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Both HERA and Dodd Frank have "double insulated" funding mechanisms that abrogates Congress's Power of the Purse, that coupled with the Unconstitutional Single Director problem addressed in Seila and Collins it seems like the SCOTUS could be poised to FINALLY give these beleaguered Plaintiffs more than a Phyrric Victory.
But how could the SCOTUS possibly bulldoze Dodd-Frank given the potential disruption that could take place in the financial regulation industry?
REMEDY IS THE WHOLE REASON PLAINTIFFS CHALLENGE THE CONSTITUTIONALITY OF STATUTES AND AT CONSIDERABLE TIME AND EXPENSIVE.
To deny Plaintiffs any meaningful remedy is going to chill future litigation challenging federal government overreach.
Great stuff, thanks! The funding mechanism violation of the Seperation of Powers was a brilliant idea, I wonder who figured it out first?
Did the NCLA come up with it first in this lawsuit? Great video interview with the Plaintiff in this one:
https://nclalegal.org/moroney-cfpb/
ClarenceBeaks21: The NCLA seems more focused on reigning in the 4th Branch of the Federal Government than the Pacific Legal Foundation, which seems to have a broader mission of reigning in governmental overreach from property rights, does that seem correct or have you ever noticed?
"The New Civil Liberties Alliance is challenging the constitutionality of CFPB’s funding structure in a case pending in the U.S. Court of Appeals for the Second Circuit. A decision is expected in that case, CFPB v. Law Offices of Crystal Moroney, P.C., at any time. Judge Jones’ opinion is likely to play a major role in the Second Circuit’s deliberations."
https://nclalegal.org/2022/06/judge-jones-stands-up-for-separation-of-powers-principles/
All American Check Cashing is far from the only CFPB target to defend itself by challenging the constitutionality of CFPB’s funding structure. Such challenges have proliferated in the wake of Seila Law. While Judge Jones’s opinion is the first appellate opinion to address the issue, it will not be the last. As noted above, NCLA is challenging CFPB’s funding structure on behalf of a client in a case that will be decided by the Second Circuit in the coming months. That five judges signed onto Judge Jones’s opinion and that no appellate judge has expressed a dissenting view suggest that there is good reason to doubt the constitutionality of CFPB’s funding structure and that the issue will reach the Supreme Court in the years to come.
Moreover, if challengers prevail, the constitutional “fix” will not be easy, and could result in invalidation of significant numbers of CFPB actions. For example, Judge Jones concluded that the proper remedy for the Appropriations Clause violation was dismissal of CFPB’s enforcement action against All American Check Cashing, even though statute-of-limitations issues might prevent a constitutionally rejuvenated CFPB from filing new charges. Id. at *18. She stated that dismissal was warranted because “the separation of powers problem flowing from the CFPB’s budgetary independence concerns the CFPB’s authority to act” and “CFPB lacked authority to use the funds necessary to pursue the enforcement action against All American.” Ibid.
If CFPB targets ultimately prevail in their challenges to CFPB’s funding structure and Congress acts to eliminate the constitutional deficiencies, CFPB’s ability to proceed against those targets may well depend on the reconstituted CFPB’s ability to “ratify” actions taken by the old CFPB. It likely would be many years before the courts could finally resolve those ratification issues.
Here's what NCLA had to say in their Amicus Brief in Collins in regards to granting a Phyrric Victory Remedy in Collins:
"For one thing, denying all such
relief provides precisely the wrong incentives for
government actors. Congress will have no incentive to
avoid creating administrative-agency structures that
violate separation-of-powers principles if it concludes
that courts will do no more than tell the government,
“Don’t do it again.”
More importantly, prospective-only remedies of
this sort deprive citizens of all incentive to sue to
prevent unconstitutional government activity. The
Shareholders have devoted considerable time and
resources to their successful effort to demonstrate the
unconstitutionality of FHFA’s structure. Such efforts
in support of constitutional principles ought to be
encouraged and rewarded.
This Court has repeatedly emphasized the need
to structure relief in Appointments Clause cases to
avoid “creat[ing] a disincentive to raise Appointments
Clause challenges with respect to questionable judicial
appointments.” Ryder v. United States, 515 U.S. 179,
183 (1995). Similarly, to remedy the Appointments
Clause violation in Lucia, the Court ordered that any
future proceedings be conducted by a new ALJ,
regardless whether the initial ALJ was re-appointed in
accordance with Appointments Clause procedures.
Lucia, 138 S. Ct. at 2055 n.5. The Court explained
that awarding the petitioner the right to a hearing
before a different ALJ was an appropriate remedy
because it “create[d] incentives to raise Appointments
Clause challenges.” Ibid. Devising remedies that
provide prevailing plaintiffs with some meaningful
relief is similarly necessary to encourage individuals to
file lawsuits raising separation-of-powers claims."
On CFPB'S unique funding mechanism (does it apply to FHFA as well?): "In constructing the CFPB this way, Chief Justice Roberts stressed, “Congress deviated from the structure of nearly every other independent administrative agency” in the nation’s history—and certainly from the structure of those agency structures considered in the Court’s prior decisions."
"Novelty in agency design is constitutionally suspect."
Will Justice Thomas's dissent in Seila Law be addressed in CFSA v CFPB?:
"Although the chief justice portrayed his approach to severability as the most minimalist course, two justices disagreed. In dissent, Justice Clarence Thomas charged that selectively choosing which statutory provisions to enforce and which to erase is, in fact, a more aggressive and activist approach to severability than simply denying enforcement of the agency order at issue. Such an approach is more restrained, Justice Thomas argued, because it does not require taking a blue pen to Congress’s work. Moreover, Justice Thomas averred, the alternative of simply refusing to give legal effect to an order from an unconstitutionally constructed agency is more consistent with the original conception of the judicial power, which extends no farther than “the negative power to disregard an unconstitutional enactment.”
