9 min read

The Supreme Court’s new regulatory war

A look at the cases before the Supreme Court in its new term.
The Supreme Court’s new regulatory war
Photo by the U.S. government

You may not have heard of it, but the Consumer Financial Protection Bureau (CFPB) is one of the Obama administration’s signature accomplishments.

The brainchild of then-Harvard professor Elizabeth Warren, the agency was designed to serve as a watchdog protecting consumers in their dealings with banks, lenders, and other financial institutions. Since its creation by the Dodd-Frank Act in 2010, the CFPB has returned more than $17.5 billion to defrauded American consumers.

It has also been mired in legal fights over its organizational structure pretty much that entire time, brought by Republicans and industry figures who have opposed the CFPB since its inception.

The first wave of legal challenges focused on the CFPB’s leadership structure: originally, to ensure the agency’s independence, the CFPB was created with a single director who could only be fired by the president for cause. In 2020, the Supreme Court sided with a law firm under CFPB investigation, declaring that setup an unconstitutional restriction of the president’s powers.

However, the court declined to completely dismantle the agency, as the law firm had requested, ruling that the CFPB could continue but with a more easily fireable director.

Today, the Supreme Court will consider a new attempt to unravel the CFPB, again brought by an opponent in the agency’s crosshairs.

This time, the focus is the CFPB’s financial structure, which was also uniquely designed to ensure the agency’s independence. Unlike most agencies, which are funded by Congress through the annual appropriations process, the CFPB receives its funding from the Federal Reserve. Each year, the CFPB requests funds from the Fed, which can then transfer up to 12% of its operating budget to the agency.

After the CFPB instituted a regulation restricting payday lending in 2017, a trade group for the payday lending industry challenged the rule by arguing that the agency itself is unconstitutional because Congress doesn’t fund it — the case before the court today.

If the 6-3 conservative Supreme Court sides with the trade group, the decision could unwind not just the payday lending rule, but every regulation instituted by the CFPB since 2010, under the theory that they were all issued unconstitutionally. The impact on the financial industry would be massive.

Such a decision could also have ripple effects for other independent agencies funded outside the appropriations process, including the Federal Reserve itself, which is financed primarily by earning interest on the securities it owns.

The CFPB case is just the latest front in the 6-3 court’s war on the regulatory state. In the past two terms, the Supreme Court has repeatedly struck down key regulations, most notably in a 2022 case citing the “major questions doctrine,” which holds that major policy questions should be decided by Congress, not administrative agencies. (Recall that, as I’ve written before, a lot of lawmaking these days is effectively done by regulation, as Congress absents itself and allows policy on the environment, abortion, immigration, etc. to be set by agencies.)

Later this term, the court is set to hear its most sweeping regulatory case yet: Loper Bright Enterprises v. Raimondo, an obscure case on fisheries that could lead to the unraveling of “Chevron deference,” the decades-old Supreme Court precedent that largely instructs judges to defer to federal agencies in disputes over regulations.

Think of today’s CFPB case — and another upcoming case on regulations issued by the Securities and Exchange Commission (SEC) — as appetizers for Loper Bright, the main regulatory course of the term.  

The CFPB and SEC cases have something else in common: they both come from the New Orleans-based Fifth Circuit Court of Appeals, which is considered the most conservative appellate court in the country. It is one of the courts where Donald Trump was most successful in his transformation of the federal bench, a project that had unwinding regulations as one of its key projects.

Today’s case reached the Supreme Court because a three-judge Fifth Circuit panel ruled against the CFPB last year, a decision that is now being appealed. All three of those judges were Trump appointees.

More Supreme Court cases to watch

In its new term, which kicked off yesterday, the Supreme Court will once again find itself considering some of the thorniest — and most consequential — issues in American life. Here’s what’s coming up:

  • Guns: The justices will decide whether a federal law that bans individuals subject to domestic violence restraining orders from obtaining firearms is a violation of the Second Amendment.
  • Social media: The justices will weigh the constitutionality of laws passed by Texas and Florida to regulate content moderation on Big Tech platforms.
  • Redistricting: The justices will hear another racial gerrymandering case, this one stemming from South Carolina.
  • Opioids: The justices will review Purde Pharama’s controversial bankruptcy plan.  
  • Taxes: The justices will consider the definition of income tax, a ruling that could unwind all sorts of taxes on American wealth.

Controversial cases on the abortion pill and transgender rights could also reach the justices. Plus, more attention will likely be paid to the court itself, as pressure mounts on the justices to implement an ethics code after revelations about Clarence Thomas and Samuel Alito’s ties to billionaire businessmen.

Just yesterday, the court announced that it would not be hearing a January 6th-related case brought by former Trump lawyer John Eastman. But the biggest headline was that Thomas recused himself, a potential sign that the renewed attention to the court’s ethics is having an impact. Thomas did not outline his reasoning, although he formerly employed Eastman as a clerk and his wife Ginni Thomas collaborated with Eastman in his efforts to overturn the 2020 election.

Thomas did not recuse himself from previous January 6th-related cases.

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More news to know.

Rep. Matt Gaetz is moving forward with a push to oust McCarthy. (Gage Skidmore)

Rep. Matt Gaetz (R-FL) filed a motion to oust House Speaker Kevin McCarthy (R-CA) yesterday. Gaetz’s motion is privileged, which means the House will be required to consider it within the next two days. So far, four Republicans have signaled plans to side with Gaetz, meaning McCarthy will need Democratic support to keep his gavel. Per Punchbowl News, McCarthy spoke to House Minority Leader Hakeem Jeffries (D-NY) late last night, their first conservation since Gaetz began floating the move.

