WASHINGTON (CN) — Limitations on when the president can remove the head of the Consumer Financial Protection Bureau are fundamentally incompatible with the Constitution, the Supreme Court ruled Monday.
“Such an agency lacks a foundation in historical practice and clashes with constitutional structure by concentrating power in a unilateral actor insulated from presidential control,” Chief Justice John Roberts wrote for the 5-4 court.
Monday’s decision keeps the CFPB intact but strikes the language that limits the situations in which the president can remove the agency’s director.
In partial dissent, Justices Clarence Thomas and Neil Gorsuch said they would not have decided whether the limitations on removal of the CFPB head could be separated from the rest of the statute.
The case presented fundamental questions about the scope of presidential power and the proper structure of the federal government.
Created in the wake of the 2008 financial crisis, the CFPB has power to regulate a broad range of financial products, from credit cards to mortgages and student loans. In an effort to insulate the new regulatory agency from political pressure, Congress created the bureau as an independent agency led by a single director who can only be removed from office “for inefficiency, neglect of duty or malfeasance in office.”
Independent agencies are common in the federal government, but most are led by multi-member commissions, rather than by a single director. While challenging an investigative request from the bureau, California-based debt-relief law firm Seila Law argued this unique structure renders the agency unconstitutional.
The high court’s conservative majority agreed, saying the way the CFPB is organized departs from the structure of “nearly every other independent administrative agency in our history.”
But for the president, the Constitution does not grant extensive powers to any single government official, especially not one with as much power to set policy and make enforcement decisions as the CFPB director, Roberts wrote.
Even beyond that, the agency does not receive funding through the regular appropriations process and the director serves a five-year term, an arrangement that would saddle some future presidents with their predecessor’s appointee for their entire term.
“In our constitutional system, the executive power belongs to the president and that power generally includes the ability to supervise and remove the agents who wield executive power in his stead,” the 37-page lead opinion by Roberts states. “While we have previously upheld limits on the president’s removal authority in certain contexts, we decline to do so when it comes to principal officers who, acting alone, wield significant executive power.”
Because of these anomalies, the majority declined to extend the New Deal-era ruling in Humphrey’s Executor that held Congress can create independent agencies within the executive branch.
The holding in that case, Roberts wrote, is limited to “multimember expert agencies that do not wield substantial executive power.”
Monday’s decision fractured along the question of whether the for-cause removal provision can — or should, in response to the case at hand — be separated from the rest of the law that created the bureau.
Roberts led the majority on the question of whether the CFPB violates the constitutional structure, with the court’s liberal wing in dissent. But on the severability question, Thomas and Gorsuch dropped off the majority holding, while Justices Elena Kagan, Ruth Bader Ginsburg, Stephen Breyer and Sonia Sotomayor joined on for that section alone.
Thomas said the court should not have ruled on the severability question because it was not necessary to resolve Seila Law’s challenge to the investigative demand.
In dissent, Kagan said the majority had ignored past decisions empowering Congress to decide how to best organize the executive branch.
“In second-guessing the political branches, the majority second-guesses as well the wisdom of the framers and the judgment of history,” Kagan wrote. “It writes in rules to the Constitution that the drafters knew well enough not to put there.”
Offering a “spoiler alert,” Kagan wrote the Constitution says “nothing at all” about the president’s power to remove executive branch officials. As times have changed and the federal bureaucracy has evolved to meet new challenges, Congress has been able to adapt agencies by building in greater protections from political influence.
The Obama appointee also critiqued the majority for concluding that single-director independent agencies pose a greater threat to political accountability than multimemeber commissions.
“A multimember structure reduces accountability to the president because it’s harder for him to oversee, to influence — or to remove, if necessary — a group of five or more commissioners than a single director,” Kagan wrote. “Indeed, that is why Congress so often resorts to hydra-headed agencies.” (Emphasis in original.)
Seila Law is represented by Kannon Shanmugam with the firm Paul, Weiss, Rifkind. Shanmugam would not comment Monday.
Because the Trump administration declined to defend the CFPB’s structure, the court appointed Kirkland & Ellis attorney Paul Clement to argue in defense of keeping the agency as is.
“In practice, the CFPB was designed to prevent the American people, to the maximum extent possible, from exercising oversight over CFPB’s sole director, who was granted vast authority over the financial lives of every American,” White House Press Secretary Kayleigh McEnany said in a statement. “While the president has full confidence in the current director of the CFPB and believes that she has fully upheld her statutory duties, the president also believes that no official should hold such immense powers without, at least, being directly accountable to a democratically-elected president regardless of party affiliation.”