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.

If that sounds disturbing to you, you’re not alone. Concerned citizens immediately challenged the part of the law that said the agency’s head could not be removed by the president except “for cause,” an unusual level of unaccountability in a republic. In 2020, the Supreme Court agreed, holding in Seila Law LLC v. CFPB that Congress could not limit the president’s power to appoint and dismiss executive branch officials.

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.

As Judge Cory Wilson noted in the Oct. 19 opinion (quoting Seila Law,) “Each year, the Bureau simply requests an amount determined by the director to be reasonably necessary to carry out the agency’s functions. The Federal Reserve must then transfer that amount so long as it does not exceed 12 percent of the Federal Reserve’s total operating expenses.” (internal quotes and citations omitted).

The left’s dream agency — and the vision of its most prominent advocate, Elizabeth Warren — was designed to have a director who could not be fired and a budget that could not be cut. Whatever other excesses the administrative state had reached before this, they at least were ultimately accountable to the president in the leadership and to Congress in their budget. Warren and the progressives designed the CFPB to avoid even those notional controls, creating what critics rightly called a “fourth branch” of American government.

The funding mechanism was one of several objections the plaintiffs raised in the case, and the court agreed that it was unconstitutional, violating the Appropriations Clause of Article I, which holds that “No money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law”.

Quoting from James Madison’s explanation of the spending power in “Federalist No. 48,” the court notes that “the legislative department alone has access to the pockets of the people.” Historically, this made Congress the most powerful of the three branches. In the days

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