This will be the first time since 1910 that the House has voted on a “motion to vacate,” as the gambit is known. “Bring it on,” McCarthy tweeted last night. “Just did,” Gaetz responded.

More headlines for your awareness:

  • The UN authorized a multinational armed force to deploy to Haiti, in a mission to combat the violent gangs that control much of Port-au-Prince and other parts of the country. The U.S. is set to contribute $200 million to the effort.
  • It appears that Donald Trump didn’t get a jury trial in his $250 million New York civil fraud case because his lawyers forgot to check a box.
  • Former White House chief of staff John Kelly confirmed that Trump referred to American soldiers as “losers” and “suckers” while in office.
  • Rep. Henry Cuellar (D-TX) was carjacked in Washington, D.C., last night, just a mile from the Capitol. He was unharmed, although his car and phone were stolen.
  • Things keep getting worse for Rep. Jamal Bowman (D-NY), who was forced yesterday to disavow his own office’s use of the term “Nazi.”
  • As they face twin opioid and migrant crises, Democratic state and local leaders from London Breed to J.B. Pritzker are taking firmer stances on drug policy and immigration.  

The day ahead.

Vice President Kamala Harris (left) will swear in Laphonza Butler (right) as a U.S. senator today. (Laphonza Butler / Twitter)

Chaos in the House: Under House rules, the chamber is required to take up Gaetz’s motion either today or tomorrow. Per CNN, McCarthy is set to make a procedural move to try and defeat Gaetz’s gambit — a “motion to table” — as early as today, which would be the first test of which man is stronger.

House Republicans and Democrats will both meet separately for caucus meetings at 9 a.m. ET to discuss their plans for the motion. The GOP gathering is sure to feature fireworks: Rep. Kat Cammack (R-FL) joked last night that the party should “do a PayPerView” of the meeting “and use the proceeds to pay down our $33 trillion national debt.” Democrats won’t be allowed to bring phones to their meeting, allowing the party to chart its path forward in secret.

A new senator: Vice President Kamala Harris will swear in her former aide, Laphonza Butler, as the new Democratic senator from California at 3 p.m. ET. Butler, the president of pro-choice group EMILY’s List, was appointed by Gov. Gavin Newsom (D-CA) to succeed the late Dianne Feinstein, who died last week at age 90. The appointee has already faced questions stemming from her residency in Maryland; she has yet to announce if she will seek a full term.

Butler will be the first Black woman in the chamber since Harris left to become VP in 2021, as well as the first Black LGBT senator ever. Butler’s first vote will be cast later today, on advancing James C. O’Brien’s nomination to be Assistant Secretary of State for European and Eurasian Affairs.

Quiet day for Biden: The president has nothing on his public schedule, although Bloomberg reports that he may hold a call with American allies to “reassure them that U.S. support for Ukraine will continue” even after assistance for Kyiv was left out of the government funding measure approved on Friday.

Per the Wall Street Journal, the Pentagon has about $5.2 billion worth of weapons left in its coffers to send to Ukraine, which officials believe “could last only for another few months”

On the trail: It isn’t often that two presidential primary candidates square off one-on-one, but that’s what will happen tonight at 6 p.m. ET as Chris Christie and Vivek Ramaswamy hold their own debate on Bret Baier’s show on Fox News. “This is going to be fun,” Christie tweeted.

Meanwhile, Donald Trump is expected to attend the second day of his New York civil fraud trial, where he angrily railed against the case on Monday.

In the states: In Oregon, State Rep. Paul Holvey (D) faces a recall election after clashing with labor leaders. Per Pluribus News, he is only the 40th state legislator in American history to face a recall — and the first since 2018.

Before I go...

Nobel Prize-winning scientists Katalin Karikó and Drew Weissman. (Peggy Peterson / Penn Medicine)

Here’s an inspiring story: Katalin Karikó and Drew Weissman, the University of Pennsylvania researchers whose work laid the foundation for the mRNA Covid vaccines by Pfizer and Moderna, were awarded the Nobel Prize in Physiology or Medicine on Monday. But their path to the Nobel was far from straightforward.

Karikó has focused on messenger RNA for most of her career. “She was convinced,” the New York Times reported in 2021, that “mRNA could be used to instruct cells to make their own medicines, including vaccines.”

But most of Karikó’s colleagues laughed at her first experiments. “For many years her career at the University of Pennsylvania was fragile,” the Times reported. “She migrated from lab to lab, relying on one senior scientist after another to take her in. She never made more than $60,000 a year.”

At one point, Penn demoted Karikó from a full-time position and said she wasn’t “of faculty quality.” When Karikó and Weissman sent their groundbreaking 2005 paper on mRNA to the prestigious journal Nature, it was rejected as an “incremental contribution.”

That paper ended up planting the seeds for the vaccines that saved an estimated 8 million lives in just their first year on the market. Now, its authors are Nobel laureates. (By the way, none of that stopped Penn or Nature from celebrating the scientists on Monday, without any acknowledgment of their past skepticism.)

Click here to read the NYT’s 2021 profile of Karikó for free.

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