Tangle - The Supreme Court's CFPB ruling.

I’m Isaac Saul, and this is Tangle: an independent, nonpartisan, subscriber-supported politics newsletter that summarizes the best arguments from across the political spectrum on the news of the day — then “my take.”

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Quick hits.

1. Donald Trump’s lawyers rested their case in the so-called hush money trial, setting the stage for closing arguments next week. During the final days of testimony, former Trump lawyer Michael Cohen admitted he stole from the Trump Organization. (The latest)
2. Wikileaks founder Julian Assange can appeal his extradition to the U.S. to face espionage charges, a London court ruled on Monday. (The decision)
3. Chair of the Federal Deposit Insurance Corporation (FDIC) Martin Gruenberg said he is prepared to step down after a scathing report on harassment inside the agency. (The announcement) 
4. Four states — Georgia, Kentucky, Idaho, and Oregon — are holding House primaries on Tuesday, while California’s 20th district is holding an election to replace former House Speaker Kevin McCarthy (R). (The elections) 
5. The United States says its troops will exit Niger no later than September 15 after a new ruling junta terminated its military cooperation accord. (The withdrawal)

Today's topic.

The CFPB ruling. On Thursday, the Supreme Court rejected a conservative-led challenge to the funding structure of the Consumer Financial Protection Bureau (CFPB). In a 7-2 ruling, the justices concluded that the CFPB's funding did not violate the Constitution, reversing a lower court decision. Justice Clarence Thomas broke with Samuel Alito and Neil Gorsuch, whom he typically aligns with, to write the majority opinion.

Back up: The CFPB is a federal regulatory agency established in 2010 to oversee financial products and services as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Sen. Elizabeth Warren (D-MA) spearheaded the creation of the agency and led it in its early days. The CFPB gives consumers legal pathways to take action against predatory companies and financial practices, and it has returned nearly $21 billion to consumers since its founding.

However, the agency has been politically divisive from the start. Many Republicans have opposed the agency, particularly its non-traditional funding mechanism: Rather than relying on the annual budget process in Congress for funds, the CFPB is funded directly by the Federal Reserve, with an annual limit of over $700 million.

The case: In 2017, the CFPB issued new regulations on payday lending, prompting two industry groups to challenge the rule in court. A three-judge panel from the U.S. Court of Appeals for the 5th Circuit rejected their challenge to the rule, but agreed with the plaintiffs that the CFPB's funding structure violated Article 1 Section 9 of the Constitution, which says that "no money shall be withdrawn from the Treasury, but in Consequence of Appropriations made by Law."

The 5th Circuit said the CFPB's funding was "double insulated" from Congress because it received its money directly from the Federal Reserve and because the Fed (rather than Congress) determined the amount of funding necessary to carry out its duties.

The SCOTUS ruling: On Thursday, the Supreme Court overturned that ruling. In his 22-page opinion, Justice Thomas argued that appropriations have been understood as a legislative means of authorizing expenditures from a source of public funds since their inception in the 18th century. The CFPB's funding fits squarely in this definition of appropriations, Thomas wrote, since Congress specified the Federal Reserve as the source for funding and indicated how the CFPB should use it. Thomas was joined by Chief Justice John Roberts and Justices Sonia Sotomayor, Brett Kavanaugh, Amy Coney Barrett, Elena Kagan, and Kentanji Brown Jackson in his opinion.

In dissent, Justice Alito argued that the drafters of the Constitution would be "shocked" and "horrified" by the CFPB's funding scheme, and said centuries of historical practice show that the Appropriations Clause demands legislative control over the source and disposition of the funds. Alito added that the CFPB's funding structure "affords it the very kind of financial independence that the Appropriations Clause was designed to prevent."

Today, we're going to look at some arguments from the right and left about the ruling, then my take.

What the right is saying.

• The right is disappointed in the court’s decision but suggests the victory for the CFPB could be short lived.
• Some express dismay at Congressional Republicans’ seeming disinterest in disbanding the agency. 
• Others say the CFPB will continue to harm the consumers it's meant to protect.

