Elizabeth Warren Knows Why SCOTUS Is Taking On Her Signature Accomplishment

This week on Amicus, Sen. Elizabeth Warren came on the show to talk about the Supreme Court case that challenges the very existence of the Consumer Financial Protection Bureau, a federal agency she helped create after the 2008 financial crash. The agency was included in the Dodd-Frank Act, as Warren explained, to centralize things: “The idea is gather up all those laws that are out there among all the agencies, put it with one agency, give them the expertise, give them the resources, and then, by golly, hold them accountable to make sure that we just kind of have a level playing field in consumer credit.”

The CFPB has returned over $17 billion to vulnerable customers since its inception 12 years ago, but on Tuesday, the Supreme Court heard a case claiming that the way it is funded renders the entire agency unconstitutional. Warren, who told me that “wonky is [her] love language,” helped sort through the incredibly technical and arcane case.

An excerpt of our conversation has been lightly edited and condensed for clarity below. The full episode will air Saturday morning—stay tuned.

Dahlia Lithwick: Can you explain, because it’s the central issue, how the CFPB is funded? It was quite deliberately funded the way it is to insulate it from the sort of annual political circus that is appropriations, right? This mechanism wasn’t an accident or an oversight, this thing that they’re claiming to be unconstitutional?

Elizabeth Warren: The funding system is quite deliberate. So let’s start with banking regulators. First banking regulator, 1863. What does that Congress do? Right in the middle of the Civil War, they said, we’re going to have a banking regulator, but let’s make it independent of the political process, the funding process. So, it has what’s called independent funding. Its fees and so on—it does not go through appropriations. Every single banking regulator since then, all banking regulators in the history of the United States, have all been funded outside the appropriations process.

And they’re not the only ones. Social Security is funded outside the process. Medicare is funded outside the appropriations process. Heck, going back to the 1790s, the postal system was funded outside the appropriations process. So this is not like some new deal. It’s the standard tool for all the bank regulators.

This CFPB quickly becomes the  bête noire, the symbolic hill that folks who have a deregulatory project are willing to die on. It takes a bite at the banks, the payday lenders hate it, but it’s more than that—it comes to symbolize the Death Star for freedom and liberty. Could you reconstruct what it is about the CFPB, which is one of the most successful bureaus, that folks [can’t stand]?

I think it starts with Ronald Reagan. Do you remember Ronald Reagan’s quote, what are the nine most terrifying words in the English language? “I’m …”

“… from the government, and I’m here to help.”

That’s exactly right. You know what? CFPB is the government and it does help. And that’s—that’s exactly the point. I think the reason it engenders such fury among these sorts of ideological conservatives here is that it’s government actually working.

I mean, this is the part that’s really remarkable. This is not the heavy hand of regulation. This is not the government coming in and substituting its judgment for where the market should go.

Think about the complaint process. If I get cheated by my bank for $15, $150, I can’t afford to go to court. Are you kidding? Nobody can. The market doesn’t work in that sense. But if it happened to a lot of other people—it could be happening to you, it could be happening to other people, but we don’t sit around and talk about the charge that was put onto our checking account.

But what a complaint hotline does, it says two things. It both gives the consumer a remedy without having to spend any money at all, and the minute you send it in, the CFPB, in effect, date stamps it, sends it on to the institution you’re complaining about, and then the clock starts to run, and the institution either gets this thing settled right away, which often means getting your money back, or it has to answer to the CFPB.

And what that does is it creates a public database—which, by the way, the banks fought like crazy against a public database. So you can go check, “Oh, I’m thinking about opening a checking account. I do business right now with Chase. Maybe I could take a look and see how well does it treats its customers, at least as best we can see from the complaints and so on.”

In other words: More useful information in the marketplace, more reporters who will actually analyze the data and write about it. And CFPB uses that for what’s called heat-mapping to see where the problems are cropping up. And it’s additional information that comes straight from the families who are affected, to say, “Wait, here’s what went wrong for me.” And that just chaps some of these ideologues who want to say government is always bad. They cannot get over the fact CFPB works.

I love what you’re saying, because that overarching complaint, which is these are the dead-eyed bureaucrats in the nanny state who are messing with your life—what you’re saying is, actually, it’s rendering the government visible and transparent and functional. These aren’t dead-eyed bureaucrats who are taking away your rights and liberties and privileges. They’re helping you navigate a system that is absolutely impenetrable otherwise.

