Basing its decision on the Founders’ belief that concentrated government power threatens Americans’ liberty, a federal appeals court has ruled that the Constitution forbids a federal regulatory agency from being run by a single director. This is the latest challenge to the power of independent federal agencies – a challenge that has been running for decades and has been a favorite cause of businesses and conservative advocates.
In fact, the appeals court’s opinion on Tuesday embraced the derogatory phrase that those challengers have been using for years, calling the agencies the “headless fourth branch of the U.S. Government.” It said that those agencies exercise “enormous power over the economic and social life of the United States.”
It added that, “because of their massive power and the absence of presidential supervision and direction,” the independent agencies “pose a significant threat to individual liberty and to the constitutional system of separation of powers and checks and balances.”
If that decision withstands further appeals, which apparently are planned, it could be one of the most consequential decisions of modern times on the structure of the federal government, putting added power into the hands of each occupant of the White House.
Although asked to rule that independent agencies, as such, are always unconstitutional if they are not directly supervised by the president, the appeals court said it was bound by a 1935 Supreme Court decision upholding the creation of such agencies to use executive-style power while not being answerable to the White House. That ultimate issue, though, will remain in the case, and could be pressed by the agencies’ critics as this particular case unfolds further.
For now, the effect of the 2-to-1 ruling by the U.S. Court of Appeals for the District of Columbia Circuit was confined to a single agency – the six-year-old Consumer Finance Protection Bureau.
Created as a part of the sweeping congressional attempt to reform the nation’s financial industry in the wake of the 2008 near-collapse of that industry, the so-called “Dodd-Frank Act,” the Bureau has broad power to enforce 19 different federal laws that seek to protect consumers’ financial interests. It can regulate, the appeals court noted, “everything from home finance to student loans to credit cards to banking practices.” The Bureau was an idea promoted strongly by Elizabeth Warren, now a U.S. senator from Massachusetts, when she was an adviser to President Obama.
The appeals court stopped short of shutting down the agency altogether, as it had been asked to do. But, saying it was deeply troubled by the fact that the Bureau operated entirely on its own, and under the “unilateral” leadership of a single director, the court modified that structure by – in effect — putting the Bureau into the Executive Branch and by explicitly giving the president the authority to fire the director at any time, for any reason and even for no reason at all—in legal terms, “at will.”
The court majority accomplished that feat by simply deleting from the law creating the Bureau a phrase that allowed the director to be removed only “for cause,” meaning that he could only be discharged for “inefficiency, neglect of duty, or malfeasance in office.” Under that provision, the director could not be fired even for a deep disagreement on policy with the president, the constitutional head of the Executive Branch.
The first director of the Bureau is Richard Cordray, a former state official in Ohio. He has a five-year term that began in the summer of 2013 so, under the law as written, he could serve until 2018 even after a change in the presidency. He now will be subject to removal by the new president chosen in November. (The court opinion spoke highly of Cordray in a footnote.)
As set up by Congress, the court majority said, the Bureau director can use “enormous executive power” even while being “unaccountable” and “unchecked.” It described that official as the single most powerful official anywhere in the government, other than the president.
Major portions of the 101-page majority opinion, written by Circuit Judge Brett M. Kavanaugh and joined by Senior Circuit Judge A. Raymond Randolph, were devoted to the constitutional analysis and history of the independent agencies as a group. It found that, of the many such agencies created since 1887, only the Bureau was set up with a single director as its head.
The checks and balances system works in other independent agencies, the opinion said, because they all have several members who can check each other. The president, the majority noted, is checked by being accountable to the entire nation and by the constitutional command that he must “faithfully execute: the laws passed by Congress. No one, it found, checks the Bureau director.
(NOTE: This post also appears on Constitution Daily, the blog of the National Constitution Center in Philadelphia.)