The Supreme Court will decide if Trump can fire the head of the CFPB. The implications are enormous.
By: Ian Millhiser
Next Tuesday, the Supreme Court will hear Seila Law v. CFPB , which asks whether the president is allowed to fire the head of the Consumer Financial Protection Bureau (CFPB) at will. That question may seem minor and esoteric, but the stakes underlying Seila Law are enormous .
There is an off chance that the Court could use this lawsuit to strike down the entire CFPB — a decision that would dismantle much of the infrastructure Congress built in response to the 2008 financial crisis. Meanwhile, there’s a much greater chance that the Court will use this case to fundamentally alter the balance of power between the president and the federal government’s “independent” agencies.
The “Seila Law” in the Seila Law case is a law firm that is being investigated by the CFPB for allegedly engaging “in unlawful acts or practices in the advertising, marketing, or sale of debt relief services.” This lawsuit is its Hail Mary attempt to end that investigation by having the entire agency conducting the investigation struck down. Yet, while that outcome is unlikely, the Court’s decision in Seila Law is likely to fundamentally rework the balance of power between the president and various “independent agencies.”
Various federal officials, ranging from the CFPB director, to Federal Reserve governors, to members of the Federal Trade Commission, serve in independent agencies. That means that the agency’s leaders enjoy a certain amount of job security. They can be fired by the president, but only “ for cause ” or for “ inefficiency, neglect of duty, or malfeasance in office .”
The legal theory animating Seila Law is that the CFPB director, at least, may not be given this kind of job security. As a constitutional matter, the lawyers behind Seila Law argue, the president has the authority to oversee the CFPB — and that includes the power to fire its director if the president objects to how the CFPB is being run.
In the short term , a decision allowing the CFPB director to be fired at will by the president could benefit Democrats — the current director, Kathy Kraninger, is a Trump appointee whom a Democratic president would probably prefer to replace as soon as possible. But there are also very good reasons why the heads of independent agencies are protected from being fired. And, if the Supreme Court strips these agency heads of their protection, President Trump could easily find new ways to abuse his power.
If the president had the power to fire Federal Reserve governors at will, for example, he could remove Fed governors unless they goose the economy by keeping interest rates low during a presidential election year — potentially changing the outcome of that election.
The “unitary executive,” explained
Seila Law could be the culmination of a conservative crusade that began more than three decades ago, with Justice Antonin Scalia’s dissenting opinion in Morrison v. Olson (1988).
Morrison involved a federal law, which expired in 1999 , that provided for “independent counsels” — a kind of special prosecutor who could only be fired for cause. The Court upheld this law in a 7-to-1 decision, with Scalia the only voice in dissent.
As Scalia argued, the Constitution provides that “the executive Power shall be vested in a President of the United States .” This provision, according to Scalia, “does not mean some of the executive power, but all of the executive power.” Thus, because the power to bring prosecutions is vested in the executive branch, there cannot be a prosecutor who is “independent” of the president. Under Scalia’s view, federal officers must either serve at the pleasure of the president, or be responsible to an official who serves at the will of the president.
Scalia’s Morrison dissent laid out the “unitary executive” theory of the presidency. Under this theory, the president sits at the top of the executive branch’s org chart — and everyone beneath him must be accountable to that president.
Justice Scalia’s Morrison dissent, it should be noted, is a dissent . Scalia’s idea of a unitary executive lost out in 1988 — he couldn’t even convince a single one of his colleagues to join his jeremiad against agency officials who act independently from the president.
But Scalia’s dissent has also garnered a cult following among conservatives in the more than three decades since it was written, and many of its most loyal fans are now in very powerful jobs. One of them is Justice Brett Kavanaugh, who said in 2016 that he wanted to “ put the final nail ” in the Morrison majority opinion’s coffin.
Significantly, the Trump Justice Department also filed a brief arguing that the CFPB director’s job protections are unconstitutional. The unitary executive may not be the law of the land, yet, but it is the dominant viewpoint in conservative legal circles.
Two big questions at the heart of Seila Law
Though it is likely that five members of the Supreme Court will agree that the president should be allowed to fire the CFPB director, it is less clear whether the Court’s decision will have significant implications beyond the CFPB.
In Humphrey’s Executor v. United States (1935), the Supreme Court held that Congress could create independent agencies led by multi-person, bipartisan boards — and that the members of these boards could be given job security protections. But the CFPB is not led by such a board. It is led by a single director.
According to the Trump administration, this unusual arrangement, a single director shielded from accountability to the president, is different in kind from a multi-member board. “A single-headed independent agency presents a greater risk than a multimember independent agency of taking actions or adopting policies inconsistent with the President’s executive policy,” the Trump administration argues in its Seila Law brief .
Thus, it’s possible that the Supreme Court could preserve the core holding of Humphrey’s Executor — that independent agencies are fine so long as they are led by a multi-member board — while also striking down the CFPB’s single-director structure.
Another open question is whether the Court will hand down a sweeping invalidation of the CFPB, or merely change the rules governing when its director may be fired.
The lawyers challenging the CFPB’s single-director structure suggest that the agency should cease to exist . “Congress’s foremost goal in structuring the CFPB was to create an agency independent from outside influence,” they claim. So if the agency cannot be independent, it should be struck down in it entirety (or, at least, it should be prevented from bringing enforcement actions).
Realistically, there are unlikely to be five votes for such a radical outcome. Even the Trump administration rejects the argument that the entire agency should be struck down — it argues in its brief that there is “no basis to conclude that Congress would have preferred to have no Bureau at all rather than a Bureau headed by a Director who would be removable.” Similarly, though Kavanaugh is one of the Court’s most outspoken defenders of the unitary executive theory, he also heard a very similar lawsuit to Seila Law when he was a lower court judge — and his opinion in that case was relatively measured.
Although Kavanaugh agreed that the president should have the power to fire the CFPB director, he also wrote that the CFPB may continue to operate with the president able “to remove the Director at will at any time.” Thus, Kavanaugh would keep the agency largely intact.
Without Kavanaugh’s vote, it’s difficult to see how litigants hoping to kill the CFPB in its entirety will find a majority on this Supreme Court.
The short term effect of Seila Law , in other words, could potentially be very good for Democrats. As a practical matter, the Court may simply allow the next Democratic president to fire Trump’s CFPB director on day one of the new administration.
But the Court could also give Trump broad new powers to intimidate members of the Federal Reserve board and other key agencies. And there is, at least, a small chance that it will strike down the CFPB in its entirety.
Photo:President Donald Trump greets Supreme Court Justice Brett Kavanaugh, with Justices Elena Kagan and Neil Gorsuch looking on. Alex Wong/Getty Images