In The Wall Street Journal, Hal Scott called the ruling a “pyrrhic Supreme Court victory” for the CFPB.

“The justices held that the Constitution’s Appropriations Clause authorizes Congress to fund the bureau with profits from the Federal Reserve. But for nearly two years the Fed has been losing money because of rising interest rates. That calls into question the legitimacy of the CFPB’s funding since September 2022—and all regulations issued during that period,” Scott wrote. “The Fed has continued to fund the CFPB, deepening its losses, to the tune of $721 million in 2023. This funding is supposed to come from Fed earnings, and unless the term ‘earnings’ is understood to mean revenue without regard to cost… the CFPB would seem to have no valid claim now to any money from the Fed.”

“This means the agency can’t rely on the Appropriations Clause—or last week’s decision by the high court—to justify the legality of its continued operations. Its general operations may now be illegal, including current enforcement of all its rules,” Scott said. “This CFPB shutdown could be accomplished through a new round of litigation—or if Donald Trump becomes president again, he could order it himself. Meanwhile the Fed should itself have to justify how it can fund an agency when the Fed has no real earnings.”

In RedState, Ward Clark asked “how might the GOP rein in this rogue agency?”

“The CFPB survived a major challenge when the Supreme Court allowed it to keep its over-regulating doors open… So, we may very well ask: What now? Well, some members of Congress have some thoughts on that,” Clark said. “Representative Andy Barr (R-KY) is pushing the CFPB Transparency and Accountability Reform Act, HR 2798. This bill fiddles with the structure of the CFPB but does not eliminate it, as does Rep. Blaine Luetkemeyer's Consumer Financial Protection Commission Act, HR 1411. This strikes me as a lot like rearranging deck chairs on the Titanic.”

“There's a common thread in all those proposed bills, none of which are likely to go anywhere; none of them just outright repeal the CFPB,” Clark wrote. “Barring some overwhelming takeover of Congress and the Executive Branch by actual small-government conservatives and libertarians, it's looking like we're stuck with the CFPB and all of its overweening and intrusive activities, along with all of the other overweening and intrusive government bureaus and agencies. But the fight is still worth fighting, if for no other reason than to keep the inevitable expansion to a halfway sane level.”

In The Hill, Patrick M. Brenner said the decision threatens “American consumers.”

“This ruling will only embolden the CFPB, which, under the leadership of Director Rohit Chopra, has increasingly instituted overly broad regulatory actions. A recent directive has cast an unnecessarily wide and destructive net over popular comparison shopping websites, arguably threatening the American way of life,” Brenner wrote. “The Supreme Court has preserved the CFPB’s carte blanche but also brings to light the agency’s overreach. Originally intended to regulate financial product comparison tools, the CFPB’s latest directive ensnares websites that millions of Americans rely on for services ranging from booking vacations to finding babysitters and plumbers.”

“Ironically, price comparison websites are achieving what the CFPB was fundamentally created to do: Protect the consumer’s pocketbook. By providing a platform for easy access to competitive pricing information, these tools naturally enhance market transparency and drive down prices, offering a shield against the inflationary pressures that so many Americans currently face,” Brenner said. “The CFPB demands rigorous scrutiny by unconflicted watchdogs to restore sanity to our digital and economic landscapes. Only then can we ensure that our digital domains remain vibrant and accessible from the heavy hand of misguided governance.”

What the left is saying.

• The left is relieved by the court’s decision, saying a different outcome would have been disastrous. 
• Some lambast the Fifth Circuit for forcing the court to take the case in the first place.
• Others question the historical accuracy of the dissent. 

In Vox, Ian Millhiser wrote “the Supreme Court decides not to trigger a second Great Depression.”

“In a sensible world, no judge would have taken the plaintiffs’ arguments in CFPB v. Community Financial Services Association seriously. Briefly, they claimed that the Constitution limits Congress’s ability to enact ‘perpetual funding,’ meaning that the legislation funding a particular federal program does not sunset after a certain period of time,” Millhiser said. “The implications of this entirely made-up theory of the Constitution are breathtaking. As Justice Elena Kagan points out in a concurring opinion in the CFPB case, ‘spending that does not require periodic appropriations (whether annual or longer) accounted for nearly two-thirds of the federal budget’ — and that includes popular programs like Social Security, Medicare, and Medicaid.”

