Supreme Court Lifts Limits on Trump’s Power to Fire Consumer Watchdog

WASHINGTON — The Supreme Court ruled Monday that the president is free to fire the director of the Consumer Financial Protection Bureau without cause. The decision, rejecting a federal law that sought to place limits on presidential oversight of independent agencies, was a victory for the conservative movement to curb the administrative state.

The vote was 5 to 4, with the court’s five more conservative justices in the majority.

The bureau, the brainchild of Elizabeth Warren, then a law professor at Harvard and now a senator and former presidential candidate, was created as part of the Dodd-Frank Act, which was passed in 2010 after the financial crisis. In an effort to protect the bureau’s independence, the statute said the president could remove its director only for cause, defined as “inefficiency, neglect of duty or malfeasance.”

President Trump targeted the agency, appointing Mick Mulvaney, the former South Carolina congressman, as interim director after the agency’s original director, Richard Cordray resigned in late 2017. Mr. Mulvaney, who was also the budget director, saw it as a an opportunity to dismantle an agency vilified by Republicans since its inception as an example of government overreach.

Business groups, which shared that view, challenged the law’s limit on presidential power in court, saying that it violated the separation of powers. The Trump administration agreed with the challengers. The bureau once took the opposite position, but it changed its stance last year, agreeing that its director could be fired at will.

The case before the court, Seila Law v. Consumer Financial Protection Bureau, No. 19-7, was brought by a law firm that objected to an investigation of aspects of its debt relief services. The firm challenged the bureau’s power to conduct the investigation, saying its director was unconstitutionally insulated from presidential control.

The firm lost in the United States Court of Appeals for the Ninth Circuit, in San Francisco, which concluded that Supreme Court precedents upholding limits on presidential power to remove officials on multimember commissions and independent counsels allowed the bureau’s structure.

In the Supreme Court, the firm argued that those precedents were off point and that “the court has never upheld the constitutionality of an independent agency that exercises significant executive authority and is headed by a single person.”

In 2018, in a separate case, the District of Columbia Circuit upheld the contested provision. Justice Brett M. Kavanaugh, then a judge on that court, issued a 73-page dissent arguing that “the C.F.P.B. is unconstitutionally structured because it is an independent agency that exercises substantial executive power and is headed by a single director.”

In the case the Supreme Court agreed to hear, both sides agreed that the bureau’s structure violated the Constitution. That consensus caused the court to appoint Paul D. Clement, who served as solicitor general in the Bush administration, to defend the Ninth Circuit’s position.

Though the law firm and the administration agreed that the bureau’s structure violated the Constitution, they were divided about whether actions taken by the director would have to be voided if the Supreme Court struck it down. The firm said yes, while the administration said no.

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