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