“Thankfully, that won’t happen. Seven justices joined a majority opinion in CFPB which rejects the Fifth Circuit’s attack on the United States economy, and restates the longstanding rule governing congressional appropriations,” Millhiser wrote. “As seven justices correctly conclude, the fact that CFPB’s funding mechanism is unusual does not make it unconstitutional, and judges are not supposed to simply make up new constitutional restrictions on Congress because they think that Congress acted in a way that is novel or unwise.”

In CNN, Steve Vladeck criticized the “truly preposterous ruling by the Fifth Circuit” that put the case before the court. 

“The real headline from Thursday is not that the Supreme Court is more ‘moderate’ than its critics often claim; it’s that there’s a court of appeals that is even more extreme — not just in this case, but in 10 other cases the Supreme Court will decide this term,” Vladeck said. “Had the Supreme Court ruled the other way, all of the agency’s work on behalf of consumers could have been erased…. At an even broader level, the argument against how Congress funds the CFPB could also have been used to go after the constitutionality of the Federal Reserve itself — with potentially cataclysmic financial consequences.”

The outcome “is representative of a pattern we’re likely to see over and over again this term — in which bipartisan Supreme Court majorities regularly slap down the Fifth Circuit in cases with clear ideological valences,” Vladeck added. “The real takeaway from Thursday’s ruling — and from the broader pattern for which it is likely to be an exemplar — is that the current Supreme Court is less radical than the Fifth Circuit. But given the Fifth Circuit’s behavior in this case and others, that tells us a lot more about the federal appellate judges in Louisiana, Mississippi and Texas than it says about the justices in Washington.”

In Balls and Strikes, Madiba K. Dennie said “the ‘originalist’ justices keep getting history spectacularly wrong.”

“The majority opinion was written by Justice Clarence Thomas. In standard originalist fashion, he purported to consult the text of the Constitution and contemporaneous sources to conclude that, in order to satisfy the original public meaning of the Appropriations Clause, appropriations ‘need only identify a source of public funds and authorize the expenditure of those funds for designated purposes,’” Dennie wrote. “Alito’s dissent, which Gorsuch joined, offers a dueling originalist account that reaches a very different conclusion.”

“Alito states, incorrectly, that Dodd-Frank empowers the CFPB ‘to draw as much money as it wants from any identified source for any permissible purpose until the end of time,’” Dennie said. “This is not the first time Supreme Court justices have made originalist arguments that befuddled people who actually know a thing or two about the time period… Conservatives like Thomas and Alito insist that squabbling over the past is the only appropriate way to assess the Constitution’s meaning. But the justices aren’t trained in history, and actual historians are becoming adamant in real time that the justices aren’t any good at it.”

My take.

Reminder: "My take" is a section where I give myself space to share my own personal opinion. If you have feedback, criticism, or compliments, don't unsubscribe. Write in by replying to this email, or leave a comment.

• Maybe I’m biased by my background, but I'm convinced by arguments that the CFPB’s funding is constitutional.
• I also think the CFPB does mostly good work.
• Opponents can be optimistic that increased scrutiny could result in a change to its funding model, and we can all be heartened by a sound decision from the court.

One of the first big pieces of investigative journalism I ever worked on was about payday lending. I published the piece in a news outlet called A Plus, which has since folded, and unfortunately it no longer lives on the internet (there is a web archive link to the story here). For the story, I went through the process of taking out a series of payday loans, reluctantly justifying their need with more and more dire financial situations to the brokers on the other end. I tried to paint the picture of the exact kind of desperate person who should not take out a payday loan, then listened carefully as a half-dozen different payday lending companies talked me into it.

The story was eye-opening, and after the piece was published it actually ended up being cited by Congress in a call for universities and retirement plans to divest from payday lending services. I left the experience of reporting the piece feeling that there was a need for agencies like the Consumer Financial Protection Bureau, and I was rather impressed with some of the work they were doing.