When's the last time the Supreme Court used a bulldozer on a major Act? I just see the Supremes demonstrating ONCE AGAIN that they are afraid of "disrupting the status quo" and years of an Unconstitutionally Structured Federal Agency actions regulating a large swath of the American Economy. Especially in regards to Dodd Frank:
"Chief Justice Roberts’s tendency to engage in constitutional avoidance appears to be driven by his desire to avoid unduly disruptive results. Invalidating a federal statute is no small thing, and striking down a federal law will often prove disruptive to federal programs and congressional designs."
Written prior to ACB and Jackson additions:
"Whatever the Court was, it is now truly the Roberts Court. The chief justice was in the majority for 98 percent of the Court’s decisions in the October 2019 term. He only dissented twice. The chief’s preferences as to outcome prevailed more than those of any other justice. And, as the most senior justice, he has the additional power to shape the Court’s jurisprudence by deciding who will author which decisions, and when to keep opinion writing duties for himself."
"In his confirmation hearing, Chief Justice Roberts identified the foundation of his minimalist approach. “Judges are like umpires” he said, “[because they] don’t make the rules, they apply them.” At the time, many commentators dwelled on his suggestion that deciding cases was like calling balls and strikes, but this missed his larger point: “Nobody ever went to a ballgame to see the umpire.” Whatever its other faults, Chief Justice Roberts’s minimalism is his way of trying to make the umpires less important, keeping the focus on those who play the game. While this approach may frustrate those who seek greater consistency and coherence within the Court’s jurisprudence, and may also be a bit naïve about the judiciary’s role in American government today, it is an approach to which the chief justice is committed. And as the October 2019 Term suggests, it is an approach that will continue to have a significant influence on the outcomes of major cases that come before the Court."
Thanks! It'd be awesome if the SCOTUS denied the governments Petition for a Writ of Certerrori but that seems unlikely as 27 states have requested cert.
Happy Holidays to you and yours!
Thank you for the early gift! Heard this the other day on the opening line on a show about Ben Franklin, happy holidays to you and yours!
"I am . . . a mortal enemy to arbitrary government and unlimited power. I am naturally very jealous for the rights and liberties of my country; and the least appearance of an encroachment on those invaluable privileges is apt to make my blood boil exceedingly."
Benjamin Franklin
https://www.mackinac.org/7502#:~:text=I%20am%20naturally%20very%20jealous,would%2C%20but%20not%20for%20decades.
It looks like NCLA hasn't filed an Amicus Brief on the CFPB case yet but it looks like it fits within the scope of their Mission and focus on challenging federal government overreach:
"The vast majority of our cases fall into the following categories: Judicial Deference Doctrines (Auer, Chevron and others); Administrative Restrictions of Speech; Agency Guidance Abuse; Structure of Government; and Unconstitutional Conditions on Spending"
It looks like the Chairman of the Board is retired Justice Brown, didn't she write the dissent in one of the earlier rounds of GSE litigation, calling out the federal government overreach here as no better than the actions of a Banana republic?
https://nclalegal.org/board-of-advisors/
Thanks for alerting us to the new Amicus Brief to the CFPB case. As I recall, David Thompson posited #4 when discussing Remedy in Collins before the final decision:
(4) Sledge Hammer: Along lines of the concurrence musings in Seila by Thomas and Gorsuch, SCOTUS could simply refuse to enforce the CFSA order. This signals that as long as the CFPB’s unconstitutional funding structure remains as-is, CFPB can expect to find all similar challenged orders unenforceable. IMHO: this is a low-risk, low-reward option that favors old school orthodox legislative reform in due (sloooooow) course.
This is from the 3 Judge Appealate Panel that decided the CFPB, on obtaining a meaningful remedy for the Plaintiff, instead of another Phyrric victory:
3.
That leaves the question of remedy. Though Collins is not precisely
on point, we follow its framework because, though that case involved an
unconstitutional removal provision, we read its analysis as instructive for
separation-of-powers cases more generally. See Collins, 141 S. Ct. at 1787–
88; cf. All Am. Check Cashing, 33 F.4th at 241 (Jones, J., concurring) (finding
Collins “inapt” for determining a remedy for the Bureau’s “budgetary
independence”).
Collins clarified a dichotomy between agency actions that involve “a
Government actor’s exercise of power that the actor did not lawfully
possess” and those that do not. 141 S. Ct. at 1787–88. Examples of the
former include actions taken by an unlawfully appointed official, see Lucia v.
SEC, 138 S. Ct. 2044, 2055 (2018); a legislative officer’s exercise of executive
power, see Bowsher v. Synar, 478 U.S. 714, 727–36 (1986); and the President’s
exercise of legislative power, see Clinton v. City of New York, 524 U.S. 417,
438 (1998). The remedy in those cases, invalidation of the unlawful actions,
flows “directly from the government actor’s lack of authority to take the
challenged action in the first place.” All Am. Check Cashing, 33 F.4th at 241
(Jones, J., concurring).
In contrast, the Court found the separation of powers problem posed
by an official’s unlawful insulation from removal to be different. Collins, 141
S. Ct. 1787–88. Unlike the above examples, such a provision “does not strip”
a lawfully appointed government actor “of the power to undertake the other
responsibilities of his office.” Id. at 1788. Thus, as discussed supra in II.B.,
to obtain a remedy, a plaintiff must prove more than the existence of an
unconstitutional provision; she must prove that the challenged action
actually “inflicted harm.” Id. at 1789.
