News Release: Supreme Court Ruling Against CFPB Could Worsen Government Shutdowns 


Sept. 28, 2023


Carter Dougherty

Supreme Court Ruling Against CFPB Could Worsen Government Shutdowns
Court will decide if financial regulators can function during a budget impasse in Congress

Washington, D.C. – A ruling by the Supreme Court against the Consumer Financial Protection Bureau could imperil the functioning of numerous critical federal agencies that are funded outside of the annual appropriations process, a step that would worsen future government shutdowns and possibly impede the operations of the judiciary, according to Americans for Financial Reform and the former Republican chair of the Federal Deposit Insurance Corporation, Sheila Bair. 

In CFPB v. CFSA – oral arguments to be heard on Tuesday, Oct. 3 – the Supreme Court will decide whether to overturn the Fifth Circuit’s unprecedented interpretation of the Appropriations Clause that calls into question the constitutionality of the CFPB’s secure funding mechanism. 

The CFPB, created after the 2008 financial crisis, covers its operating expenses with money from outside the annual appropriations process. All bank regulators and numerous other agencies and programs likewise rely on funding outside annual appropriations, such as Social Security and Medicare.

Even the Supreme Court has a history of operating on funding that does not come from an annual appropriation, notably filing fees paid by litigants. This advantage has allowed the courts function in previous government shutdowns, notably in 2013, when it heard oral arguments in 11 cases.

“If the Supreme Court does not turn back this unprecedented interpretation of the Constitution, it will put all of these government agencies at the mercy of the increasingly unpredictable annual appropriations process,” said Elyse Hicks, consumer policy counsel at Americans for Financial Reform. “The gears behind important financial regulatory and rulemaking work would grind to halt any time Congress reached a budgetary impasse. The judiciary too could find itself unable to meet its financial obligations during a government shutdown.”

Former Republican chair of the FDIC Sheila Bair expressed similar sentiments in an op-ed for Politico

Bair suggests that an unfavorable decision would introduce chaos whenever Congress is at odds about its annual budget, especially during times of stress: 

“When I chaired the Federal Deposit Insurance Corporation during the financial crisis of 2008 and 2009, we had to ramp up our funding quickly to protect Main Street bank depositors. We were able to do so because Congress had long given the FDIC authority to set and fund its own budget through deposit insurance premiums paid by banks Imagine the dysfunction if the Fed’s budget could be held hostage to congressional dissatisfaction over interest rate policy, or if a member of Congress unhappy about a failed bank in his district could try to block the FDIC’s budget. Individual agency budgets could be put at risk by disgruntled politicians or lobbying interests.”