowledge, nobody has previously suggested that the FCA’s funding structure violates the
Appropriations Clause. Before the decision below issued, there was no reason to doubt it; as discussed supra in Part II.A, the Appropriations Clause prohibits
anyone but Congress from expending money from the
Treasury—no more and no less. Like the CFPB, “the
[FCA’s] funding structure was authorized by Congress
and bound by specific statutory provisions.” L. Offs. of
Crystal Moroney, 63 F.4th at 181 (considering the
funding structure of the CFPB). Thus, “the [FCA’s]
funding structure does not offend the Appropriations
Clause.” Id.
Under the Fifth Circuit’s reasoning, however, the
FCA’s 50-year-old funding structure would suddenly
be subject to question. In holding the CFPB’s funding
structure to violate the Appropriations Clause, the
Fifth Circuit introduced extratextual considerations
that have no basis in the Constitution. None of the individual features that the Fifth Circuit decried should
be significant from an Appropriations Clause perspective. But even assuming some could be relevant, the
circuit court did not specify which features of the
CFPB’s funding structure it considered decisive and
which it considered merely distasteful. Consequently,
the reading of the Appropriations Clause advanced by
the Fifth Circuit and Respondents could call into
question other agencies’ funding mechanisms, including the FCA’s.
25
1. The Fifth Circuit’s extratextual reading of
the Appropriations Clause has no basis in
the Constitution or precedent.
In holding the CFPB’s funding structure to violate
the Appropriations Clause, the Fifth Circuit incorrectly read additional requirements into the text of
the clause.
First, the Fifth Circuit suggested the Appropriations Clause requires Congress to appropriate funds
on an annual, or at least “time limited,” basis. See
CFSA, 51 F.4th 616, 638–39 (5th Cir. 2022) (CFSA)
(“While the great majority of executive agencies rely
on annual appropriations for funding, the Bureau
does not. . . . Congress did not merely cede direct control over the Bureau’s budget by insulating it from annual or other time limited appropriations.”).
This purported requirement is inconsistent with
the text of the Constitution and longstanding congressional practice. Contrary to Respondents’ suggestion,
see CFSA Cert. Opp. 15 (“Rather than both chambers
of Congress and the President needing to agree to
fund the CFPB each year, . . . .” (emphasis added)),
nothing in the Appropriations Clause or elsewhere in
the Constitution requires Congress to revisit and reauthorize agency funding on an annual (or any other)
timeframe. Had the Framers intended to impose time
limits on appropriations, they would have done so
explicitly, as they did regarding funds appropriated
for armies. U.S. Const. art. I, § 8, cl. 12 (“The Congress
shall have Power . . . To raise and support Armies, but
no Appropriation of Money to that Use shall be for a
longer Term than two Years”). Moreover, as the CFPB
notes, history is replete with examples of so-called
“standing” or “permanent” appropriations that last for
multiple years or indefinitely, Social Security
26
payments being one of them. Br. for Pet’rs 20–21 (citing 42 U.S.C. 301, 401(b)).
Second, the Fifth Circuit found fault with the fact
that Congress directed the CFPB to obtain its funds
from the Federal Reserve System, which in turn
obtains its funds from fees it assesses against
financial institutions. See 12 U.S.C. 243. The Fifth
Circuit described this arrangement as “a double
insulation from Congress’s purse strings.” CFSA, 51
F.4th at 639.
But neither the CFPB’s nor the Federal Reserve
System’s source of funding is “insulat[ed]” from
congressional control, let alone in a way that is
proscribed by the Appropriations Clause. “Congress
can, consistent with the Appropriations Clause, create
governmental institutions reliant on fees, assessments, or investments rather than the ordinary appropriations process.” PHH Corp., 881 F.3d at 95 (observing that “[t]he way the CFPB is funded fits within
the tradition of independent financial regulators”).
The Appropriations Clause thus does not foreclose
Congress’s decision to fund agencies through
assessments or fees, as it has the Federal Reserve
System, the FCA, and others. Nor does the clause
preclude Congress from making one source of funds
available to two different agencies. See Br. for Pet’rs
34 (noting the Federal Reserve Board has the
“ministerial” role of “simply transfer[ring] the
requested amount, subject to the cap set by Congress,
to the CFPB).
Third, the Fifth Circuit faulted the Bureau Fund
for being “[un]tethered to the Treasury.” CFSA, 51
F.4th at 639. To be sure, the Bureau Fund is
maintained at a Federal Reserve bank, see 12 U.S.C.
27
5497(b)(1), not in the Treasury, and the CFPB need
not remit unused funds to the Treasury.