Into which category does the Bureau’s promulgation of the Payday
Lending Rule fall, given the agency’s unconstitutional self-funding scheme?
The answer turns on the distinction between the Bureau’s power to take the
challenged action and the funding that would enable the exercise of that
power. Put differently, Congress plainly (and properly) authorized the
Bureau to promulgate the Payday Lending Rule, see 12 U.S.C. §§ 5511(a),
5512(b), as discussed supra in II.A–C. But the agency lacked the
wherewithal to exercise that power via constitutionally appropriated funds.
Framed that way, the Bureau’s unconstitutional funding mechanism “[did]
not strip the [Director] of the power to undertake the other responsibilities of his office,” Collins, 141 S. Ct. at 1788 & n.23, but it deprived the Bureau of
the lawful money necessary to fulfill those responsibilities. This is a
distinction with more than a semantical difference, as it leads us to conclude
that, consistent with Collins, the Plaintiffs are not entitled to per se
invalidation of the Payday Lending Rule, but rather must show that “the
unconstitutional . . . [funding] provision inflicted harm.” Id. at 1788–89.
However, making that showing is straightforward in this case.
Because the funding employed by the Bureau to promulgate the Payday
Lending Rule was wholly drawn through the agency’s unconstitutional
funding scheme,17 there is a linear nexus between the infirm provision (the
Bureau’s funding mechanism) and the challenged action (promulgation of
the rule). In other words, without its unconstitutional funding, the Bureau
lacked any other means to promulgate the rule. Plaintiffs were thus harmed
by the Bureau’s improper use of unappropriated funds to engage in the
rulemaking at issue. Indeed, the Bureau’s unconstitutional funding structure
not only “affected the complained-of decision,” id. at 1801 (Kagan, J.,
concurring in part), it literally effected the promulgation of the rule. Plaintiffs
are therefore entitled to “a rewinding of [the Bureau’s] action.” Id.
In considering other violations of the Constitution’s separation of
powers, the Supreme Court has rewound the unlawful action by granting a
new hearing, see Lucia v. SEC, 138 S. Ct. 2044, 2055 (2018), or invalidating an order, see NLRB v. Noel Canning, 573 U.S. 513, 521, 557 (2014); see also 5
U.S.C. § 706(2)(A) (providing that, under the APA, a “reviewing court
shall . . . hold unlawful and set aside agency action . . . found to be . . . not in
accordance with law”). In like manner, we conclude that the district court
erred in granting summary judgment to the Bureau and in denying the
Plaintiffs a summary judgment “holding unlawful, enjoining and setting
aside” the challenged rule. Accordingly, we render judgment in favor of the
Plaintiffs on this claim and vacate the Payday Lending Rule as the product of
the Bureau’s unconstitutional funding scheme.
III.
The Bureau did not exceed its authority under either the Act or the
APA in promulgating its 2017 Payday Lending Rule. The issuing Director’s
unconstitutional insulation from removal does not in itself invalidate the rule,
and the Plaintiffs fail to demonstrate cognizable harm from that injury. Nor
does the Bureau’s rulemaking authority transgress the nondelegation
doctrine. We therefore AFFIRM the district court’s entry of summary
judgment in favor of the Bureau in part.
But Congress’s cession of its power of the purse to the Bureau violates
the Appropriations Clause and the Constitution’s underlying structural
separation of powers. The district court accordingly erred in granting
summary judgment in favor of the Bureau and denying judgment in favor of
the Plaintiffs.
The SCOTUS should, if they don't, the US Congress will continue passing laws that experiment with novel forms of federal agency government that bypasses Constitutional safeguards, knowing that the SCOTUS will simply rewrite the Section (s) of law that is Constitutionally offensive with zero consequences.
Here's Justice Gorsuch in Collins: "This Court possesses no authority to substitute its own
judgment about which legislative solution Congress might
have adopted had it considered a problem never put to it.
That is not statutory interpretation; it is statutory reinven-
tion. Indeed, while never uttering the words “severance doctrine,” the Court today winds up implicitly resting its
remedial enterprise upon it—severing, or removing, one
part of Congress’s work based on speculation about its
wishes and usurping a legislative prerogative in the pro-
cess. See, e.g., Arthrex, ante, at 6–7 (GORSUCH, J., concur-
ring in part and dissenting in part); Synar, 626 F. Supp., at
1393. By once again purporting to do Congress’s job, we
discourage the people’s representatives from taking up for
themselves the task of consulting their oaths, grappling
with constitutional problems, and specifying a solution in
statutory text. “Congress can now simply rely on the courts
to sort [it] out.” Tennessee v. Lane, 541 U. S. 509, 552 (2004)
(Rehnquist, C. J., dissenting).2"
Here's exactly what Justice Gorsuch predicted in the remand:
"The Court’s conjecture does not stop there. After guess-
ing what legislative scheme Congress would have adopted
in some hypothetical but-for world, the Court tasks lower
courts and the parties with reconstructing how executive
agents would have reacted to it. On remand, we are told,
the litigants and lower courts must ponder whether the
President would have removed the Director had he known
he was free to do so. Ante, at 35. But how are judges and
lawyers supposed to construct the counterfactual history?
It is no less a speculative enterprise than guessing what
Congress would have done had it known its statutory
scheme was unconstitutional. It’s only that the Court pre-
fers to reserve the big hypothetical (legislative) choice for
itself and leave others for lower courts to sort out."
I miss his cartoons!
