WASHINGTON, DC — The Supreme Court on Monday denied review of a major challenge to the constitutionality of the CFPB and Dodd-Frank, resulting from the understandable recusal of Justice Brett Kavanaugh, who was still a judge on the federal appeals court handling the case on its way to the justices when the case was pending before that court.
Congress enacted Dodd-Frank in 2010 where the government asserted vast new powers over banking and financial services, essentially as sweeping as those the Affordable Care Act (Obamacare) claimed over health care. Smaller banks nationwide are being forced out of business because they cannot comply with the crushing regulatory burden imposed by the banking-takeover statute.
Dodd-Frank also created the Consumer Financial Protection Bureau (CFPB) to implement much of the statute. CFPB is the brainchild of Sen. Elizabeth Warren (D-MA) when she was a law professor at Harvard, a position she would likely never have held except for the fact that Harvard Law School thought it was hiring its first-ever Native American professor. Warren was slated to be the first CFPB director and ran for the Senate after Republicans blocked President Barack Obama’s nomination of the person President Donald Trump often refers to as “Pocahontas.”
And as with Obamacare, Dodd-Frank raised profound constitutional questions.
State National Bank of Big Spring brought a lawsuit raising three constitutional challenges to Dodd-Frank. The first issue is that it violates the separation of powers for a single director to lead vast, independent agency of the CFPB when that director can only be removed by the president of the United States for “good cause” rather than serving at the pleasure of the president.
The second issue concerns the underlying idea of independent agencies. The Supreme Court in Myers v. United States (1926) affirmed the longstanding view of the Constitution that the president’s Appointments Clause authority mandates that the power to appoint includes the power to remove the person who currently holds the appointed position and thus that everyone the president appoints serves at his pleasure. In 1935, the Supreme Court in Humphrey’s Executor held that it is sometimes constitutional to insulate some appointees from removal, thus creating the concept of an “independent agency.” The second question in the challenge is whether Humphrey’s Executor should be overruled.
The CFPB is entirely financed by funds derived from fees in the financial services industry. The third issue is whether this violates the Appropriates Clause of the Constitution, under which Congress regularly appropriates the resources to fund federal agencies and hold them accountable.
Top-notch lawyers brought the case on behalf of State National Bank, including former White House Counsel C. Boyden Gray — a leading figure in the Federalist Society — attempting to take these issues all the way to the Supreme Court.
On Monday, the Supreme Court denied review. The reason was clear when the denial of certiorari included the notation that Justice Brett Kavanaugh was recused from the case.
Kavanaugh was still a judge on the U.S. Court of Appeals for the D.C. Circuit when this case was on appeal before that court, and even though he was not on the three-judge panel who heard the case — and so was not required to recuse from the case — he clearly decided to stay above reproach by not voting on the matter.
Many new justices take precisely that same approach, and judicial ethics experts largely applaud erring on the side of caution. For example, Justice Neil Gorsuch recused himself from an important case challenging the constitutionality of a Ten Commandments display because of his service as a judge on the lower court, considering that case overlapped the time of the appeal in that case.
Kavanaugh had previously decided cases involving these constitutional issues, opinions that strongly suggest he would have sided with the challengers here. But without his vote, it would have been impossible for the challengers to win this case, leaving it no surprise as to why the Supreme Court did not take a case that could easily result in a 4-4 tie with no decision.
Two other cases raise similar issues, both currently before the U.S. Court of Appeals for the Fifth Circuit.
American Check Cashing is a case that likewise challenges the constitutionality of the CFPB and is being led by former Solicitor General Ted Olson.
The other case is Collins v. Mnuchin, raising the same arguments over the constitutionality of the Federal Housing Finance Authority (FHFA). Supreme Court heavyweights Chuck Cooper and David Thompson are leading that charge and already won before the Fifth Circuit. At this point, the full Fifth Circuit could rehear the case en banc with all the court’s judges participating, or the FHFA could petition the U.S. Supreme Court to take the case.
If either of these cases reaches the Supreme Court, it could address the profound questions of constitutional government that Gray’s case raised.
The petition is State National Bank of Big Spring v. Mnuchin, No. 18-307 in the Supreme Court of the United States.
Ken Klukowski is senior legal editor for Breitbart News. Follow him on Twitter @kenklukowski.