As we noted in our strategic analysis of the Supreme Court’s CFPB decision, Chief Justice Roberts hued a very careful line as he sought to put the President fully in charge of independent agencies without at the same time shutting them down altogether as his own inclinations and the demands of more conservatives justices would have it.  Instead, the decision targets only independent-agency directors who, if their positions and agencies meet certain conditions, are independent no more.  The CFPB’s director was the first to feel the guillotine and FHFA’s may be next.  However, the Court’s scythe may strike down more independent-agency officials even without new decisions – it all depends on how vigorously a President chooses to use the formidable weaponry even this careful compromise places in his hands.

With the Court now laying out the parameters for which independent-agency officials must be dismissible at will, a president – whether it be Mr. Trump or Mr. Biden in 2021 – may well feel emboldened to go after once-independent officeholders, including the chairman of the Fed.  The specifics in the Roberts majority decision most clearly apply to independent agencies with a single head, but much in the discussion as well as the side-opinion from Justices Thomas and Gorsuch raises issues pertinent to all independent agencies.

I am no lawyer, but the Roberts decision against the CFPB director takes firm stands that, while in some instances expressly limited only to agencies with a single director such as the CFPB and FHFA, in others clearly extend to multi-member boards such as the Federal Trade Commission.  A key case used to defend the Bureau is a 1935 one in which the President’s power of dismissal was curtailed, but Chief Justice Roberts notes that, “The Court’s conclusion that the FTC did not exercise executive power has not withstood the test of time”.  In a much more recent decision, the Court asserted the President’s at-will dismissal power over a multi-member agency (the Public Company Oversight Accounting Bord), extending the separation-of-powers principle beyond the single directorships undone in the CFPB decision.  Emphasizing its broad impact, the Chief Justice in the CFPB case established that:

The Framers’ constitutional strategy is straight forward: divide power everywhere except for the Presidency, and render the President directly accountable to the people through regular elections. In that scheme, individual executive officials may wield significant authority, but that authority remains subject to the ongoing supervision and control of the elected President.

Why worry about the Fed? It’s not all that long ago when President Trump was looking for a way to fire Mr. Powell and, had he this decision in hand at the time, he might well have succeeded.  The case is limited to the CFPB and thus does not clear the runway for changes at the Fed, but it does establish the criteria under which the Court – at least as currently configured – will consider other agency officials.  Virtually all of these apply with as much force to the Fed as to the CFPB. 

Litigation would be necessary to prove the point, but the new decision changes the line-up.  Before the case, agency opponents had to file suit to get their man or woman; now, agency defenders need to do so.  In the absence of an injunction, they are forced into little more than rhetorical battle since their hero will have been forced off the field.

Yesterday, President Trump said he was “very, very happy” with Mr. Powell.  Tomorrow, who knows?  Given the bipartisan accolades surrounding Chairman Powell, it seems unlikely that Mr. Biden would, if elected, take him on.  The same is not necessarily true for Vice Chairman Quarles, who has become something of a boogeyman for Democrats opposing recent Fed moves characterized as unduly lax.  Vice Chairman Clarida might also be on the chopping block to ensure that Gov. Brainard has allies as well as friends at the Fed.  For all their awesome offices, it’s possible that the vice chairs are “inferior officers” and thus insulated from the President under the terms of the CFPB decision.  However, faced with a firing letter, officials may pack their bags no matter these ambiguities surrounding such a summary dismissal.

Who wins what, who sits where, and the order of the day will determine how far the next Administration or, perhaps even this one, uses the new power granted by the Roberts decision to his own ends.  It is, however, clear to nonlawyers and lawyers alike that the CFPB decision is a sea-change in the balance of power between Congress and the President over the control of independent agencies.  It has made independent agencies considerably less potent and the President, whomever he is, a lot more powerful.  Over time – and perhaps not much of it – the construct of U.S. financial policy and the vaunted independence of the central bank could have a new, far less free-spirited look.