Neither of these features offends the
Appropriations Clause. The Appropriations Clause
does not mandate that all agencies maintain their
funds in the Treasury; rather, it mandates that money
may not leave the Treasury without congressional
approval. Whether money, once appropriated to an
agency, is located wholly within the agency, the
Treasury, or elsewhere is irrelevant to Congress’s
appropriations
authority.
Nor
does
the
Appropriations Clause require that unused amounts
of authorized expenditures be transferred to the
Treasury. Indeed, Congress has provided for agencies
other than the CFPB—such as the FCA—to retain
and invest unused amounts of approved expenditures
rather than transfer them to the Treasury. See 12
U.S.C. 2250(3) (permitting FCA to invest and reinvest
excess funds); see also, e.g., id. 355 (authorizing
Federal Reserve to buy and sell bonds and notes); id.
1823(a)(1) (providing for the investment of FDIC
funds “not otherwise employed”); id. 4516(f)(6) (authorizing the Director of the FHFA to request investment of funds “not required to meet the current working needs of the Agency”).
Fourth, the Fifth Circuit believed that “Congress
relinquished its jurisdiction to review [CFPB] funding
on the back end” by opting not to subject funds derived
from the Federal Reserve System to review by the congressional Committees on Appropriations. CFSA, 51
F.4th at 639 (citing 12 U.S.C. 5497(a)(2)(C)).
As an initial matter, as Petitioners make clear, no
appropriation of funds is truly indefinite because Congress can always repeal or amend the law that established the appropriation. See Br. for Pet’rs 20. It is
28
moreover incorrect to conclude that Congress has “relinquished its jurisdiction to review” CFPB’s expenditures. In the CFPA, Congress required the Bureau to
submit regular reports to Congress that “justif[y] . . .
the budget request of the previous year,” 12 U.S.C.
5496(c)(2), and required annual audits of the CFPB’s
operations, budget, and finances, id. 5496a. The only
supposed relinquishment is Congress’s decision not to
subject these funds to review by the congressional
Committees on Appropriation. See id. 5497(a)(2)(C).
This cannot bear the significance that the panel attributed to it. There is no conceivable constitutional
requirement that funding be reviewed by a particular
committee rather than the Congress as a whole. Nor
did the Fifth Circuit suggest that other congressional
committees would lack authority to engage in oversight of these transactions. Indeed, neither House of
Congress even had a Committee on Appropriations for
the first several decades after the Founding. See
United States Senate, Appropriations Committee Created,
https://www.senate.gov/about/origins-foundations/committee-system/appropriations-committeecreated.htm (last accessed May 4, 2023); Appropriations, About the Committee, https://appropriations.house.gov/about (last accessed May 4, 2023).
Fifth, the Fifth Circuit apparently deemed the
scope of the CFPB’s regulatory portfolio relevant to
the Appropriations Clause analysis. See CFSA, 51
F.4th at 638. It took issue with the fact that the CFPB
“wields vast rulemaking, enforcement, and adjudicatory authority over a significant portion of the U.S.
economy.” CFSA, 51 F.4th at 638 (quoting Seila Law,
140 S. Ct. at 2191).
But the Appropriations Clause does not impose
additional requirements on appropriations for
29
enforcement purposes or to agencies with robust enforcement powers. Indeed, as Petitioners explain,
“Congress has frequently chosen” to fund “financial
regulatory agencies” through fees and assessments,
rather than annual appropriations legislation. Br. for
Pet’rs 22.
2. The Fifth Circuit’s decision could threaten
the FCA.
Because the Fifth Circuit’s analysis is unmoored
from any textual or historical grounding, it is not clear
that any of the distinctions discussed in Part II.C.1
supra have constitutional significance. Beyond that,
the Fifth Circuit failed to apply the extraconstitutional factors it identified in a jurisprudentially tenable or practically administrable way. The court did not
articulate a line that would clarify which types of
funding structures are constitutionally permissible
and which are not. Nor did it establish a limiting principle that would anchor its reasoning in any alleged
concerns animating the Appropriations Clause. The
Fifth Circuit summarily concluded: “Wherever the
line between a constitutionally and unconstitutionally
funded agency may be, this unprecedented arrangement crosses it.” CFSA, 51 F.4th at 639. Yet, as discussed above, no feature of the CFPB’s funding structure independently offends the Appropriations
Clause, and it is unclear what combination of features
is sufficient in that court’s view to create a constitutional violation.
The Fifth Circuit’s opinion thus opens the door for
challenges to any agency that is funded in any way
other than that court’s preferred method of annual appropriations legislation—with no constitutional basis.
