The Judicial Arsonists Went Too Far for the Conservative Justices This Time

The Supreme Court delivered a vehement smackdown to a rogue and lawless lower court on Thursday, upholding the Consumer Financial Protection Bureau’s funding structure by a 7–2 vote. Incredibly, Justice Clarence Thomas, the court’s staunchest conservative, wrote the majority opinion emphatically rejecting the 5^th U.S. Circuit Court of Appeals’ claim that the CFPB, a consumer watchdog agency, is unconstitutional. In the process, the court exposed the 5^th Circuit’s hackish manipulation of history to reach a far-right partisan result with zero basis in law.

That said, Thursday’s decision in CFPB v. Community Financial Services Association is not a sign that SCOTUS is tacking toward the center. Rather, it’s evidence of just how far off the rails the 5^th Circuit went after it was stacked with Donald Trump’s aggressive appointees. Trump’s judges are auditioning for a Supreme Court appointment if Trump wins a second term by disregarding all known limits on judicial power to hobble the Biden administration. SCOTUS’s docket is increasingly dominated by the 5^th Circuit’s most nihilistic big swings, and Community Financial won’t be the last decision of the term that humiliates the lower court with a lopsided, vehement reversal. These rulings are not really progressive victories, because they involve frivolous cases that should never have existed in the first place. We should not overpraise the Supreme Court for declining to leap into every abyss that the 5^th Circuit invites the justices to jump into.

Congress created the CFPB through the Dodd–Frank Act after the financial crisis of 2008, directing the agency to protect consumers against fraud and deception in home mortgages, credit cards, consumer loans, and retail banking. It also gave the agency a broad mandate to guard against “abusive” practices in financial services, which led to a crackdown on high-interest “payday lenders.” One common practice of these predatory businesses is to repeatedly attempt to withdraw money from a borrower’s account long after it’s clear that there are insufficient funds. The business then demands fees from each failed withdrawal. These fees add up, because once payday lenders have identified an account with low funds, they’ll attempt withdrawal over and over again—as many as 11 times a day—to maximize profit.

The CFPB finally banned this practice in 2017. But an association of payday lenders represented by the conservative law firm Jones Day challenged the rule on the grounds that the CFPB is funded unconstitutionally. At least seven appeals courts had previously considered and rejected this argument (as did another last year). But Jones Day maneuvered its case before the 5^th Circuit, which—standing alone, as usual—agreed that the agency draws its budget unlawfully and effectively struck it down. That was no surprise: In recent years, this heavily Republican circuit has veered to the fringes of the conservative legal movement, issuing a series of precedent-defying, hard-right decisions that expand its power to new heights.

To understand the 5^th Circuit’s ruling against the CFPB, it’s best to close your history books, toss your pocket Constitution, and open your mind to the possibility that these judges are just making up whatever arguments are necessary to blow up the parts of the federal government that they dislike. (Hint: most of it.) Judge Cory Wilson, a Trump appointee, embraced a theory first put forth by Judge Edith Jones, a Ronald Reagan appointee and crude, unapologetic partisan. (Judges Jennifer Walker Elrod, Don Willett, Kurt Engelhardt, Kyle Duncan, and Andrew Oldham also endorsed this now-discredited theory.)

This collection of shameless firebrands rooted their hostility toward the CFPB in the Constitution’s appropriations clause, which states that “no money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” The Supreme Court has said that this means “simply that no money can be paid out of the Treasury unless it has been appropriated by an act of Congress.” And the CFPB’s budget is appropriated: By statute, it’s drawn from the Federal Reserve, which in turn is largely funded by interest earned on securities. The 5^th Circuit, though, made up a new rule: Appropriations, it proclaimed, must be funded directly by Congress, and must be done so regularly. The CFPB’s “perpetual funding,” combined with its “insulation” from the congressional appropriations process, renders it unconstitutional.

