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I've ranted before about the ridiculous nature of the Consumer Financial Protection Bureau (CFPB) a holdover from the Obama era.

It's primary gimmick is the following: it isn't dependent on funding from US Congress. At one time, it even used to be independent of the US Executive Branch until a court ruling in 2016 that the US President could fire the head of the agency.

A three-judge panel on the 5th Circuit Federal Court of Appeals ruled this week that the CFPB's structure is unconstitutional because Congress has no control over the agency's budget, which is funded entirely by the Federal Reserve. Under the terms of Dodd-Frank, the CFPB is entitled to receive a budget totaling up to 12 percent of the Federal Reserve's annual operating expenses, and the Federal Reserve is not allowed to refuse the CFPB's requests for funding.

Now, that funding model has been used to reverse a ruling by the CFPB as unconstitutional with the potential to put all its rulings since formation into question on the same constitutional basis.

Why it matters: The reasoning behind the ruling, if upheld, could potentially invalidate all the rules enacted by the CFPB over its 11-year existence — including regulations underpinning the U.S. mortgage system.

This is one of the big reasons I oppose the passing of bad law even when it serves a concrete good. It can take a long time to fix the massive problems that such law brings.

And note that a key argument by the court was that there was no precedent for the CFPB's unconstitutional structure. If there had been other agencies with similar setups, this could have been very hard to overturn. Similarly, the CFPB is a precedent for future breaking of the US Constitution along these lines. Without the ruling, there would have been a stronger case for future misdeeds of this sort.

 

Reply to: Re:Nonsense

    (Score: 4, Insightful) by Anonymous Coward on Saturday October 22 2022, @07:13PM

    by Anonymous Coward on Saturday October 22 2022, @07:13PM (#1277888)

    Nowhere in your comment did you address a single one of the points I made regarding the constitutionality of the CFPB. This ruling amounts to nothing more than three judges that were appointed by Donald Trump using their positions to legislate from the bench. The drivel you posted does zero to address this and devolves into offtopic rambling about abortion. I'm going to keep this on-topic.

    This ruling relies on Article 1, Section 9, Clause 7 of the Constitution [cornell.edu], referred to as the appropriations clause. Here is what the Constitution actually says:

    No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.

    This merely indicates that money cannot be spent out of the Treasury without authorization by Congress. That's it. It doesn't restrict how Congress can authorize appropriations under law, only that the appropriations have to be authorized by Congress. As the link notes, there is abundant judicial precedent that Congress has a lot of flexibility in how appropriations are made:

    The restriction on drawing money from the Treasury “was intended as a restriction upon the disbursing authority of the Executive department,” and “means simply that no money can be paid out of the Treasury unless it has been appropriated by an act of Congress.”

    The Court has also recognized that Congress has wide discretion with regard to the extent to which it may prescribe details of expenditures for which it appropriates funds, and has approved the frequent practice of making “lump sum” appropriations, i.e., general appropriations of large amounts to be allotted and expended as directed by designated government agencies. As an example, the Court cited the act of June 17, 1902,4 “where all moneys received from the sale and disposal of public lands in a large number of states and territories [were] set aside as a special fund to be expended for the reclamation of arid and semi-arid lands within those states and territories,” and “[t]he expenditures [were] to be made under the direction of the Secretary of the Interior upon such projects as he determined to be practicable and advisable.” The Court declared: “The constitutionality of this delegation of authority has never been seriously questioned.” 5

    The CFPB was created by an act of Congress, specifically the Dodd-Frank Act of 2010 [wikipedia.org], which authorizes funding for the CFPB through a means outside of the annual appropriations process. The Constitution does not require that appropriations be made on an annual basis, only that Congress must authorize drawing money from the Treasury, and that an accounting of that money is spent must be made available to the public. There is nothing in the Constitution saying that funds must be appropriated on an annual basis, and in fact the annual appropriations process exists because of other laws enacted by Congress.

    If Congress wishes to change how the CFPB is funded, they have the ability to do so by amending the Dodd-Frank Act. Power has not been usurped by the Executive Branch because Congress already authorized the appropriations. Again, Congress can modify the CFPB's budget at any time by passing a law to do so. There is nothing in the Constitution that requires this to be subject to the annual appropriations process. This ruling, however, is a case of the judicial branch usurping authority by claiming that Congress' appropriations in the Dodd-Frank Act of 2010 are unconstitutional for reasons that make zero sense, are totally inconsistent with judicial precedent, and arbitrarily restrict the ability of Congress to appropriate money through law. You've provided zero basis for how this actually violates the Constitution, instead posting off-topic drivel that has nothing to do with the CFBP.

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