The Supreme Court should have made members of the SEC subject to presidential removal, and this failure is the central mistake of Free Enterprise Fund.
When the very first Congress met in 1789 to create and structure the original federal departments, a momentous constitutional question emerged: who has the power to remove federal officers? Since there was no discussion of the subject at the Constitutional Convention, the members of Congress had to examine the issue for the first time. Although as many as four distinct positions were voiced among the members of the first Congress, the political struggle over the removal power has been fought over the course of American history between two of those arguments articulated in 1789: congressional delegation theory and executive power theory.
Proponents of the first position argued that since the Constitution is silent or ambiguous about where removal power is vested, Congress is free to vest this power wherever it pleases. After all, isn’t the execution of the law simply auxiliary to the creation of law? Advocates for the second position, however, argued that the Constitution vests the removal power in the President alone. In their view, executive authority is vested entirely in the president subject only to those express provisions in the Constitution. If the Constitution is silent, then we should assume that the power to remove belongs to the one that has the power to appoint. At stake in this debate was more than simply the power to fire administrators; the members of the first Congress were trying to come to terms with the very meaning of the balance of powers under our constitutional system of government.
Two Theories of Removal
In one of the Supreme Court’s final cases of this past term—Seila Law v. Consumer Financial Protection Board (CFPB)—these two positions squared off once again. Petitioners in the case were challenging the constitutionality of the CFPB’s “for cause” removal limitations arguing that the limits on executive removal violated the separation of powers. Agreeing with the petitioners, Chief Justice Roberts, writing for the Court, echoed the executive power theory advocates in the first Congress. Following the argument made on behalf of this theory by James Madison in 1789, Roberts explained that there is a direct chain of responsibility from the president to the people that can only be maintained when subordinate officers are subject to removal by the chief executive. Executive officers may wield significant powers under statutory authorization, but that power is always subject to the “supervisions and control of the elected President.”
In the end, there must be a clear chain of responsibility so the people can see the “who” and the “how” of the execution of the laws. The CFPB’s single director, who is only removable for “inefficiency, neglect of duty, or malfeasance in office,” is:
neither elected by the people nor meaningfully controlled (through the threat of removal) by someone who is…Yet the Director may unilaterally, without meaningful supervision, issue final regulations, oversee adjudications, set enforcement priorities, initiate prosecutions, and determine what penalties to impose on private parties. With no colleagues to persuade, and no boss or electorate looking over her shoulder, the Director may dictate and enforce policy for a vital segment of the economy affecting millions of Americans.
According to Roberts, an office of administration designed like the CFPB is an affront to the clear chain of accountability required by our constitutional vision of executive power and to the fundamental tenets of republican government.
Four of the Court’s justices disagreed and their dissent illustrates the continuing appeal of congressional delegation theory. Justice Kagan’s dissent explained that heretofore Congress has enjoyed a wide latitude for structuring the administration of the laws as it sees fit. While she did not deny that there are some “core executive functions” that Congress cannot strip from the control of the president, Kagan argued that there are times when it does make sense to shield an officer from otherwise normal political pressures and influences.
The text of the Constitution, the history of the country, and the precedents of this Court…bestow discretion on the legislature to structure administrative institutions as the times demand, so long as the President retains the ability to carry out his constitutional duties. And most relevant here, they give Congress wide leeway to limit the President’s removal power in the interest of enhancing independence from politics in regulatory bodies like the CFPB.
Since its decision in the 1935 case of Humphrey’s Executor v. United States, the Court has generally sided with Congress’s desire to limit the President’s influence over certain regulatory agencies (so-called Independent Regulatory Commissions [IRCs]). Generally, these regulatory agencies consist of a body of commissioners who share power under staggered terms and whose membership sometimes stipulates a bipartisan composition. Removal of these commissioners is limited to “good cause” (i.e. inefficiency, neglect of duty, or malfeasance in office; but not differences of opinion on policy) and any attempt to displace such an officer is subject to judicial review. In Humphrey’s Executor, the Court justified these protections for the commissioners on the grounds that they did not in fact wield executive power; rather, their powers were better understood as quasi-legislative and quasi-judicial.
The exception was logically problematic to begin with, particularly when the Court tried to distinguish these agencies by explaining that an independent regulatory agency is “an administrative body created by Congress to carry into effect legislative policies embodied in the statute in accordance with the legislative standard therein prescribed.” One couldn’t have offered a more succinct definition of what an executive office does. Nevertheless, Congress continued to create a host of such protected offices even though the Humphrey’s rationale behind the IRCs quickly dissolved as a working consensus on the Court in subsequent years. As Justice Jackson explained in FTC v. Ruberoid (1952),
Administrative agencies have been called quasi-legislative, quasi-executive, or quasi-judicial, as the occasion required, in order to validate their functions within the separation of powers scheme of the Constitution. The mere retreat to the qualifying “quasi” is implicit with confession that all recognized classifications have broken down, and “quasi” is a smooth cover which we draw over our confusion, as we might use a counterpane to conceal a disordered bed.