I say all this just to share my own personal experience and bias as I look at this story: I believe the CFPB's work is valuable and important. Does that mean it never oversteps or over-regulates? Of course not. Patrick Brenner, whom I interviewed for today's Tangle podcast, makes a good argument that the CFPB's recent rule against comparison websites was a major overreach. But on net, I think it genuinely looks out for working-class, middle-class, and lower-income Americans who are most often the victims of predatory financial practices. That the CFPB survived this court challenge is a testament to how well the legislation was written, and this outcome will surely add to Senator Elizabeth Warren's reputation as a policy wonk.

Of course, the value of the CFPB’s work has nothing to do with the constitutionality of its funding, which is what this case was about.

I'm trying hard to leave my bias about the CFPB at the door here, but I think the 7-2 ruling was the right outcome. Justice Elena Kagan punched what I thought was the cleanest hole in the argument from the plaintiffs: Spending that does not require periodic appropriations accounts for nearly two-thirds of the federal budget — programs like Social Security, Medicare, and Medicaid. The idea that all this funding has somehow been unconstitutional for over a century is hard to buttress with any serious historical argument. 

As Clarence Thomas wrote for the majority, since our nation’s founding we’ve understood that Congress can appropriate the use of public funds. The Federal Reserve is a source of public funding, and Congress authorized it to fund CFPB. Congress can always revise that (which serves as the oversight), and it isn’t unconstitutional for Congress to delegate its funding. Even Brenner, in his appearance on the podcast, conceded that this ruling looked right to him — though he’s hopeful a future president or Congress will dissolve the CFPB.

For critics like Brenner, there is some silver lining here: This ruling could bring attention to possible avenues for reforming the agency’s funding mechanism. And the CFPB’s opponents are indeed getting to work in the legislative arena, with two bills already floated in Congress to address some of the concerns about the CFPB.

On top of spurring some reform and just sounding like a more defensible interpretation of the Constitution, the ruling is good for two other reasons. For one, it brought together an unusual coalition of justices at a time when the court is facing political controversies about its bias. Two, it balances a recent trend of the court restricting the reach of federal agencies, reinforcing the idea that it isn’t going to undercut programs unless it has strong cause to. 

With that context, I’m heartened that the court clearly stated that the structure or purpose of any agency is not going to be judicially undermined if Congress writes clean legislation to clearly authorize it. Hopefully lawmakers will take the cue, stop expansively interpreting agency power, and draft more legislation like this one that can withstand court challenges. 

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Your questions, answered.

Q: Is Tangle gonna cover the commencement speech made by Harrison Butker? I don’t think his comments were excusable but I’m wondering if maybe there’s something I’m missing.

— Anonymous from Columbia, MO

Tangle: Well, the story is a little bit on the “culture war” side of things for us to want to touch it, but at the same time it’s generating a good bit of buzz — and I do have some thoughts. So while we wouldn’t want to devote a full Tangle edition to Butker’s address, I’m glad you asked. 

To catch up those of you who didn’t know, Harrison Butker is the kicker for the Kansas City Chiefs and an outspoken Catholic. Last week, Butker gave the commencement address at Benedictine College, a Catholic liberal arts school in Kansas. His address ended up sparking hundreds of headlines and lots of controversy.

First, as a commencement address, I’ll concede that I thought it started out pretty divisively. Butker used exactly the kind of rhetoric that polarizes us politically and culturally, criticizing the sitting president for ushering in “degenerate cultural values” — a broad jab similar to what many conservatives and moderates rightfully found so distasteful when celebrities were speaking out against Trump during his presidency. That’s fine as a political speech, but I just don’t think a commencement address is the time for that. Further, I was surprised to see that he told the audience that you’re not truly Catholic if you think “that you can be both Catholic and pro-choice,” when the majority of Catholics hold some pro-choice views.