Don’t even try to make sense of this blather—you can’t. The 5^th Circuit conjured the theory from thin air, in direct violation of numerous Supreme Court precedents that say the exact opposite. Taken seriously, the theory would throw the nation into chaos. First, it would undermine the constitutionality of many other financial regulators, including the Federal Reserve, potentially destabilizing the economy. Second, it would jeopardize the legality of many other government programs, like Medicare and Social Security, that are perpetually funded and amount to trillions of dollars in annual “mandatory” spending. Third, as housing lenders warned, it would crash the economy by ripping away key legal protections provided by the CFPB to home lenders and investors, setting off a chain reaction that would topple the national mortgage market and risk another recession.

Thankfully, as none other than Clarence Thomas explained on Thursday, the 5^th Circuit is dead wrong. In his opinion for the court, Thomas started with the Founding-era meaning of the word “appropriations,” which were understood as nothing more than “a legislative means of authorizing expenditure from a source of public funds for designated purposes.” This “identified source and purpose” of money is “all that is required for a valid appropriation,” the justice wrote, echoing what constitutional historians told the court. He then canvassed the history of appropriations in England (from the Middle Ages to the Revolution), the American colonies, and post-Revolutionary America—all of which confirmed his broad interpretation of the constitutional text.

In a concurrence, Justice Elena Kagan extended the history lesson into the 19^th and 20^th centuries. She pointed to a “continuing tradition” of Congress creating “a variety of mechanisms to pay for government operations” for “over 200 years now,” none of which were second-guessed by courts. And Justice Ketanji Brown Jackson wrote a brief solo concurrence urging the judiciary to defer to the democratic process instead of fabricating excuses to invalidate Congress’ handiwork. Only Justice Samuel Alito, joined by Justice Neil Gorsuch, dissented, reprising the 5^th Circuit’s allegation that “the Framers would be shocked, even horrified,” by the CFPB’s funding “scheme.”

These three opinions shine a light on the choose-your-own-adventure aspect of originalism: Pick your preferred time frame, your favored scholars and sources, and you can mount an “originalist” argument for pretty much any position you want. Here, Thomas put the most emphasis on the practice of the American colonies and the First Congress, deeming this era the most relevant. Kagan went further, highlighting congressional practices into the late 20^th century. To side with the 5^th Circuit, Alito had to fixate on a somewhat random period of English history in the 17^th century—from James I to Charles I—to assert that the Constitution empowers courts to strike down appropriations that they dislike.

Are these kings’ squabbles with the British Parliament over “tonnage and poundage duties” especially germane to the meaning of the U.S. Constitution? Of course not. Alito just zeroed in on this chapter of dubious relevance because he believed it bolstered his foregone conclusion. Which means, as Thomas wrote, that he “largely ignores the historical evidence that bears most directly on the meaning of ‘appropriations’ at the founding.”

Community Financial is best understood as a memo to the 5^th Circuit to cut it out with the nuttiness. Chief Justice John Roberts sent that message loud and clear by assigning the majority opinion to Thomas, the most conservative justice and a longtime foe of the administrative state. Justices Brett Kavanaugh and Amy Coney Barrett sent the message, too, by signing on to both Thomas and Kagan’s opinions, putting up a cross-ideological front against the 5^th Circuit’s extremism. Jackson got a dig in, too, reminding the lower court that the Constitution lets Congress “address new challenges by enacting new laws and policies—without undue interference by courts.”

The big question now is whether this coalition of sanity will hold for the remainder of the term. Some of the biggest outstanding cases involve 5^th Circuit decisions that granted domestic abusers a right to possess guns, invalidated the federal bump stock ban, destroyed the Securities and Exchange Commission, strictly limited access to medication abortion, upheld Republican censorship of the internet, and prohibited the Biden administration from communicating with social media companies about disinformation. Affirming even one of these wild decisions, which the conservative justices are likely to do, will embolden the 5^th Circuit to keep swinging for the fences.

Then again, maybe nothing will stop the judicial arsonists who keep jamming the Supreme Court with these gonzo rulings. Republican Party leaders have expressed dissatisfaction that Trump’s appointees do not unfailingly do their bidding. Lower court judges with Supreme Court ambitions—i.e., most Trump appointees—have internalized the lesson that absolute fealty to the GOP, expressed through cartoonishly lawless decisions, is the path to promotion. They cannot be embarrassed into respecting the law when they lack the capacity for shame in the first place.