See, e.g., Br. of Plaintiffs-Appellants at 50–54, Collins
v. Dep’t of the Treasury, No. 22-20632 (5th Cir. Feb. 1,
30
2023) (relying on CFSA in arguing that the Federal
Housing Finance Agency’s “self-funding structure” violates the Appropriations Clause”). The features of
the CFPB’s funding structure that the Fifth Circuit
considered problematic that are most relevant to the
FCA’s funding structure are discussed below.
With respect to the first feature discussed in Part
II.C.1 above, the Fifth Circuit found CFPB’s “selfactualizing, perpetual funding mechanism” to be the
“[m]ost anomalous” feature of its funding structure,
juxtaposing it with the “annual appropriations for
funding” on which “the great majority of executive
agencies rely.” CFSA, 51 F.4th at 638.
But the Appropriations Clause places no restrictions on the form, source, or duration of an
appropriation made by Congress, once made. See Br.
for Pet’rs 14–18. The FCA and many other agencies
are not funded by annual appropriations bills.
Pursuant to valid legislation, the FCA requisitions its
funds through assessments imposed on the System
institutions it regulates, and its funds are maintained
in a Treasury expense account or in investments
whose earnings are deposited therein. The FCA’s
funding mechanism can thus also be said to be
“perpetual,” CFSA, 51 F. 4th at 638: the FCA requires
no annual or other periodic appropriations by
Congress because Congress designed it to obtain its
funding through other means. Indeed, as the D.C.
Circuit recognized, “Congress can, consistent with the
Appropriations Clause, create governmental institutions reliant on fees, assessments, or investments rather than the ordinary appropriations process.” PHH
Corp., 881 F.3d at 95.
With respect to the fourth feature discussed in
Part II.C.1 above, the Fifth Circuit highlighted
31
language in the CFPA that, in its view, “underscore[s]” Congress’s lack of oversight over the CFPB’s
funding: that “[f]unds obtained by or transferred to
the Bureau Fund shall not be construed to be Government funds or appropriated monies.” CFSA, 51 F.4th
at 639 (quoting 12 U.S.C. 5497(c)(2)). As discussed in
Part II.B., supra, substantively identical language applies to the FCA’s funds. See 12 U.S.C. 2250(b)(2). Far
from “underscor[ing]” a “novel cession by Congress of
its appropriations power,” CFSA, 51 F.4th at 639, that
language merely states that the CFPB’s and FCA’s
funds should not be treated as appropriated money,
and is “plainly concerned with insulating the [FCA]
from statutory restrictions governing appropriations.”
United States v. Wells Fargo & Co., 943 F.3d 588, 605
(2d Cir. 2019) (interpreting substantively similar language in 12 U.S.C. 244 applying to the Federal Reserve). Here again, the Fifth Circuit provides no dividing line between permissible uses of this unremarkable language and impermissible ones.
With respect to the fifth feature discussed in Part
II.C.1 above, the FCA too wields “extensive
enforcement powers” over FCS-related activities.
Harper, 878 F.2d at 1176. The Fifth Circuit neglected
to explain how it determined the point at which point
an agency’s enforcement powers, in its view, implicate
the Appropriations Clause or why this is an
appropriate judicial task. See CFSA, 51 F.4th at 641;
Br. for Pet’rs 35. Whether the FCA’s enforcement
powers are of such scope as to trigger extra scrutiny
under the Appropriations Clause is unclear under the
Fifth Circuit’s reasoning. On a proper reading of the
Appropriations Clause, however, the relative scope of
an agency’s enforcement powers is constitutionally
irrelevant. The Appropriations Clause does not
discriminate between funds used for enforcement and
32
funds used for other purposes, and it certainly does
not impose additional requirements on the funding of
executive agencies with enforcement powers.
If any of the factors the Fifth Circuit analyzed are
considered dispositive to determining compliance
with the Appropriations Clause, the Fifth Circuit’s
analysis thus throws into question the lending and enforcement structures that farmers have relied on for
more than five decades, as well as every other agency
that is funded outside the annual appropriations process.14
CONCLUSION
For the reasons explained above, the Court should
reverse the judgment of the Fifth Circuit.
14 Of course, to the extent CFSA is read to hold that an agency’s
funding structure is unconstitutional only where it includes all
the features of the CFPB’s, or where the agency’s annual administrative expenditures are not capped by Congress, then the FCA
is distinguishable.
33
Respectfully submitted.
RACHEL L. FRIED
Counsel of Record
JEFFREY B. DUBNER
ORLANDO ECONOMOS
Democracy Forward
Foundation
P.O. Box 34553
Washington, DC 20043
(202) 383-0794
rfried@democracyforward.org
Counsel for Amici Curiae
MAY 2023
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.