Supreme Court Shields Powerful Federal Agency from Future Congressional Oversight

The U.S. Supreme Court has ruled in favor of maintaining the Consumer Financial Protection Bureau’s (CFPB) unique funding structure, shielding the powerful federal agency from congressional oversight.

The Supreme Court’s decision allows the CFPB to continue receiving funds directly from its parent agency, the Federal Reserve, without yearly congressional oversight, the Daily Signal reports.

Established under the Dodd-Frank Wall Street Reform and Consumer Protection Act as a response to the 2008 financial crisis, the CFPB’s funding mechanism has been a point of contention.

This method circumvents the traditional congressional budget approval process.

Justice Clarence Thomas, writing for the majority in a 7-2 decision, affirmed that this funding arrangement adheres to the constitutional appropriations clause.

This clause governs the allocation and use of federal funds.

The Court’s ruling rejected challenges that argued this funding scheme undermines Congress’s control over federal expenditures, commonly known as the “power of the purse.”

The issue reached the Supreme Court after various rulings in lower courts.

Initially, a district court supported the funding scheme, but the U.S. Court of Appeals for the 5th Circuit ruled against it.

The controversy began in earnest following the CFPB’s implementation of strict regulations on small-dollar loans in 2017.

These regulations prompted two trade associations to challenge the bureau’s funding structure.

These associations contended that by not requiring annual reviews by Congress, the funding setup left the bureau too autonomous and unaccountable.

Justices Samuel Alito and Neil Gorsuch provided the dissenting opinions, voicing concerns over the separation of powers and historical precedents.

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Alito invoked English constitutional history and Montesquieu’s philosophical insights to argue that the funding mechanism was an overreach.

“Steeped in English constitutional history, the Framers placed the appropriations clause in the Constitution to protect this hard-won legislative power,” Alito argued.

His dissent emphasized that the mechanism could potentially allow executive expenditures in perpetuity without proper congressional oversight.

Their dissent underscored a fundamental debate about the balance of power between Congress and the executive branch.

The opinion stresses that the decision could lead to less congressional control over federal financial administration.

Justice Clarence Thomas countered in the majority opinion that the CFPB’s funding structure is constitutionally sound.

“The statute that provides the bureau’s funding meets these requirements,” he stated.

“We therefore conclude that the Bureau’s funding mechanism does not violate the appropriations clause.”

This landmark decision reaffirms the constitutionality of the bureau’s self-sustaining financial model and potentially sets a precedent for future federal agency funding practices.

According to Thomas, the appropriations clause allows such a financial arrangement as long as it is properly authorized by law, which in this case, it was.

READ MORE – Thomas Massie Introduces Bill to Abolish Federal Reserve

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By Nick R. Hamilton

Nick has a broad background in journalism, business, and technology. He covers news on cryptocurrency, traditional assets, and economic markets.

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