Thread by @tphillips

Today, the Fifth Circuit declared the CFPB's funding mechanism unconstitutional. The logic is formalistic to the Nth degree, saying that Congress cannot fund agencies outside of the trad. appropriations process. Could have consequences for the FBAs, too.

aboutblaw.com/5mY

Start on page 23. The CFPB succeeds at all other arguments, so no need to discuss.

The Constitution says "No money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law." Court says there are separation of powers reasons for this.

The CFPB gets its money from the Fed; 12% of the Fed's annual budget. Note, this isn't money being drawn from Treasury, like the Constitution prohibits.

So, what's the problem? 1) it takes $ away from the Treasury (what the FRB would have remitted to UST now goes to CFPB)

2) The CFPB gets to set its own funding. Congress doesn't get to weigh in.

The court calls this "double insulation" - getting to set its own budget and the money doesn't come from the Treasury.

3) Dodd-Frank says that CFPB funds "shall not be construed to be Government funds or appropriated monies." So, when Congress wrote Dodd-Frank, it (apparently) violated the separation of powers by "expressly renounc[ing] its check" on the CFPB.

The Court then shoots down the CFPB's arguments.

1) CFPB argued that Congress OK'd the funding when it passed the CFPA (the CFPB's statute). But the Court says that "nope," that wasn't an "appropriations" bill, so it doesn't count.

2) CFPB says "our money isn't coming out of the Treasury, like the Constitution prohibits, it comes out of the FRBNY." The Court says "nope," the prohibition against money coming out of the Treasury doesn't mean that explicitly, it means something more *waves hands*

3) CFPB says "Fed, FDIC, OCC, NCUA, and FHFA also have these funding mechanisms." Court says that's comparing apples with a grapefruit. See image. The CFPB is different from these agencies *because*.

All in all, the Court says that the CFPB is “no longer dependent and, as a result, no longer accountable to Congress and,
ultimately, to the people." By abandoning its check on the CFPB, "Congress ran afoul of the separation of powers embodied in the Appropriations Clause."

So why is this just wrong?

1) It's not what the Constitution says! For all conservatives say about words on the page having meaning, the 5th Circuit just reads "drawn from the Treasury" out of the Constitution.

2) What is the difference between an appropriations and other bill?

I don't think anything. Approps bills go through the appropriations committees in Congress, but those aren't in the Constitution. This is courts just making things up again.

What's next? Because CFPB lost on the grounds of this funding, the implication is that Congress needs to change CFPB's funding to annual approps for it to win any cases in the future.

That's bad for all the reasons Congress made it not subject to approps in the 1st place.

Lastly, the Fed, FDIC, OCC, NCUA, and FHFA are all at risk now, too. That's bad news for bank regulation.

This is just a panel decision, and the CFPB will appeal. Maybe the 5th circuit en banc will overrule it, or maybe SCOTUS will. But I'm not sure they will.

Scary times. End.