Why Is Congress Giving Its Powers Away?

If he were alive today, James Madison would probably be most surprised and dismayed by one feature of today’s government — the willingness of Congress to cede its unique constitutional authorities to the executive branch. This both compromises and defeats the constitutional separation of powers and is therefore responsible for the vast number of federal administrative agencies, which each year make more than 3,000 rules that are binding on the American people.

Nevertheless, despite giving away large portions of its legislative authority, Congress until 2010 kept tight control of appropriations — its “power of the purse” to limit the funds that executive agencies are provided annually to carry out their work. This changed abruptly with the enactment of the Dodd-Frank Act, which created the Consumer Financial Protection Bureau (CFPB) and provided it with a unique financing mechanism that is now finally under constitutional challenge.

The CFPB, the brainchild of Senator Elizabeth Warren (D., Mass.), was created to consolidate in one agency almost all the federal government’s consumer-financial-protection authorities. To protect it from interference by the president, the agency was to be headed by a single administrator who served for a five-year term and could be removed from office only for “inefficiency, neglect of duty, or malfeasance.”

This in itself was an almost unprecedented departure from the norm. Restricting the president’s ability to remove a single administrator at will would make it impossible for him to carry out his electoral mandate as well as his constitutional responsibility to “see that the laws be faithfully implemented.” Last year, the Supreme Court ruled that the five-year term of the CFPB director was unconstitutional.

But Dodd-Frank also tried to make the CFPB financially independent of Congress, by relieving it of the need to get congressional appropriations. The agency was authorized to draw funds from the Federal Reserve System instead of going to Congress. The CFPB director could do this each year by requesting from the Fed any amount (not to exceed 12 percent of the Fed’s earnings) that the director determines “to be reasonably necessary to carry out the authorities” of the agency. Although the act made the CFPB a subordinate bureau of the Fed, the Fed was explicitly prohibited from interfering with its funding or operations. Moreover, Dodd-Frank also prohibited the Appropriations Committees of the House and Senate from reviewing the agency’s withdrawals from the Fed.

What is astonishing here is that Congress did not seem to care that it was giving up a vital constitutional power — the ability to control executive agencies by controlling their funding — for the sole purpose of preventing future presidents and future Congresses from exercising their traditional control over the agency’s activities, no matter what the mandate or views of the American people.

Now, eleven years after Dodd-Frank’s enactment, the issue of how the CFPB is financed has finally been brought before the federal courts by the New Civil Liberties Alliance (NCLA), a public-interest pro bono law firm in Washington, D.C., in the case Law Offices of Crystal Moroney, P.C. v. CFPB. It is now on appeal to the Second Circuit. NCLA is arguing, among other things, that the CFPB’s funding mechanism violates the nondelegation doctrine, which prohibits Congress from delegating its legislative or appropriations powers to an agency of the executive branch.

Because the Supreme Court has already ruled that the CFPB director may be removed by the president without cause, the case now has even more constitutional salience. Now, in effect, the president will be able to control the CFPB’s drawing of funds from the Federal Reserve, without oversight by either the Fed or Congress. This is yet another reason for the CFPB’s aberrant funding mechanism to be overturned.

In Federalist No. 78, Alexander Hamilton declared that the Framers intended the judiciary to be the “guardians of the Constitution.” What Congress was willing to do in the CFPB case for short-term political gain — giving up its power of the purse and distorting the entire constitutional framework — suggests that the judiciary must act promptly and forcefully to reestablish the constitutional role of Congress in the appropriation process.