That's right familymang, BUT WILL THE SCOTUS TAKE A SCALPEL OR BULLDOZER TO DODD FRANK AND HERA next year?
Would the remedy for the Plaintiff Shareholders be different if the SCOTUS used a bulldozer on HERA versus a scalpel or are the 9 robes, "out to get us!"?
How low will it go ! Aren't the shares worthless so long as the Gubmint boot is on the Shareholders Necks?
I don't know Skepi, tell me, will the SCOTUS use the bulldozer or scalpel on Dodd-Frank?
Will the SCOTUS THEN say that HERA is somehow different and NO REMEDY FOR SHAREHOLDERS?
Stay tuned, HEEEHEEE !
SUMMARY OF THE FINAL RULE
The final rule retains the key
concepts from the proposed rule
and:
• clarifies the scope of a new
activity and a new product;
• enhances the review of
pilots;
• clarifies which activities are
excluded from the review
and approval requirements
and expands the criteria for
excluded substantially
similar activities;
• distinguishes the
information requirements
for new product and new
activity submissions and
reduces the amount of
information required for a
Notice of New Activity; and
• clarifies and improves other
procedural elements of the
rule such as by making
explicit that an Enterprise
may consult with FHFA
prior to submitting a Notice
of New Activity.
The final rule also establishes a
public disclosure requirement
for FHFA to report on its
determinations on new activity
and new product submissions.
---------------
Will this make it easier for the FHFA to shovel subsidized and loss underwritten mortgages to the current administrations target voter base?
A new substitute for the soon to be extinct $20,000 student loan forgiveness?
"Today’s rule establishes that FHFA will determine which new activities merit public notice and comment, and therefore should be treated as new products and subject to prior approval. In addition, the final rule establishes a public disclosure requirement for FHFA to publish its determinations on new activity and new product submissions.
The final rule implements Section 1321 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended by Section 1123 of the Housing and Economic Recovery Act of 2008.?
The final rule will be effective 60 days from the date it is published in the Federal Register."
https://www.fhfa.gov/mobile/Pages/public-affairs-detail.aspx?PageName=FHFA-Announces-Final-Rule-for-New-Enterprise-Products-and-Activities.aspx
"The funds statutorily available to the CFPB cannot
exceed twelve percent of the Federal Reserve’s operat-
ing expenses, as reported in 2009 and adjusted for infla-
tion—an amount that presently exceeds $700 million.
12 U.S.C. § 5497(a)(2)(A)(iii); see Pet. App. 34a n.12. Up
to that statutory limit, the Federal Reserve is author-
ized to transfer to the Bureau Fund “the amount
determined by the [CFPB] Director to be reasonably
necessary to carry out the authorities of the Bureau
under Federal consumer financial law,” after account-
ing for the prior year’s funding. 12 U.S.C. § 5497(a)(1)."
SUMMARY OF ARGUMENT
"This amicus brief focuses principally on the
extraordinary remedy ordered by the court of appeals
for that purported Appropriations Clause violation—
vacatur of an otherwise lawfully promulgated regula-
tion."
"Indeed, it is altogether speculative that the CFPB might
somehow have behaved differently had its funding been
drawn from the Treasury rather than the Federal
Reserve.
The mismatch between the harms identified by the
court of appeals and the remedial order highlights the
impropriety of the ruling. This case is not one where a
court found that an agency had acted in derogation of
Congress’s direction or in a manner inconsistent with
express funding limitations. To the contrary, the court
of appeals found that the Payday Lending Rule was well
within the scope of the CFPB’s delegated authority.
Vacatur of the rule was not needed to respect the separa-
tion of powers between Congress and the Executive: the
executive agency was acting entirely as Congress
commanded. It was the court of appeals that stepped in
to create a conflict between the branches that did not
otherwise exist."
"Here, the court of appeals not only vacated the
Payday Lending Rule but did so based on reasoning
that could require vacatur of numerous other CFPB
regulations that set robust, nationwide protections for
consumers, provide guidance to financial-services
providers, and complement the States’ regulatory and
enforcement efforts"
II. THE COURT OF APPEALS ERRED IN VACATING
THE CHALLENGED REGULATION.
"This Court has repeatedly rejected the argument
that a challenged agency action “must be completely undone,” just because the agency operated with a consti-
tutional defect at the time of its action. Collins v. Yellen,
141 S. Ct. 1761, 1788 (2021); see, e.g., Seila Law, 140 S.
Ct. at 2208 (refusing to invalidate a civil investigative
demand issued by a prior CFPB Director with unconsti-
tutional removal protection). That holding applies even
when the Court holds that a statutory scheme “violates
the separation of powers” (as the court of appeals held
here, see Pet. App. 28a–42a). See Collins, 141 S. Ct. at
1783. Rather, a challenger is entitled to only as much
relief as would be “sufficient” to correct the specific
constitutional defect, based on traditional remedial
principles. Free Enter. Fund v. Public Co. Accounting
Oversight Bd., 561 U.S. 477, 513 (2010); see Madsen v.
Women’s Health Ctr., Inc., 512 U.S. 753, 765 (1994)
(requiring relief that is “no broader than necessary to
achieve its desired goals”).
"In
other words, the hypothetical difference between the
CFPB’s funding coming from the Federal Reserve or
from the Treasury is minute at best, and is by no means
a basis to afford judicial relief against the CFPB’s
regulations or other actions."
"The record suggests just
the opposite, if the CFPB’s history of dealing with other
structural constitutional problems is any guide. Even
after this Court found in Seila Law that the Director
had been operating with unconstitutional removal
protections, which included the period in which the Pay-
day Lending Rule was issued, the Director ratified and
then reissued the relevant provisions of that regulation.
