Overnight Finance

On The Money: Supreme Court takes up challenge to CFPB | Warren's surge brings scrutiny to wealth tax | Senators eye curbs on Trump emergency powers

Happy Friday and welcome back to On The Money. I'm Sylvan Lane, and here's your nightly guide to everything affecting your bills, bank account and bottom line.

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THE BIG DEAL--Supreme Court agrees to hear challenge to consumer agency: The Supreme Court on Friday agreed to hear a legal challenge to the structure of the Consumer Financial Protection Bureau (CFPB) in a major victory for critics of the powerful financial regulator.

The court on Friday announced it would take up the lawsuit Seila Law vs. CFPB. The case involves a law firm, Seila Law, that refused to comply with a CFPB request for documents.

  • The firm challenged the agency's structure as unconstitutional, arguing that the bureau's director enjoys an illegal amount of independence from the president's executive branch authority.
  • The Trump administration and CFPB Director Kathy Kraninger have backed the challenge, which could transform or even dismantle the agency. Their support for the challenge has infuriated Democrats and the agency's allies.
  • House Democrats urged the Supreme Court to reject Seila Law's appeal for a ruling, insisting that Congress did not infringe on separation of powers.

I explain what this means for the future of the CFPB here.

 

The crux of the issue: The CFPB was created by the 2010 Dodd-Frank Wall Street reform law to police the financial sector for consumer fraud and abuse. 

Dodd-Frank prevents the president for firing the CFPB director before his or her five-year term expires unless "for cause," which is considered to be severe neglect or misconduct.

  • Seila Law and the Trump administration argue that the "for cause" provision hinders the president's constitutional authority over the executive branch. 
  • A district court ruled in favor of the CFPB and the Ninth Circuit Court of Appeals upheld that ruling, leading Seila Law to appeal to the Supreme Court.

 

What happens next? We're not quite sure when the Supreme Court will hold arguments on this case, but the most likely outcomes are:

  • The court rules that the "for cause" provision of Dodd-Frank is unconstitutional and severs it from the law, making the CFPB director fireable at will. That's how Justice Brett Kavanaugh ruled when he had a similar case on the D.C. Circuit Court of Appeals. His ruling though was later overturned by the full appeals court.
  • The court rules that the "for cause" provision is unconstitutional, but says it is up to Congress to fix it.
  • The court rules in favor of the CFPB, upholding its structure.

That said, the court could theoretically shut down the entire CFPB, but legal experts expect the court to take a more measured approach in line with Kavanaugh's opinion.

 

LEADING THE DAY

Warren's surge brings new scrutiny to signature wealth tax: Sen. Elizabeth Warren's (D-Mass.) emergence as a front-runner in the Democratic presidential primary is bringing new attention, and scrutiny, to her proposed wealth tax.

  • The Massachusetts senator first called for the new tax in January, and it's become the foundation for how she plans on funding some of her other policy proposals.
  • The idea polls well and has been championed by progressives, with fellow presidential candidate Sen. Bernie Sanders (I-Vt.) releasing his own wealth-tax plan last month.

But as Warren has started to edge out former Vice President Joe Biden in a number of state and nationwide polls, her policy stances -- along with how she communicates them -- are under a magnifying glass, more so than similar plans by other White House hopefuls.

The Hill's Naomi Jagoda tells us why here. 

 

ON TAP NEXT WEEK

Monday:

  • The Brookings Institution hosts an event entitled "What is the impact of persistent military spouse unemployment?," 10 a.m.

Tuesday:

  • The Brookings Institution hosts an event entitled "How millennials think differently about climate change and national debt: Lessons for policymakers," 9 a.m.
  • The House Financial Services Committee holds a hearing entitled "The End of Affordable Housing? A Review of the Trump Administration's Plans to Change Housing Finance in America," 10 a.m.
  • The Senate Banking Committee holds a hearing on oversight of the Consolidated Audit Trail, 10 a.m.
  • The House Natural Resources Committee holds a hearing to consider a bill to amend the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), 10 a.m.
  • A House Financial Services subcommittee holds a hearing entitled "An Examination of the Decline of Minority Depository Institutions and the Impact on Underserved Communities," 2 p.m.
  • The American Enterprise Institute (AEI) hosts an event entitled "Trump's tax reform happened: Now what? A panel discussion on the Tax Cuts and Jobs Act," 2 p.m.

Wednesday:

  • Facebook CEO Mark Zuckerberg will testify before the House Financial Services Committee on the social media company's impact on the financial and housing sectors, 10 a.m. 
  • The House Small Business Committee holds a hearing entitled "Prison to Proprietorship: Entrepreneurship Opportunities for the Formerly Incarcerated," 11:30 a.m.

Thursday:

 

GOOD TO KNOW

  • A bipartisan group of senators want the Senate to vote on legislation reining in a president's emergency powers
  • China's economic growth sank to its lowest level in 26 years as the world's second-largest economy continues to be embroiled in a trade war with the United States, The Associated Press reported Friday. 
  • Business groups are keeping pressure on Congress to approve President Trump's trade deal to replace the North American Free Trade Agreement (NAFTA) despite the impeachment drama overtaking Washington.

 

ODDS AND ENDS

  • Rohit Chopra, a Democrat on the Federal Trade Commission (FTC), on Friday testified before a House panel that he is concerned the U.S. government is "too often captured" by the country's largest tech companies.
  • A bipartisan group of lawmakers on Friday sent letters to two tech giants over accusations that they were censoring pro-democracy protesters in Hong Kong to protect business interests in China.
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