The Supreme Court on Monday ruled that the federal law which created the Consumer Financial Protection Bureau (CFPB) during the Obama administration unconstitutionally limited the reasons for which the president could fire its director -- but in doing so allowed the agency to continue operating, saying that the part of the law requiring certain reasons for the director's removal is "severable" from the rest.
The CFPB is partially the brain-child of former Democratic presidential candidate Sen. Elizabeth Warren. D-Mass., and was signed into law by former President Obama in the wake of the 2008 recession and mortgage crisis. The ruling from the high court could affect the authority of dozens of other federal agencies with quasi-independent status, like the Federal Reserve and the Social Security Administration.
"We therefore hold that the structure of the CFPB violates the separation of powers. We go on to hold that the CFPB Director’s removal protection is severable from the other statutory provisions bearing on the CFPB’s authority. The agency may therefore continue to operate, but its Director, in light of our decision, must be removable by the President at will," the court stated.
Warren earlier this year slammed the effort, through this case, titled Seila Law LLC v. Consumer Financial Protection Bureau, to eliminate the CFPB.
"Big banks & their allies will do anything to undermine the @CFPB – even ask the Supreme Court today to shut it down," she said. "We won’t let President Trump gut the consumer agency & let the big banks go back to cheating customers & gambling with our economy."
The ruling follows past conflict over the agency's director. In 2017, the Obama-appointed leader of CFPB, Richard Cordray, resigned and appointed the agency’s chief of staff Leandra English. But President Trump used his authority to designate Mick Mulvaney – who was also serving as the director of the Office of Management and Budget at the time -- as the acting director instead.
Seila Law LLC in 2017 refused to comply with a demand from the CFPB that it turn over information related to an allegation that it engaged in unlawful marketing practices, saying the agency was illegitimate because the limits on the removal of its director violated separation of powers. The CFPB took Seila Law to court to force it to turn over the documents and information in question, which led to the case the court decided Monday.
Monday's ruling can be seen as a partial loss for Warren. The CFPB will remain but be more subject to the whims of changing presidential administrations. But she, in a tweet, appeared to see the glass half full.
"Let’s not lose sight of the bigger picture: after years of industry attacks and GOP opposition, a conservative Supreme Court recognized what we all knew: the @CFPB itself and the law that created it is constitutional. The CFPB is here to stay," she said.
Former White House Counsel Don McGahn lauded the Supreme Court for reigning in "unelected bureaucrats" in a statement to Fox News.
"Today the Court took a stand against unaccountable government bureaucracies, and took a step toward restoring our Constitution’s separation of powers," McGahn said. "Per the Court, unelected bureaucrats exercising executive power must be removable at will by the President, thus restoring some accountability."
Monday's ruling could also be an ominous sign for the red states backing a suit to invalidate the Affordable Care Act, also known as ObamaCare, over the removal of the financial penalty related to the individual mandate. The Trump administration has supported the effort, submitting a brief to that effect last week. The red states and the president argue that because there is no longer a financial penalty for not buying health insurance, the mandate can no longer be read as a tax and is unconstitutional. They further say that the individual mandate is so closely tied to the intent of the law that the rest of it cannot stand without the mandate -- that it is not "severable."
"It has long been settled that 'one section of a statute may be repugnant to the Constitution without rendering the whole act void,'" Chief Justice John Roberts said in the majority opinion in the CFPB case.
After analyzing some of the debate behind the law, he continued: "These observations certainly confirm that Congress preferred an independent CFPB to a dependent one; but they shed little light on the critical question whether Congress would have preferred a dependent CFPB to no agency at all... it is far from evident that Congress would have preferred no CFPB to a CFPB led by a Director removable at will by the President."
The popular Supreme Court publication SCOTUSblog acknowledged that part of the ruling, and its potential implications, in a Monday tweet.
"The tone of today’s ruling refusing to entirely invalidate the CFPB suggests that the Court will similarly sever one part of Obamacare and refuse to strike that whole statute down when it decides that issue next term," it said.
Carrie Severino, the president of the conservative Judicial Crisis Network, however, said the ruling was a victory for the principle of separation of powers.
"Today's 5-4 decision in Seila Law LLC v. CFPB was a huge victory for constitutionalism and separation of powers. Our framers believed that separation of powers was the important bulwark of liberty in the Constitution," she said. "Today’s decision, authored by Chief Justice Roberts, reminds us that granting executive power to an unelected, unaccountable bureaucrat is anathema to our system of checks and balances."
The 5-4 ruling was split largely along ideological lines, with the conservative justices saying the limit on the president's firing power was unconstitutional and the liberal justices saying it was not. All justices, however, agreed that the entire CFPD did not need to be struck down.
Fox News' Bill Mears and Shannon Bream contributed to this report.