Special guest Alex J. Pollock, Senior Fellow with the Mises Institute and former Principal Deputy Director of the Office of Financial Research in the U.S. Treasury Department, joins us to discuss his recent blog post published on The Federalist Society website in which he urges Congress to look into the question of whether the Federal Reserve can lawfully continue to fund the CFPB if (as now) the Fed has no earnings. We begin with a review of the Supreme Court's recent decision in CFSA v. CFPB which held that the CFPB's funding mechanism does not violate the Appropriations Clause of the U.S. Constitution. Alex follows with an explanation of the CFPB's statutory funding mechanism as established by the Dodd-Frank Act, which provides that the CFPB is to be funded from the Federal Reserve System's earnings. Then Alex discusses the Fed's recent financial statements and their use of non-standard accounting, the source of the Fed's losses, whether Congress when writing Dodd-Frank considered the impact of Fed losses on the CFPB's funding, and how the Fed can return to profitability. We conclude the episode by responding to arguments made by observers as to why the Fed's current losses do not prevent its continued funding of the CFPB, potential remedies if the CFPB has been unlawfully funded by the Fed, and the bill introduced in Congress to clarify the statutory language regarding the CFPB's funding.

Alan Kaplinsky, Senior Counsel in Ballard Spahr's Consumer Financial Services Group, hosts the conversation.