See Payday, Vehicle Title, and Certain High-Cost Installment Loans, 85 Fed. Reg. 41,905 (July 13, 2020);
Payday, Vehicle Title, and Certain High-Cost Install-
ment Loans, 85 Fed. Reg. 44,382 (July 22, 2020). That
is, there is strong evidence that the CFPB would have
issued the same regulation once again, after any consti-
tutional defect was corrected.
The Court
could, as petitioners suggest (Pet. 24), sever the CFP
Act’s provision that precludes the House and Senate
Committees on Appropriations from reviewing the
CFPB’s budget. See 12 U.S.C. § 5497(a)(2)(C). Or the
Court could require the CFPB to request funding from
the Committees going forward, as the CFP Act itself
contemplates when there is a need for additional appro-
priated funds. See id. § 5497(e). Each of those remedies
would be sufficient to ensure the necessary degree of
congressional control.
This Court’s precedents confirm that the CFPB’s
lack of periodic congressional appropriations should not
invalidate the CFPB’s regulatory actions. The Court has
held that, if the federal government takes actions and
incurs obligations that have not been properly funded
through appropriations, the funding “insufficiency does
not . . . cancel its obligations.” Maine Cmty. Health
Options, 140 S. Ct. at 1321 (quotation marks omitted).
This understanding makes sense. Whenever the federal
government has acted—whether through promulgating
regulations, holding adjudications, forming contracts,
or issuing grants—members of the public (including
Amici States) rely on those actions in shaping their
affairs. And “it is not reasonable to expect” those with no familiarity with the appropriations process “to know
how much of [an] appropriation remain[ed] available for
[an agency] at any given time.” Salazar v. Ramah
Navajo Chapter, 567 U.S. 182, 1999 (2012) (quotation
marks omitted). This Court should thus grant certiorari
and confirm that the absence of valid appropriations
“does not make void” a prior unfunded action. See The
Head Money Cases, 112 U.S. 580, 599 (1884)."
So what happens to the $1.7B, NEW CFPB HQ?
"The Consumer Financial Protection Bureau on Tuesday ordered Wells to repay $2 billion to consumers and enacted a $1.7 billion penalty against the bank. It's the largest fine to date against any bank by the CFPB and the largest fine against Wells..."
SBC = Senate Banking Committee
BOTH Dodd Frank AND HERA have self funded operating budgets exempt from Congressional Appropriations Oversight.
Amicus Brief from the pro CFPB funding mechanism states focuses on remedy (I added bold):
"We file this amicus brief, however, to address
specifically the remedial issue in the event that the
Court were to find a constitutional defect, explaining
that the remedy imposed by the court below was neither
justified nor compelled by law, and that this issue also
warrants this Court’s review. The remedy imposed
below would deprive the States and their residents not
only of the protections given by the specific regulation at
issue, but also of the CFPB’s role more broadly as a fed-
eral regulator and enforcer of consumer financial laws.
Left undisturbed, the court of appeals’ reasoning could
jeopardize many of the CFPB’s actions from across its
decade-long existence, to the detriment of both consum-
ers protected by those actions and financial-services
providers that rely on them to guide their conduct."
Congress established a clear funding structure for
the CFPB to “ensure that the Bureau has the funds to
perform its mission,” without being placed under
“repeated Congressional pressure.” S. Rep. No. 111-176,
at 163. Indeed, Congress observed that the annual
appropriations process was “widely acknowledged” to
have limited the effectiveness of the former Office of
Federal Housing Enterprise Oversight—a predecessor
to the Federal Housing Finance Agency that had
unsuccessfully regulated Fannie Mae and Freddie Mac
leading up to the financial crisis. See id.; see also
OFHEO’s Final Report on Fannie Mae: Hearing Before
the Subcomm. on Capital Markets, Insurance, and
Government Sponsored Enterprises of the H. Comm. on Fin. Servs., 109th Cong. 3 (2007) (statement of Rep.
Michael G. Oxley, Chairman, H. Comm. on Fin. Servs.).
The CFP Act therefore provides that the CFPB is
funded through “the combined earnings of the Federal
Reserve System” through a specific “Bureau Fund” of the
Federal Reserve. 12 U.S.C. § 5497(a), (b)(1)."
In theory, the court could vacate the NWS based on the unconstitutional Seperation of Powers violation as demonstrated by the recent CFPB decision in the 5th. The pro 5th Circuit states in their Amicus Brief to the USSCT quoted J. Jones:
"The only remaining question would then be the
remedy. The Fifth Circuit was right to vacate a rule
enacted without constitutional funding. “An agency’s
funding is the very lifeblood that empowers it to act.”
CFPB v. All Am. Check Cashing, Inc., 33 F.4th 218, 241
(5th Cir. 2022) (Jones, J., concurring). "
QUESTION PRESENTED (I added bold)
Whether the court of appeals erred in holding that the
statute that describes how the Consumer Financial
Protection Bureau is funded, 12 U.S.C. § 5497, violates the
Appropriations Clause, U.S. Const. Art. I, § 9, Cl. 7, and
in vacating a regulation promulgated at a time when the
CFPB was receiving such funding.
INTRODUCTION AND INTERESTS
OF AMICI CURIAE*
The Consumer Financial Protection Bureau is a failed
experiment in administrative governance. Conceived as
an answer to the problems that led to the Great Recession,
Congress endowed the Bureau with an “unprecedented
combination of structural characteristics” meant to
cloister it from outside accountability. William Simpson,
Above Reproach: How the Consumer Financial
Protection Bureau Escapes Constitutional Checks &
Balances, 36 REV. BANKING & FIN. L. 343, 345 (2016). At
the same time, Congress gave the agency “enormous
power over American business, American consumers, and
the overall U.S. economy.” PHH Corp. v. CFPB, 881 F.3d
75, 165 (D.C. Cir. 2018) (Kavanaugh, J., dissenting). This
toxic blend of broad power and unchecked autonomy has
been a problem from the start.
