Superior court empowers Trump to fire chief of consumer office

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In issuing its ruling, the superior court cited a key 1935 decision that “allowed Congress to provide expulsion protection for cause to a multi-member body of experts who were balanced along partisan lines,” but did not extend that authority to a single director vested in the executive power.

All of the court’s appointed Republicans backed the decision to remove restrictions on firing leaders of so-called single-member agencies, while all of the Democrats’ appointed judges said they would have left those limitations in place.

A then-Democrat-controlled Congress established the office as part of the historic 2010 Dodd-Frank financial review, mandating that it be led by a single director appointed for a five-year term who could only be fired for “inefficiency, negligence in the fulfillment of duty “. or embezzlement “in an attempt to isolate the agency from political interference. In a similar move, the authors of Dodd-Frank also chose to fund the CFPB through the Federal Reserve, rather than the congressional appropriation process .

However, where Democrats see independence, Republicans see a lack of accountability. Republicans have always tried to overhaul the agency’s single director structure and replace it with a bipartisan commission similar to the leadership of other financial regulators. Republican attacks have slowed since Trump put his own people in charge of the office, but the leadership problem has never been solved.

High-ranking member of the House of Representative Financial Services Patrick McHenry (RN.C.) suggested that Republicans will resurrect their push for the creation of a commission to head the office in the wake of Monday’s decision.

“Today, the Supreme Court recognized what Republicans have been saying for years: The CFPB’s leadership structure is unconstitutional,” McHenry said in an emailed statement. “The responsibility to fix it now goes back to Congress. I hope that my fellow Democrats will work with us. ”

Some groups in the financial industry also revived calls for legislation to set up a bipartisan commission on the agency.

“This result subjects consumers and the financial services industry to potentially radical regulatory changes with each administration,” Richard Hunt president and CEO of the Consumer Bankers Association said in an email. “It is inconceivable that Congress, which wanted to protect the Bureau from political whims, would have approved that result.”

“Instead of allowing legal action to create a political agency that Congress never intended, Congress should immediately pass legislation creating a bipartisan commission to head the CFPB, just as the Democratic-led House of Representatives originally did in 2009, “said Hunt.

The political ramifications of the fight over whether the removal from office of the CFPB director violates the separation of powers from the Constitution was clear, as the Supreme Court considered the case brought by Seila Law, a California debt relief firm. who refused to cooperate with an office investigation. .

The Trump administration, including CFPB Director Kathy Kraninger, reversed its initial position in September and said it agreed that the office is unconstitutionally structured.

Kraninger welcomed the ruling Monday: “Today’s Supreme Court decision finally brings certainty to the Office’s operations,” he tweeted. “Consumers and market participants must understand that the same rules continue to govern the consumer financial market.”

The decision by Trump officials not to endorse the agency had prompted the court to turn to former attorney general and conservative legal star Paul Clement to defend the agency. The current attorney general, Noel Francisco, joined Seila Law in saying that the CFPB effectively does not answer to anyone, during oral arguments in March.

“The president represents the elections; the CFPB director does not, “Francisco told the court.” So, if the director is isolated from presidential supervision, then his exercises of executive power are isolated from democratic control. And that is not the structure that our Constitution creates and requires “.

House Democrats sent their attorney-general to endorse Clement’s argument that removal for cause is only a modest restriction on the president’s power to remove someone and helps preserve the agency’s independence.

Clement referred to the coronavirus pandemic in his arguments, saying that Congress would be perfectly within its rights to pass a law that the director of the Centers for Disease Control and Prevention can only be removed for cause: “That is the kind of sensible decision that Congress has been making for over 100 years, “he said.

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