Second, as a cultural statement, I really don’t think it’s a big deal at all. The main thrust of his speech was about how Catholic values are built to thrive in the modern world and to implore graduates to be courageous and outspoken about those values. Mainly, Butker is getting criticized for telling the women in the audience to be willing to embrace being stay-at-home mothers, crediting his success to his wife embracing faith as well as “one of the most important titles of all: homemaker.” But that’s a perfectly legitimate and pretty common conservative view, and the line was followed by 18 seconds of applause. 

Third, as a statement about his views, I thought the points drawing the most criticism were both consistent with the theme of his speech and appropriate for the audience he was addressing. Butker said speaking out against abortion was a moral duty, but he also told graduates that they should have courage to make stands they consider to be truly Catholic. While opinions on being pro-choice vary, the Catholic Church clearly opposes it — so Butker is right that that is the Catholic position. The same is true for IVF, which he called “playing God with having children.” Again, that might seem fringe to some Americans, but the Catholic Church more or less agrees with him.

So, to summarize: An outspoken Catholic gave a speech championing Catholic values at a Catholic university, received a positive response from those in attendance, and then a bunch of non-Catholics and liberals got really upset. It’s all kind of silly.

I think that’s the big takeaway — it might have been an inappropriate secular speech at a secular university, but it wasn’t a secular speech or a secular graduating class, and he shouldn’t be criticized as if it was. Some are chiding him for calling Taylor Swift his “teammate’s girlfriend,” but that was clearly a joke (though he should be getting a little flak for attributing a Chaucer quote to her). In context, and with the Biden statements aside, I thought it was a total non-story — and the people petitioning for him to lose his job are acting pretty unhinged.

Want to have a question answered in the newsletter? You can reply to this email (it goes straight to my inbox) or fill out this form.

Under the radar.

For over two decades, the U.S. has presumed that al-Qaeda acted alone on 9/11 and has crafted foreign policy in the Middle East accordingly. But a growing body of evidence suggests that understanding is wrong, and a new lawsuit brought by the families of 9/11 victims alleges that al-Qaeda had not just significant but decisive support from the Saudi government. The 71-page document was released in a redacted form earlier this month, summarizing the evidence the plaintiffs have gathered in discovery proceedings and through recently declassified materials. The Atlantic has the story (paywall).  

Numbers.

• 205 million. The estimated number of consumers or consumer accounts eligible to receive relief from the CFPB’s enforcement and supervisory work.
• $4.8 billion. The approximate amount of civil penalties imposed by the CFPB on companies and individuals for violating the law.
• 56. The number of public enforcement actions filed by the CFPB in 2015, the highest in the agency’s history. 
• 29. The number of public enforcement actions filed by the CFPB in 2023.
• 256,000. The approximate number of consumers whose records were illicitly transferred to a personal email account by a former CFPB employee in March 2023. 
• 61%. The percentage of Americans who said they approved of increased government regulation of banks and major financial institutions in 2010, shortly after the Dodd–Frank Act was signed into law, according to Gallup.
• 79%. The percentage of U.S. voters who said they support the mission of the CFPB in 2022, according to a poll from Lake Research Partners. 

The extras.

• One year ago today we had just written a Friday edition announcing our first-ever live event.
• The most clicked link in yesterday’s newsletter was our video on the Penn protests.
• Nothing to do with politics: AI and the “zombie internet.”
• Thursday’s survey: 1,273 readers answered our survey on the Samuel Alito upside-down flag controversy with 47% saying it showed his bias and was an ethics violation. “I understand that Alito’s wife put the flag up, but I don’t understand why Alito doesn’t just say it was over the line. What’s the harm in an apology?” one respondent said.

Have a nice day.

Andrew D’Eri is a 24-year-old with autism who was looking to find a job. His father, John, saw him struggling and had an idea for how to help: Along with Andrew’s older brother, John founded Rising Tide Car Wash as a way to help Andrew and others like him find work. Now, Rising Tide employs 80 people with autism over two locations in the Parkland, Florida, area. “Typically, people with autism are really good at structured tasks, following processes, and attention to detail. So we saw that they're really important skills that people with autism have that make them, in some cases, the best employees you can have,” John said. NDTV has the story.

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