...This “financial
freedom,” the Court observed, “makes it even more likely that the agency will slip … from [the control] of the
people.” Id. at 2204 (cleaned up).
The appropriations issue that Seila Law noted has now
come to a head. In the decision below, the Fifth Circuit
correctly held that the CFPB’s unprecedented funding
scheme impermissibly shifts Congress’s power of the
purse to the Bureau.
The CFPB experiment has failed. The Court should
return it to the lab.
The
Appropriations Clause serves an important purpose: it
allows Congress to supervise and control federal
administrative agencies.
III. The decision below is correct. The Fifth Circuit
took Congress at its word—Congress said it was not
making an appropriation, and nothing else in the law
overcomes that express statement. The Court should not
accept the Bureau’s invitation to rewrite or ignore
Congress’s direction. And neither history nor practice can
save the Bureau, either, especially when the historical
record contains many instances of the Bureau describing
itself as an agency without an appropriation. Having
correctly found that the CFPB violated the
Appropriations Clause, the Fifth Circuit was right to
vacate the rule at issue.
A. Article 1, Section 9, Clause 7 of the Constitution
says that “[n]o Money shall be drawn from the Treasury,
but in Consequence of Appropriations made by Law.”
This “straightforward and explicit command” means what
it says: “[N]o money can be paid out of the Treasury
unless it has been appropriated by an act of Congress.”
OPM v. Richmond, 496 U.S. 414, 424 (1990). The
Founders regarded congressional power over the purse
“as the most complete and effectual weapon with which
any constitution can arm the immediate representatives of
the people.” THE FEDERALIST NO. 58 (James Madison).
So the Appropriations Clause’s restraint is “absolute.”
U.S. Dep’t of Navy v. FLRA, 665 F.3d 1339, 1348 (D.C.
Cir. 2012) (Kavanaugh, J.). It covers “any sum of money
collected for the government.” Ring v. Maxwell, 58 U.S.
147, 148 (1854); accord Republic Nat’l Bank of Mia. v.
United States, 506 U.S. 80, 93 (1992).
The Appropriations Clause is an important way that
the Constitution entrusts the “difficult judgments” to
Congress. Richmond, 496 U.S. at 428. Congress is
thought to be motivated by the “common good,” rather
than the “individual favor” that “Government agents”
might use to decide an issue. Id. Appropriations power
also provides Congress “a controlling influence over the
executive power.” 2 JOSEPH STORY, COMMENTARIES ON
THE CONSTITUTION OF THE UNITED STATES § 530, at 14
(1833). Even with “independent” agencies like the SEC,
“[s]ubjecting any regulatory agency to the congressional
appropriations process places constraint on that agency.”
Conrad Z. Zhong, A New Way to Fund the Consumer
Financial Protection Bureau, 18 U.C. DAVIS BUS. L.J. 1,
18 (2017).
...congressional control over an agency’s
finances is “[t]he most constant and effective control”).
The “appropriations monopoly” lets Congress control
“agencies by altering total funding, targeting specific
programs through earmarks and riders, and using signals
and threats.”
But an agency free
from the appropriations process can keep critical
information out of public view for as long as possible. As
a result, broader enforcement initiatives may become
hard to spot until the pattern emerges. Even rulemakings
may lack the transparency that the appropriations
process offers, as “many substantive policy decisions
happen before the agency publishes the notice of proposed
rulemaking.”
Thus, the CFPB is its own appropriator. The approach
is an anomaly
“[S]elf-funding …
effectively makes the agency accountable to nobody.”
But
relying on a self-interested CFPB to do the right thing is
a “curious assumption,” especially when the Bureau has
“lack[ed] transparency in much of its decision-making.”
Indeed, freed from fear of budgetary consequences,
the CFPB has repeatedly shown itself indifferent to
oversight from just about anyone.
In testimony before Congress, for instance, the
CFPB’s first director responded, “Why does that matter
to you?” when a congressperson asked who had authorized
hundreds of millions in renovation costs for the Bureau’s
headquarters.
Later, another director told the
House Financial Services Committee that he could
“twiddle [his] thumbs while you all ask questions” because
the CFPB is “not accountable to anybody but itself.” Jim
Puzzanghera, CFPB Chief Mick Mulvaney Says He
Could Just ‘Twiddle My Thumbs’ Before Congress To Highlight Agency’s Flaws, L.A. TIMES (Apr. 11, 2018,
11:55 a.m.), http://bit.ly/3PaQJ6o.
Even Senator Elizabeth Warren
has lamented that her brainchild “ignored congressional
mandates” and operated as a “politicized rogue agency”
when it fell under the control of a political opponent.
Elizabeth Warren, Republicans Remain Silent As
Mulvaney’s CFPB Ducks Oversight, WALL ST. J. (Mar.
28, 2018, 5:48 p.m.), https://bit.ly/3Bh6lQg.
No part of that
recitation captures this situation: an agency endowed with
substantial power, led by a single Director, indefinitely
self-funded through another agency that is itself self-
funded, in permanent control of any funds it obtains, and
expressly exempted from the usual forms of oversight that
come with federal appropriations. That combination of
features is fatal. See Pet.App.37a. It makes the agency
undeniably unique. Markham S. Chenoweth & Michael P.