Bingo.

I would add to that by saying: They’re actually enhancing your liberty, your freedom, because they’re empowering the consumer to stand on effectively an equal footing with Chase and Wells and to say, “I’m going to look at your products and I’m going to figure out which one’s best for me.”

Let’s talk a little bit about the oral argument that happened on Tuesday morning. I think in some sense it was a surprise to those of us who were expecting all those nanny state, liberty, liberty, liberty arguments. It was not that. It felt as though, overwhelmingly, the proposition being put forth by Noel Francisco (who was representing the payday lenders) was that there was no limiting principle on this thing he was saying renders the entire CFPB unconstitutional and all its prior actions also unenforceable. There’s no limiting principle there.

I’m not asking you to prognosticate, we know better than that on this show, but was your sense that this kind of extreme anti-government argument was not flying with the bulk of the court?

Well, as you say, we never know for sure what’s happening. The argument that you and I started with, or the observation, that sauce for the CFPB is sauce for the Fed, is sauce for the FDIC, is sauce for the OCC, seemed to be in the air in the Supreme Court. They were asking the question, “Well, if the CFPB can’t do this, then what about all the others that are not funded through the appropriations process?”

I mean, that is the obvious question. Plus, they were looking at how much chaos this would cause. So, as you rightly point out, when the payday lender’s lawyer is saying throw it all out, remember, one of the briefs that was filed, amicus briefs, is from the mortgage bankers and the homebuilders, who said, “Whoa, whoa, whoa. The CFPB actually gives us pretty clear rules we can all live with, and they’re helping the mortgage market work. If you come back and overturn that retroactively, holy guacamole. And if you just unravel it, even going forward, you could crash our entire industry.”

So, it’s a really scary version of: You start turning this stuff upside down, you hurt individual consumers. You hurt the economy overall, and you could destroy complete industries in this country.

Senator, the other thing that I really clocked is the voices of Elena Kagan, Sonia Sotomayor, Amy Coney Barrett, and Kentanji Brown Jackson all doing the thing that I hear you say in my ears all the time, which is, “I’m kind of a wonk, but I’m going to try to explain to you why government is not the enemy.”

I know Justice Kagan has been talking for years and years about “we can have no government if this deregulatory project is greenlit all the way down.” Is there a sense that the court is doing an adequate job of messaging, or at least the progressives or even the women on the court, of messaging this thing that has been your life’s project, which is to explain to people that notwithstanding everything you’ve heard, the government actually has to be the way that a society determines what water to drink and how we breathe and how we get vaccines?

Let’s be really wonky for a minute. It’s about government, but at the same time, there’s an underlying constitutional question that I’m wrestling with on this. Think of the three parts of government.

You think of the legislative branch. Man, we get to do all kinds of stuff. We can think up new laws, and we can repeal laws, right? But every two years or every six years, we all get hauled back in front of the voters. And the voters are like, yeah, I like that, or no, I don’t like that.

The president and all the people that the president is able to appoint get to do an incredible number of things to keep our government functioning. But at the end of every four years, you pull that president back, and in fact, that one is even limited, they can only do it twice.

But look over at the Supreme Court. Lifetime appointment, everybody’s been talking about what that means. And I’ve always thought of it as, they get lifetime appointments, but they have to look at the world through a straw. They can only review a case and controversy, they can only do ripeness, they’ve got to have a federal question or constitutional question, right? It’s very, very constrained. And the underlying part of that is that the Supreme Court is not supposed to substitute its judgment for that of Congress. It is Congress’ job to decide how we want to play out—fill in your blanks, Social Security, consumer credit, whatever part of it that we’re working on—until we hit a particular constitutional barrier. I think what we’ve seen in the last couple of years, and you’ve triggered this in my mind because you mentioned Justice Kagan in particular, getting more and more concerned about a Supreme Court that in effect is saying, “Well it’s not how I would have done it. I think it would be better if no one canceled student loan debt. I think it would be better if the head of the Consumer Financial Protection Bureau could be fired by the president.” And you may be right, in some abstract sense, but that’s not your job. Your job is a whole lot narrower than that. Your job is to say, “If this is how Congress did it, is there any reason to believe there’s a part of the Constitution that clearly prohibits what Congress has tried to do here?” And I think that’s going to be the heart of the issue on what happens with our agencies.