In a turn of events that may cause migraines for anyone fond of traditional budgeting, the Supreme Court on Thursday ruled that the Consumer Financial Protection Bureau is indeed allowed to fund itself without the usual congressional checkbook handover, effectively blessing the agency’s rather creative take on fiscal independence.
The justices, in a 7 to 2 decision, determined that the Bureau’s unique funding mechanism, which draws its coffers from the Federal Reserve rather than the annual, anxiety-riddled congressional appropriations process, does not run afoul of the Constitution. Apparently, the Founding Fathers left the door open for a financial regulator with a trust fund.
The majority opinion, penned by Justice Clarence Thomas, found that the Constitution does not require Congress to hand agencies an annual envelope of cash like a reluctant parent doling out allowance, but rather simply that Congress must authorize the money in some form. In the CFPB’s case, that form happens to be a setup where it requests funding directly from the Fed, up to a capped amount, without so much as a please and thank you from Capitol Hill.
Critics, including the payday lending industry and its loyal legal allies, had argued that this arrangement gave the agency too much discretion, too few strings and far too little chance for politicians to intermittently defund it when displeased. They claimed this amounted to unconstitutional overreach, or at least some very creative accounting.
Justice Elena Kagan, joining the majority, helpfully pointed out in a concurring opinion that Congress has authorized what can only be described as a smorgasbord of funding mechanisms for government programs over the years, ranging from the pedestrian to the downright whimsical. Apparently, if federal money has ever come from fees, fines or the back of the couch cushions, Congress has probably tried it.
Justices Samuel Alito and Neil Gorsuch were unimpressed, offering the dissenting view that the CFPB’s financial structure lacked meaningful checks and balances and could inspire other agencies to get similarly clever with their own budgets. Nothing chills the soul of a textualist like the idea of bureaucrats with both regulatory power and a steady income stream.
The ruling is a major win for the Biden administration, which clearly prefers its financial watchdogs to be both well-fed and insulated from political meddling. It is also a relief for the CFPB, which has now survived more legal challenges than a reality show contestant at tribal council.
As for Congress, it remains free to change the Bureau’s funding scheme any time it likes, provided it can agree to do anything at all.
The Constitution may separate powers, but it never separated them from a little creative bookkeeping.