By Henry Meier, Esq., The Law Office of Henry C. Meier, Esq.
The Supreme Court issued yet another significant order on July 14, giving the president wide latitude to reduce and reorganize executive branch agencies. Specifically, the court’s order in McMahon v. New York allows the U.S. Department of Education to proceed with a proposed reduction-in-force (RIF) despite ongoing legal challenges.
SCOTUS’ decision to allow the executive branch to proceed with a significant restructuring of a federal agency, before full judicial review is another sign that the Supreme Court is adopting a view of executive authority that will have implications for all federal agencies. In particular, the Consumer Financial Protection Bureau (CFPB) – and potentially the NCUA – should take note.
Certainly, credit union leaders must take this seriously as a strategic consideration. Suppose this order reflects a broader judicial willingness to affirm the executive’s authority to reorganize agencies mid-litigation. In that case, ostensibly independent regulators, such as the CFPB and the NCUA, are likely to find themselves increasingly vulnerable to structural overhauls.
Now, as tempting as it may be for at least some of you to welcome these developments; (after all, don’t credit unions want fewer regulations? ), remember that the same authority exercised by President Trump is authority that isn’t being exercised by your local Members of Congress who you have known for the last 20 years or could be used by a future president with whose ideology you may not agree. Senator Sanders to the rescue?
Executive Control and Constitutional Framing
Secretary of Education Linda McMahon was quick to issue a public statement yesterday, asserting, “Today, the Supreme Court again confirmed the obvious: The president of the United States, as the head of the executive branch, has the ultimate authority to make decisions about staffing levels, administrative organization and day-to-day operations of federal agencies.”
This is not simply offhand political commentary; it reflects a constitutional theory of the unitary executive, in which the president enjoys broad, centralized control over the administrative state. In recent years, this theory has gained traction at the Supreme Court, and this latest order may be its most practical affirmation yet. This ruling opens the door for an administration to dismantle or shape a federal agency’s workforce and structure via executive order, without waiting for the courts to resolve pending legal objections. That should raise eyebrows of regulators and the regulated.
What This Means for the CFPB
For those who have followed the CFPB constitutional controversies, this decision represents another possible inflection point. Although it is ostensibly independent, it is operating as part of the executive branch. Should a future administration wish to reduce its regulatory scope or reassign its functions, the Supreme Court’s reasoning in the Department of Education case suggests such a move could proceed quickly, even while challenged in court.
Even if the CFPB remains intact legally, the Court’s order suggests that the executive could initiate significant workforce reductions or internal reorganizations before courts intervene. That raises real concerns about the continuity and functionality of the CFPB’s enforcement, supervision and rulemaking arms under a more aggressive political agenda. To be clear, the administration argues that it will uphold non-discretionary legal obligations even as it makes these cuts, but when you read the plain language of the secretary’s pronouncements, it is fair to question at what point this becomes a distinction without a difference.
Broader Implications for All Independent Agencies
The reach of this order extends well beyond the CFPB. The precedent it sets could be applied to any independent federal agency whose statute, like the NCUA and the FDIC, does not explicitly prevent executive branch restructuring.
If an administration were inclined to reduce or eliminate perceived regulatory redundancies, it could propose merging the NCUA into the Office of the Comptroller of the Currency (OCC) or consolidating enforcement functions with another prudential regulator. While such a move would face legislative, legal and operational hurdles, SCOTUS’ order quietly lowers one of the highest obstacles: the need to delay restructuring until litigation concludes.
Appropriations and Agency Design
Another noteworthy element of this case is what it suggests about the limits of congressional control over independent executive agencies. The Education Department’s RIF plan affects the federal budget, yet the Court declined to prevent it from proceeding. This signals that judicial deference to executive reorganization authority may extend to areas traditionally considered within Congress’ purview, particularly when it comes to managing personnel and administrative structures.
This development should prompt serious reflection in both legislative and regulatory circles. If staffing levels and internal operations are now fair game for executive branch directives, regardless of congressional design or appropriations intent, the independence and predictability of federal oversight agencies could be significantly compromised.
A Legal and Strategic Turning Point
While the Court’s order did not address the merits of the underlying lawsuit, the implications are clear: The executive branch may have greater latitude to reshape federal agencies in line with its policy objectives than we previously thought, and even before legal challenges are resolved. After all, as I noted above, just last week, the court upheld the legality of mass layoffs organized pursuant to an executive order instructing all agencies, including the NCUA, to reduce their headcount.
When the court issued this order, Justice Jackson was the only dissenting voice. Justice Sotomayor explained she was voting in favor of that order because the relevant order stipulated that the reductions were to be executed “consistent with applicable law.” Fast-forward just a week, and that same justice wrote in unequivocal language that the majority’s order amounted to sanctioning “the president’s unilateral efforts to eliminate a cabinet-level agency established by Congress.” The key question is, at least for the court’s liberal minority, how much deference should be given to executive branch staffing determinations.
For the CFPB, the NCUA, and their stakeholders, this is not just an academic debate; it is a paradigm shift. From now on, defending an agency’s independence may not be enough. Agencies may now need to develop contingency plans for operating at the whim of executive fiat.
This case adds to the growing list of reasons credit unions and the NCUA should closely monitor how executive authority is interpreted and applied.
Would you like to speak with Henry? His email is henrymeieresq@outlook.com.