The Supreme Court ruled Thursday that the Obama-era funding mechanism that funds the Consumer Financial Protection Bureau (CFPB) is constitutional.
In a 7-2 decision written by Justice Clarence Thomas, the court ruled that Congress had uniquely authorized the agency to withdraw funds directly from the Federal Reserve, and that the agency therefore could not receive regular funding as required by the Appropriations Clause. It was held that the mechanism was allowed to be circumvented. Constitution.
“For most federal agencies, Congress provides funding on an annual basis. This annual process results in agencies periodically pleading with Congress to fund the following year’s operations. The Financial Protection Bureau is different. The agency does not have to apply for funding annually.” Instead, Congress provides funding that is “reasonably necessary for the Director to carry out the duties of the office, subject to an inflation-adjusted cap.” authorized withdrawal from the Federal Reserve of amounts deemed to be
“In this case, we must decide the narrow question of whether this funding mechanism complies with the appropriations provisions, and we believe that it does,” the opinion states.
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Justice Clarence Thomas (left) wrote a 7-2 majority opinion in favor of the CFPB, with Justices Samuel Alito (right) and Neil Gorsuch dissenting. (Javin Botsford/The Washington Post via Getty Images)
The CFPB was created in 2008 after the market crash with support from Democratic Sen. Elizabeth Warren (D-Mass.), and has the power to regulate banks and lending institutions under federal rules.
A group of banking associations represented by former Attorney General Noel Francisco sued the CFPB, alleging that the agency, rather than Congress, determines the annual funding amount and withdraws it from the Federal Reserve, violating the appropriations clause. .
A majority of the Supreme Court disagreed, stating that “While there may be other constitutional checks on Congress’ power to create and fund executive agencies, specifying sources and purposes makes the Appropriations Clause “It’s all the controls we require.”
“A statute authorizing the Federal Reserve Board to withdraw funds from the Federal Reserve System’s total revenues to carry out its duties satisfies the appropriations clause,” the opinion states.
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US Supreme Court building photographed in Washington DC on April 23, 2024 (Photo by Anna Moneymaker/Getty Images)
Justice Samuel Alito dissented, joined by Justice Neil Gorsuch, who said, “The court is upholding a new legal scheme from the powerful.” [CFPB] It could fund its own agenda without Congressional control or oversight. ”
“According to the court, all the Appropriations Clause requires is that Congress ‘identify the sources of public funds and authorize the expenditure of those funds for specified purposes,'” Alito said. wrote.
“Under this interpretation, this provision does not impose any temporary restrictions that would prevent Congress from permanently granting the executive branch authority to spend public funds,” he said.
“In short, there is clearly nothing wrong with a law that gives the government the power to withdraw as much money as it wants from specified sources for permissible purposes until the end of time,” Alito said.
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Associate Justice Samuel Alito. (AP Photo/J. Scott Applewhite, File)
“That is not the meaning that was understood when the Appropriations Clauses were adopted. In England, Parliament won power over the purse for the first time after centuries of struggle with the Crown. The framers of the deeply ingrained Appropriations Clause positioned it as: “We need a Constitution to protect this hard-won legislative power,” he said.
Alito continued: “Sometimes it is our duty to simply say that a law that blatantly circumvents the Constitution goes too far. That’s the case here.”
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“I respectfully disagree with today’s decision because it is not true to the original understanding of the appropriations clause and the centuries of history that created the spending requirements,” he concluded.
