By Executive Order, Trump took over the SEC, FCC, FTC, FEC, CFTC, CFPB, FERC, and FDIC. Is this legal? Wise?
Ensuring Accountability for All Agencies
Please consider the White House executive order Ensuring Accountability for All Agencies
In order to improve the administration of the executive branch and to increase regulatory officials’ accountability to the American people, it shall be the policy of the executive branch to ensure Presidential supervision and control of the entire executive branch. Moreover, all executive departments and agencies, including so-called independent agencies, shall submit for review all proposed and final significant regulatory actions to the Office of Information and Regulatory Affairs (OIRA) within the Executive Office of the President before publication in the Federal Register.
No employee of the executive branch acting in their official capacity may advance an interpretation of the law as the position of the United States that contravenes the President or the Attorney General’s opinion on a matter of law, including but not limited to the issuance of regulations, guidance, and positions advanced in litigation, unless authorized to do so by the President or in writing by the Attorney General.
There are not two but three views on this matter. First, let’s discuss for and against Trump theories.
‘Unprecedented’ Power Grab
CNN writes What to know about Trump’s executive order and ‘unprecedented’ power grab within the government.
“For at least a century, we’ve all thought that certain types of federal agency actions should be removed from politics to the extent we can,” said Christopher Walker, a University of Michigan Law School professor and an expert in administrative law.
The question of whether Trump’s move is unconstitutional or unlawful has long been an open one, Walker said.
“Personally, I don’t think so,” he said. “But is it a big change? Absolutely.”
Public Citizen, a progressive advocacy group, has called the move “illegal” and a “giant gift to the corporate class.”
“This is a profoundly dangerous idea for the nation’s health, safety, environment and economy – and for our democracy. Congress made independent agencies independent of the White House for good reason,” Robert Weissman, co-president of Public Citizen, said in a statement.
Beyond the technical requirements involving regulation review, Trump’s order also mandates far more day-to-day involvement by the White House in the business of independent agencies. The order requires liaisons from the White House to those agencies and insists that its leaders “regularly consult with and coordinate policies.”
“That’s pretty unprecedented,” said Daniel Walters, a Texas A&M University law professor and expert on administrative law. “This seems to suggest a real interest in reining in independent agencies.”
Several independent agencies contacted by CNN on Wednesday, including the SEC and the FEC, declined to comment.
The Supreme Court is already considering the case of Hampton Dellinger, the special counsel, who Trump fired this month. Dellinger, named to the job by President Joe Biden, handles allegations of whistleblower retaliation within the federal government. Dellinger’s agency could potentially slow Trump’s effort to dramatically cut the size of the federal workforce.
Trump has fired other independent agency heads in similar positions, as well. A federal judge on Tuesday temporarily blocked the White House from dismissing the chair of the federal Merit Systems Protection Board.
Another federal court is reviewing Trump’s dismissal of a member at the National Labor Relations Board.
Eyes on the Fed
Trump’s order notably excluded much – but not all – of the Federal Reserve from its requirements. During his first term, Trump frequently sparred with the agency’s leadership over interest rates.
The Fed, experts say, illustrates why Congress has long wanted to create independent agencies. If a president had complete control over the Fed’s monetary policy, he could demand lower interest rates to give the economy a jolt during an election year, even if that decision has adverse consequences, like higher inflation, months after the election.
By skirting around the Fed, the White House is attempting to avoid a legal confrontation that might go too far for a conservative Supreme Court.
But, legally, experts say, there’s little to distinguish the Federal Reserve from the other independent agencies Trump has targeted with the order.
Walker stressed that there is significant benefit to having the Office of Management and Budget review government regulations, particularly in checking the process agencies used to draft them. It’s another set of eyes to review what are often complicated policies with huge implications for the nation.
“I’m a fan of this move, from a bureaucracy perspective,” Walker said. “What worries me is presidential politics. I don’t want the process to be politicized.”
Case Law is Muddled
Please consider the 1935 Supreme Court ruling Humphrey’s Executor v. US
Facts of the case
President Hoover appointed, and the Senate confirmed, Humphrey as a commissioner of the Federal Trade Commission (FTC). In 1933, President Roosevelt asked for Humphrey’s resignation since the latter was a conservative and had jurisdiction over many of Roosevelt’s New Deal policies. When Humphrey refused to resign, Roosevelt fired him because of his policy positions. However, the FTC Act only allowed a president to remove a commissioner for “inefficiency, neglect of duty, or malfeasance in office.” Since Humphrey died shortly after being dismissed, his executor sued to recover Humphrey’s lost salary.Question
Did section 1 of the Federal Trade Commission Act unconstitutionally interfere with the executive power of the President?Conclusion
The unanimous Court found that the FTC Act was constitutional and that Humphrey’s dismissal on policy grounds was unjustified. The Court reasoned that the Constitution had never given “illimitable power of removal” to the president.
Seila Law LLC v. Consumer Financial Protection Bureau
Next, consider Seila Law LLC v. Consumer Financial Protection Bureau
Seila Law argued that the CFPB’s structure violates the Constitution’s separation of powers because it is an independent agency headed by a single Director who exercises substantial executive power but can be removed by the President only for cause.
The Chief Justice, joined by Justices Samuel Alito and Brett Kavanaugh, concluded that the Director’s removal protection is severable from the other provisions of the Dodd-Frank Act that establish the CFPB and define its authority.