While the Court fiddled in finding a workable constitutional justification for the IRCs, Congress steamed forward, developing even more innovative administrative designs in recent years. Under Sarbanes-Oxley (2002), Congress created the Public Company Accounting Oversight Board (PCAOB), a commission of regulators who were not only protected from executive removal power but were appointed by members of the SEC who are themselves shielded from removal.
Seila Law: A Partial Correction
The most recent innovation, at issue in Seila Law, has been the Consumer Finance Protection Bureau (CFPB) with a single director protected from at-will removal rather than a multi-member commission. The CFPB is even further removed from political influence by the fact that its operating funds are supplied by the Federal Reserve outside of the congressional appropriation process. With these innovations that push the administrative state well beyond the borders of political accountability, one wonders “how far is too far?” What is there to stop Congress from circumventing the entire Constitutional system of government by creating a shadow administration?
Convinced that these latest agency structures may have crossed a constitutional Rubicon, Chief Justice Roberts’s decision in Seila Law actually marks his second attempt in recent years to put the brakes on Congress’ attempts to shield the administrative state from executive control. In Free Enterprise Fund v. PCAOB (2010), Roberts wrote a decision holding that the removal protections for PCAOB officers violated the Constitution’s Appointment clause because the board members were not only shielded from removal but were appointed by members of the SEC who themselves are protected from removal by the President. Roberts argued that the double layer of protection for the PCAOB commissioners undermined the accountability that those who wield executive power must have to the chief executive. The novelty of this double layer of removal protection allowed Roberts to distinguish the PCAOB from other IRCs, but the reasoning seemed to call into question any attempt by Congress to limit the removal power of the president. While Roberts certainly understands the problem posed by the IRCs, he declined to reach the conclusions that executive power theory would require.
In Selia Law, Roberts again avoided the implications of his argument when he concluded that the single-director model is different from the for-cause removal protections granted to other administrative agencies governed by multi-member boards. Unlike a single director, Roberts explained, a board of commissioners provides some checks and balances against the abuse of power by dispersing authority among a number of administrators. But as Justice Kagan pointed out in her dissent, why are five people with for-cause protection from removal any better than one? In the end, the remedy here does not really answer the constitutional objection. Just as there is no substantial difference between being one or two steps removed from presidential control, there is really no constitutional difference between a multi-member board and an agency staffed by an individual director when political accountability is at issue.
Here the chief justice intended, as is his wont, to reach the narrowest possible ground for his decision—in this case striving to render both Humphrey’s and Morrison v. Olson (the famous 1988 decision affirming the constitutionality of the independent counsel) undisturbed as precedents. “These two exceptions—one for multi-member expert agencies that do not wield substantial executive power, and one for inferior officers with limited duties and no policymaking or administrative authority—‘represent what up to now have been the outermost constitutional limits of permissible congressional restrictions on the President’s removal power’.” The Humphrey’s decision really didn’t hinge on the multi-member nature of these administrative bodies—rather, as Justice Thomas pointed out in his concurrence, it relies on the “notion that there is a category of ‘quasi-legislative’ and ‘quasi-judicial’ power” that somehow is not part of the Constitution’s tripartite structure. Nor did Morrison rest on the designation of the office of independent counsel as an inferior officer. As Kagan noted in her dissent, Morrison “set out the governing rule…that removal restrictions are permissible as long as they do not impede the President’s performance of his own constitutionally assigned duties.”
Kagan is correct about the majority’s holding in Morrison, but it’s also true that Scalia’s famous dissent has been vindicated—witness the fact the Congress has declined to re-authorize the independent counsel statute. The Court’s opinion in Morrison is as constitutionally dubious and poorly argued as its decision in Humphrey’s. Clearly, many on the Court believe that independent regulatory agencies pose a threat to executive administration (if not, why be concerned at all with their relationship to the president), but they sense that a more adverse decision against these agencies would have seismic consequences too catastrophic for the status quo.
The history of the removal power debate reveals two concerns that need to be reconciled. Congress does have a legitimate interest in seeing that its laws are executed in a manner consistent with its stated policy goals. On the other hand, the president is accountable for the consequences of implementing those policies. Law enforcement is not simply a ministerial exercise that can be carried out without discretionary judgment—particularly when there is either no explicit guidance from a statute or where the statute is itself vague about the means by which certain policy goals are to be met. Ultimately, the president is accountable for those choices made by his subordinates. The quasi-legislative, quasi-judicial categories of Humphrey’s were a poorly conceived solution to the balance of powers between the legislature and the executive that has proven to be unworkable on the Court. Maintaining the precedent while gutting the rationale has only made the problem worse. In the wake of Seila Law, not only do we need to reexamine past precedents, but the justices need to find a better legal foundation for the modern administrative state—one that works within the separation of powers scheme rather than against it.