The United States Supreme Court weighs the future of a consumer protection agency in times of crisis

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The United States Supreme Court weighs the future of a consumer protection agency in times of crisis

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The U.S. Supreme Court on Tuesday seemed divided over whether to give the president absolute power to fire the head of a consumer protection agency in crisis, in a case with potentially broad implications for the sector financial.

The Court heard arguments regarding the structure of the Consumer Financial Protection Bureau, the outcome of which will determine to what extent American presidents can influence the agency’s implementation efforts.

Since its creation in 2010 under the Dodd-Frank law, Republicans have sought to restrict the CFPB. The agency was created by Elizabeth Warren, the Democratic senator from Massachusetts, who is now seeking the Democratic nomination for president.

Most people appointed by the President can be removed for any reason, but several agencies like the Federal Reserve, the Securities and Exchange Commission, and the Federal Trade Commission have multi-member boards of directors whose officials are not as easily dismissed. .

The Trump administration has not defended the provisions of the Dodd-Frank law that say that the director of the CFPB can only be removed from office for just cause. The Justice Ministry said on Tuesday that the president should be free to fire the agency’s chief.

The American high court, which has a 5-4 conservative majority, has not made it clear how it could rule in argument on Tuesday morning. Several of the Conservative judges appeared to be in favor of removing restrictions on the dismissal of the CFPB.

Brett Kavanaugh, a conservative judge appointed by Donald Trump last year, pointed out that CFPB leaders have a five-year term, which means that a new president could end up with a director they don’t have not named, as happened when Mr. Trump took office in 2017.

“It is really the next president who will face the problem,” he told Paul Clement, a lawyer appointed by the court to defend the structure of the CFPB. Kavanaugh said that under the current system, a president and director of the CFPB could have “a completely different conception of consumer financial regulatory issues.”

“How do you manage this seemingly different and disturbing consequence of the real world?” He asked. As appellate judge before his appointment to the Supreme Court, Mr. Kavanaugh previously stated that the structure of the CFPB was unconstitutional.

But John Roberts, the Chief Justice of the Supreme Court appointed by former President George W. Bush, who could be the swing vote in this case, did not give a clear indication of how he viewed the matter. He asked repeated questions about another aspect of the structure of the CFPB which means that it does not depend on Congress for its funding.

Liberal judges have appointed other agencies headed by a single director protected from dismissal. Elena Kagan, appointed by former President Barack Obama, noted that the Social Security Administration had a structure similar to the CFPB, saying it was “as powerful, if not more powerful” than the consumer protection agency.

“It’s comparable to the Social Security Administration. So I don’t think it’s as unprecedented as you claim, “she told Kannon Shanmugan, a lawyer for Selia Law, a law firm under investigation by the CFPB. who raised the issue.

Ruth Bader Ginsburg, another liberal justice, sought to present the case as unsuitable for a broad decision with constitutional implications.

She noted that the initial request for a civil inquiry addressed to the Selia Act had been ratified by a subsequent acting director who was not protected by the removal restrictions. “This case has a kind of academic quality,” she told Mr. Shanmugan.

One of the questions before the court is whether the removal restrictions can be separated and dealt with separately from the rest of the legislation that created the CFPB.

Although Mr. Shanmugan said that initially the judges should simply strike down the request for a civil inquiry, he argued that they should get rid of the agency entirely rather than making the director easily dismissable. This result seemed unlikely, with Mr Kavanaugh indicating that he was in favor of removing removal restrictions without going further.

Immediately after the CFPB case, the court heard arguments in a lawsuit concerning the power of the Securities and Exchange Commission to seek restitution to the federal court of the profits obtained by fraud.

Although the commission obtained disgorgement in this way for a long time, the power was challenged by Charles Liu and Lisa Wang, a married couple who were sentenced by a district court to return $ 26 million they collected from of investors after the SEC accused them of fraud.

The judges agreed to make a relatively narrow ruling which would specify that restitution should go to investors, rather than government, where possible and could only apply to net profits.

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