In Seila Law, LLC v. Consumer Financial Protection Bureau, the Supreme Court today held that the CFPB’s design violates the Constitution because it concentrates too much power in the hands of one person.

The Court’s remedy, alas, was to concentrate power in the hands of a different person.

Let’s unpack this curious result (background & Cato brief).

A decade ago, in response to the last financial crisis, Congress transferred 18 regulatory programs to the newly created CFPB. Thus empowered, the agency enjoys sweeping authority to enforce the rules it writes.

To insulate the CFPB from politics on Capitol Hill, Congress exempted the agency from the normal appropriations process. Instead, the CFPB is funded directly by the Federal Reserve, and Congress is left out of the loop.

To shield the CFPB from presidential politics, Congress made it an “independent” agency, which means simply that the CFPB’s leadership can disagree with the president (on policy) without fear of being fired.

Almost always, such “independent” agencies are multi-member and bipartisan commissions. For the CFPB, however, Congress placed a single director in charge.

Taken individually, none of the CFPB’s characteristics are unprecedented. Plenty of agencies exercise sweeping authority. A couple may bypass the appropriations process. Many are “independent” agencies. And a handful are run by a single director.

The CFPB is special because it was the first agency to incorporate all the above qualities.

The primary question before the Seila Law Court was whether the CFPB’s unique structure violated the Constitution. A bare majority of Justices answered in the affirmative.

According to Chief Justice Roberts’s opinion, the CFPB “lacks a foundation in historical practice and clashes with constitutional structure by concentrating power in a unilateral actor.” The agency is, therefore, “incompatible” with the separation of powers.

So far, so good: The CFPB’s structure is unconstitutional.

The Seila Law opinion then turns to how the Court should remedy this constitutional violation. This is where the opinion leaps off the rails.

According to seven Justices, the “solution” to the CFPB’s unconstitutional structure is simply to remove the agency’s “independent” status. In practice, this means that the president may fire the CFPB’s director “at will.” The problem is that the Court’s remedy fails to diminish the constitutional harm as set forth by the holding.

On the merits, the Court determined that the CFPB’s design was unconstitutional for two main reasons. First, the agency represented an historical anomaly. Second, Congress vested too much unaccountable power in one person.

Well, under the terms of the Court’s remedy, the CFPB remains an historical anomaly that concentrates too much unaccountable power in one person.

To my knowledge, no other executive agencies (i.e., non-independent) are spared from Congress’s power of the purse. If I’m right, then the CFPB currently is no less unprecedented than it was before the Court’s decision today.

Moreover, the agency still reflects a constitutionally dubious consolidation of power, albeit now amassed in the president instead of the CFPB director. When it comes to the CFPB—a regulatory powerhouse—the president doesn’t have to haggle with lawmakers to get funding for his priorities. No more pesky oversight from appropriators! 

In sum, the Court’s opinion is a house divided. The Court rightly struck down the CFPB’s design as unconstitutional. But the Court’s remedy has the perverse effect of perpetuating the underlying harms. Had it followed its (correct) constitutional reasoning to the logical end, the Court would have sent the entire regime back to Congress. 

Only Congress can clean up this mess. At the very least, lawmakers should normalize the CFPB’s budget process.