Court Ruling On Federal Financial ‘Watchdog’ Is Another Blow For Unconstitutional Bureaucratic Agencies

In 1925, President Calvin Coolidge said that “government control cannot be divorced from political control.” That piece of his governing philosophy put Coolidge at odds with the progressives of his own day, who believed a neutral, technocratic government was not only possible but desirable.

Their modern-day descendants have had their wish fulfilled, in part, through the Consumer Financial Protection Bureau (CFPB). Created under the Dodd-Frank Act of 2010 in response to the credit crisis of 2008-09, the agency was tasked with consumer protection in the nation’s financial sector. There were already a handful of agencies that did this, but what made the CFPB especially beloved on the left was that it was insulated from political pressure.

That is to say, it governed without answering to the people or their elected representatives in any serious way.

The CFPB is at odds with our republican form of government in another way, which came to the forefront in a Fifth Circuit Court of Appeals decision this week in Community Financial Services Association of America v. CFPB: the bureau receives its funding directly from the Federal Reserve, bypassing Congress’s power of the purse.

In striking down the regulation at issue in the case, the court declined to state what the longer-term effects of their ruling would be. The agency and its employees will continue their work for now. Appeals will certainly follow, certainly to the whole Fifth Circuit en banc, likely to the Supreme Court after that. At the very least, the funding structure of the CFPB could be struck down, making the agency financially responsible to Congress once more, like every other part of the government — an important consideration as Republicans stand a good chance of electing congressional majorities next month. But, though it is somewhat unlikely, the courts could find the funding system to be not “severable” from the rest of the section of the Dodd-Frank Act creating the CFPB, casting the whole agency’s existence into doubt.

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