Justice Clarence Thomas authored an opinion in which Justice Neil Gorsuch joined, concurring with the Chief Justice’s conclusion that the CFPB’s structure violates the separation of powers but dissenting as to the severability of the clause. Justice Thomas argued that he would repudiate entirely the first exception in which Congress may restrict the President’s power to remove lesser executive officers and that the doctrine of severability is entirely unfounded because it “involves nebulous inquir[ies] into hypothetical congressional intent.”
Justice Elena Kagan authored an opinion in which Justices Ruth Bader Ginsburg, Stephen Breyer, and Sonia Sotomayor joined, concurring with the Chief Justice’s conclusion as to severability but dissenting as to the conclusion that the configuration violates the separation of powers. Justice Kagan argued that for-cause removal restrictions serve to create in administrative agencies “a measure of independence from political pressure” and that “the text of the Constitution, the history of the country, the precedents of this Court, and the need for sound and adaptable governance—all stand against the majority’s opinion.
The president’s power to “remove – and thus supervise – those who wield executive power” flows directly from the Constitution, Chief Justice John Roberts wrote for the majority.
“The CFPB director has no boss, peers, or voters to report to,” Roberts wrote. “Yet the director wields vast rulemaking, enforcement, and adjudicatory authority over a significant portion of the US economy.”
Trump’s Executive-Power Restoration
The Wall Street Journal says Trump’s bold order putting ‘independent agencies’ under White House control echoes the Founders.
Please consider the WSJ take Trump’s Executive-Power Restoration
The federal government includes dozens of agencies that are nominally independent of the President even though they enforce laws and exercise other executive power. This wasn’t part of the original constitutional design.
Such agencies took root during the Progressive Era of the early 20th century. Woodrow Wilson in particular disliked the Constitution and wanted government by bureaucratic experts shielded from political control. Thus evolved today’s government alphabet soup of the SEC, FCC, FTC, FEC, CFTC, CFPB, FERC, FDIC, the Federal Reserve, and more.
Progressives are calling this a power grab, but if so it is restoring the vision of the Founders who gave the President control over the executive branch.
Mr. Trump’s order also has the virtue of making clear that increasingly these “independent” agencies aren’t really independent. After Barack Obama endorsed regulating broadband providers as common carriers, his FCC Chair Tom Wheeler promulgated a net-neutrality rule that did so. Does anyone believe Mr. Wheeler was acting independently? Or that the FTC sued Meta at the end of Mr. Trump’s first term without the President’s blessing?
Joe Biden issued executive orders “encouraging” various independent agencies to “consider” issuing regulations—for instance, an FTC ban on non-compete agreements. They followed his orders. He also added agency heads to White House policy councils to coordinate with cabinet departments. Mr. Trump’s order is in that sense truth in advertising.
Missing the Boat Entirely
The sole point of these agencies is for them to be independent. One would need to look at each agency individually.
The WSJ correctly points to Obama’s net neutrality nonsense and also to Biden’s FTC silliness.
Certainly, no one in their right mind should want the president to decide interest rates by decree.
Trump left the Fed independent for rate setting, but nothing else.
Extreme Ping-Pong
If Trump gets his way, the result will be extreme ping-pong depending on which party is in power.
Just wait until Democrats get their chance at this grab bag, and they will.
My Idea
Get rid of the SEC, FCC, FTC, FEC, CFTC, CFPB, FERC, and FDIC. Merge needed operations into existing organizations.
For example, the SEC has made a horrible mess of things over the years, especially its nonsensical creation of a Nationally Recognized Statistical Rating Organization (NRSRO).
I discussed the NRSRO in 2007 in Time To Break Up The Credit Rating Cartel
Before the SEC created the NRSRO, bond rating agencies got paid on how well they judged corporate bond risk. After the NRSRO, bond rating agencies got paid on how much debt they rated, with predictable results.
Moodys, Fitch, and the S&P rated junk credit obligations AAA right up to the point of default.
The SEC, Fed, and FDIC all contributed to the Great Recession and learned nothing from it.
It would be easy to get rid of much of the FDIC by mandating banks hold customer deposits in cash instead of speculating on interest rates.
We have no safekeeping bank!
Failure to safeguard customer deposits led to an FDIC takeover of Silicon Valley Bank.
For discussion, please see A Banking Game Bait and Switch on Interest Rates, Fed Stands Idly By
Look at the mess the Fed created in housing with QE to Infinity.
We have had three economic bubbles in succession, each with a bigger amplitude.
Why exactly do we need a Fed?
Letting the market set interest rates could not have done worse in 2000, 2007, or 2020.
The Fed Is Incompetent by Design and Can’t Be Fixed
But one thing worse than a Fed setting rates would be for presidents to set rates for political goals such as getting reelected.
For discussion of the Fed, please consider Fedthink! The Fed Is Incompetent by Design and Can’t Be Fixed
The FTC? Please be serious. Biden used that for nothing but union pandering. Trump will do the same.
Lead Question
Given the recent 5-4 ruling, even if it was on narrow grounds, I am reluctant to put odds of how the courts will rule.
Unlike Birthright Citizenship, I suspect there will be differences between District Court cases. If so, this will get to the Supreme Court.
Personally, I hope the court does strike this down because a continuous game of “Extreme Ping-Pong” seems very unwise, constitutional or not.
If the Fed does strike this down, I suspect it will precisely be due to it recognizing the “Extreme Ping-Pong” impact, no matter how they officially phrase it.
Instead of putting these agencies under control of political parties, I suggest we figure out what if any functions are truly needed, merge those functions into existing agencies, and kill the rest of them.
Less is more. Extreme partisan control is problematic.
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