DeGrandis, Out of the Separation-of-Powers Frying Pan
and into the Nondelegation Fire: How the Court’s
Decision in Seila Law Makes CFPB’s Unlawful Structure
Even Worse, 8/27/2020 U. CHI. L. REV. ONLINE 55, 60
(2020).
And the current director told
Congress that the CFPB’s “base level of funding” is
“guaranteed,” and the agency would only be “subject to
the normal appropriations process” if it needed to ask
Congress for more. Consumer Financial Protection
Bureau Semiannual Report, C-SPAN (Oct. 28, 2021),
https://bit.ly/3iGFC93. In its own words, then, the Bureau
has repeatedly conceded that it neither has nor needs any
congressionally enacted appropriation. Lacking that
element, the Bureau can’t rightfully call itself
constitutional now.
The only remaining question would then be the
remedy. The Fifth Circuit was right to vacate a rule
enacted without constitutional funding. “An agency’s
funding is the very lifeblood that empowers it to act.”
CFPB v. All Am. Check Cashing, Inc., 33 F.4th 218, 241
(5th Cir. 2022) (Jones, J., concurring). And the Bureau
does not convincingly explain how severing some
provision of Section 5497 could provide it with the “proper
appropriation” that is “a precondition to every exercise of
executive authority by an administrative agency.” Id. at
242. So the court appropriately vacated the rule before it.
No money, no power.
The oral arguments and briefs by the JB administration will likely call for the SCOTUS to use a scalpel IF they uphold the 5th Circuit Court of Appeals decision (it's apparently what they want according to the pro JB states Amicus Brief):
"They argue that even if there is a constitutional defect in the funding approach, any remedy must address the funding issue narrowly and without undoing prior CFPB rules or other actions."
https://www.jdsupra.com/legalnews/in-two-camps-37-states-and-d-c-urge-7699500/
Senator Elizabeth Warren is a hypocrite, on the one hand she sees NO PROBLEM when the Net Worth Swipe removes $300B+ from the GSES and deposits it in the coffers of the UST, IN RETURN FOR NOTHING, but when Elon Musk has Twitter pay for talented employees from Tesla, her panties are all in a twist and she's ready to hold hearings at the Senate Banking Committee:
"[E]very Board of Directors of a company with multiple shareholders – especially publicly traded companies – is responsible for ensuring that a controlling shareholder (especially one who is also a Chief Executive Officer, or CEO) does not treat the company as a private plaything,” Warren wrote in a letter on Sunday."
But for Senator Elizabeth Warren, we may never have had an Unconstitutionally Structured FHFA and CFPB, has that idea ever crossed your mind?
https://www.cnbc.com/2022/12/19/sen-warren-warns-tesla-board-about-musk-conflicts-of-interest-with-twitter.html
"Imagine two scenarios. First, the government grabs
all the stock certificates of private shareholders of a
company. Pet.23. Second, a government-controlled
company with both governmental and private share-
holders announces that, henceforth, whenever it is-
sues a dividend, it will pay it only to the government
shareholder. Pet.18–19. In both situations, it would be
clear that the shareholders have a direct claim for just
compensation for the taking of their rights. It would
not be clear whether the company itself, although ef-
fectively nationalized, suffered harm and thus had
any claim. But the shareholders obviously would. And,
in any event, “the right claimed by the shareholder”
would not be “one the corporation could itself have en-
forced.” Daily Income Fund, Inc. v. Fox, 464 U.S. 523,
529, 531 (1984).
Substantively, the Net Worth Sweep is the same—
but on an unprecedented scale. And substance is what
matters. See Stop the Beach Ren. v. Fla. Dep’t of Env.
Prot., 560 U.S. 702, 715 (2010) (“If a legislature or a
court declares that what was once an established right
of private property no longer exists, it has taken that
property, no less than if the State had physically ap-
propriated it or destroyed its value by regulation.”)
(emphasis omitted). The Net Worth Sweep “trans-
ferred the value of [the private shareholders’] prop-
erty rights in [the Companies] to Treasury,” which
“left nothing for” them. Collins v. Yellen, 141 S. Ct.
1761, 1779 (2021). That “injury” “flows directly from”
the Net Worth Sweep. Id. The shareholders thus have
a direct claim for just compensation for that transfer
of their rights—“to redress the United States’ wiping
out of [their] shares in” the Companies “by seizing for itself all earnings of the solvent Companies in perpe-
tuity.” Owl Creek Compl. ¶1, Pet.App.486; id. ¶114
(Count I: “the United States directly appropriated for
itself [their] property interests in the Junior Preferred
Stock ‘to benefit taxpayers.’”), Pet.App.526. Although
the Net Worth Sweep materially changed the nature
of the Companies—from “private firms” to national-
ized ones—it left them operational and (wildly) profit-
able. Pet.5, 25; Collins, 141 S. Ct. at 1774, 1777–78.
And the Companies in any event could not enforce pri-
vate shareholders’ ownership rights. Pet.29."
OWL CREEK ASIA I, L.P., et al.,
Petitioners,
v.
UNITED STATES OF AMERICA,
Respondent.
On Petition for a Writ of Certiorari
to the United States Court of Appeals
for the Federal Circuit
REPLY BRIEF FOR PETITIONERS
Did you hear the latest from the brain child of the unconstitutional FHFA and CFPB provisions in HERA and Dodd Frank?
https://www.cnbc.com/2022/12/19/sen-warren-warns-tesla-board-about-musk-conflicts-of-interest-with-twitter.html
Question: Does working as a Professor at Harvard require a lifetime membership with the Communist Party .! HeeeeHeeee!
