Supreme Court May Destroy Elizabeth Warren’s Monster. Is The Fed Next?

There’s an interesting and possibly historic case now pending in the Supreme Court, as described in this article. The case involves a government agency called the Consumer Financial Protection Bureau (CFPB) set up by Senator Elizabeth Warren with congressional approval in the aftermath of the 2008 global financial crisis.

The CFPB is just another bureaucracy putting out rules and making life more difficult and more expensive for everyday Americans. What makes the case unique is that it questions the fact that the CFPB is self-funding, meaning it operates on fees and fines and does not depend on Congress for appropriations on an annual basis. (The CFPB director was originally immune from being fired by the president, but that was ruled unconstitutional in a separate case in 2020).

The self-funding aspect of the CFPB is now also being challenged on constitutional grounds as a violation of the separation of powers. This case could be a landmark decision on its own. But it has broader application.

The same issues under consideration in the CFPB case could also apply to other self-funding government entities including the Federal Reserve System. We’ll have to see how this turns out, but in recent years the Supreme Court has been highly attentive to both the separation of powers and the limited ability of Congress to delegate its authority to so-called independent agencies such as CFPB and the Fed.

There’s a chance that the Supreme Court will not only find the self-funding of CFPB to be unconstitutional, but will broaden that ruling to include all government agencies with similar arrangements including the Fed. If that happens, the Fed will have to go back to Congress for annual appropriates like the Cabinet-level agencies. That means congressional oversight, public hearings and the ability of Congress to control Fed policy through the appropriations process.

That attack on the Fed’s independence would be tantamount to abolishing the Fed as we know it today. It’s unclear if the Supreme Court will go that far, but they might. Here’s hoping.

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