Gotta have a little fun here, because we may have lumps of coal in our stockings into perpetuity in lieu of dividends...
If the SCOTUS heard the case and believes that the double insulated CFPB funding mechanism bypasses the Congressional Appropriations Oversight Process and is therefore unconstitutional, I can't see how the SCOTUS would be able to use a scalpel on the Dodd Frank Act.
If you haven't seen it, Senator Toomey and Haggerty introduced a bill last week for the SBC to consider that provides for Congressional Appropriations Oversight but I don't think its been published yet.
It's the Judge or Jury's job to determine the veracity of a witnesses statement.
To deny the Plaintiff Shareholders a trial because J. Schlitz thinks the former POTUS would not be truthful BEFORE a trial of the facts is an injustice.
Oh yeah, Pags gives you the weekend off, how could I forget !
Just follow the conversation links and think which former POTUS could be deposed to testify and answer the following:
" ("...(1) a
substantiated desire by the President to remove the unconstitutionally insulated actor,
(2) a perceived inability to remove the actor due to the infirm provision, and (3) a nexus
between the desire to remove and the challenged actions taken by the insulated actor.”
(emphasis added))."
The Hill: Majority of states call on Supreme Court to review constitutionality of CFPB funding.
https://thehill.com/regulation/court-battles/3776771-majority-of-states-call-on-supreme-court-to-review-constitutionality-of-cfpb-funding/
Excellent points! Seems like a lot of meat on the bone for an appeal!
Couldn't all this have been avoided if the SCOTUS took a bulldozer to HERA instead of a scalpel, which in essence, REWROTE HERA BY ADDING AT WILL FIRINGS BY POTUS?
The LP will have to be dealt with if the GSES ever exit conservatorship. We'll have to see what the courts say if anything about the NWS. Does it violate the 5th Amendment for instance? Does the fact that a federal agency have double insulated from Congressional Appropriations funding render the August 17, 2012 NWS void? Will a future FHFA Director and UST decide to modify/eliminate the LP to exit conservatorship?
When was the 1st Plaintiff Shareholder case filed?
Yes and since we are involved in Multi Billion Dollar Litigation involving Defendants with unlimited resources and time, it will take a while.
In the meantime, at least in theory we build capital organically via Retained Earnings.
Why not let him testify? Denying the opportunity for the Plaintiff Shareholders to try their case based on a Constitutional Violation CREATED BY THE FEDERAL GOVERNMENT IN HERA is an Injustice.
J. Schlitz could simply hear the former POTUS testimony in his court room if he wanted to know just like DeMarco testified in Lamberth's trial.
Not allowing the Plaintiff Shareholders to proceed to trial based on a Constitutional Violation that according to the Pleadings caused them to suffer a pocketbook injury is an injustice, since the federal government set up the FHFA Director as someone accountable to NO ONE IN GOVERNMENT in HERA in the Summer of 2008:
"Finally, the Court notes that, even if plaintiffs had stated the type of claim
contemplated in Collins, the nature of their claim is far too speculative to survive a
motion to dismiss. Pointing to the Trump administration’s broad policy goal of ending
the conservatorships—the type of broad policy goal that Presidents express far more
often than achieve—plaintiffs construct an alternate history spanning over two years in
which Trump achieves his goals. In constructing this alternate history, plaintiffs
identify a number of steps that they claim Trump would have taken and insist that
Trump would have taken these steps in a particular order. Plaintiffs further claim that
they are entitled to pluck out and impose one of those steps—eliminating the
liquidation preference—even though they can point to only one fragment of one
document that even suggested that step as an option, SAC ¶ 59, and absolutely nothing
showing that Trump himself (whose opinion on the matter is the central issue) had ever
contemplated that step, much less regarded that step as necessary or important. Cf. Cmty.
Fin. Servs. Ass’n of Am., Ltd., 51 F.4th at 633 (“These secondhand accounts of President
Trump’s supposed intentions are insufficient to establish harm.”). Considering the
combination of shifting political winds, changing priorities over time, the number of
actors involved, and the vagaries of political, economic, and world events that can arise over such a timeframe and consume an administration’s attention and political capital,5
plaintiffs’ claims are an exercise in rank speculation."
Here's J. Schlitz basically calling the former POTUS a liar and ruling on the veracity of his letter to Senator Paul (Schlitz probably didn't like the RNC convention were the former POTUS shredded Jeb, GWB's brother. GWB nominated Judge Schlitz to his current lifetime appointment on the federal bench ):
"Requiring a contemporaneous expression of displeasure and a desire to remove
makes sense. Collins clearly rejected the notion that an unconstitutional removal
restriction automatically renders the agency’s every action void, and it would be far too
easy for a former President—motivated perhaps by a desire to harm a political rival or
force a new administration to implement his preferred policies—to circumvent this
holding with after-the-fact assertions about what he would have done if he had only
known he had the authority. Before opening the door to such a claim and throwing the
government into chaos by undermining years’ worth of agency action—not to mention
interfering with the policies of a duly elected succeeding administration—courts should require a very strong showing that the former President in question would, in fact, have
fired the director and would, in fact, have been successful in implementing the action
that the plaintiffs allege would have occurred if the President had not been mistaken
about the scope of his removal authority. Cf. Cmty. Fin. Servs. Ass’n of Am., Ltd., 51 F.4th
at 632 (“We distill from these hypotheticals three requisites for proving harm: (1) a
substantiated desire by the President to remove the unconstitutionally insulated actor,
(2) a perceived inability to remove the actor due to the infirm provision, and (3) a nexus
between the desire to remove and the challenged actions taken by the insulated actor.”
(emphasis added))."