Bonus 125: The Federal Reserve and the Unitary Executive

The Supreme Court's apparent unwillingness to jeopardize the central bank's independence is entirely understandable (and good); it also undermines the persuasive force of the unitary executive theory.

Welcome back to the weekly bonus content for “One First.” Although Monday’s regular newsletter will remain free for as long as I’m able to do this, I put much of Thursday’s bonus content behind a paywall as an added incentive for those who are willing and able to support the work that goes into putting this newsletter together every week. I’m grateful to those of you who are already paid subscribers, and hope that those of you who aren’t will consider a paid subscription if and when your circumstances permit:

As prior posts have hopefully made clear, one of the central legal theories on which the new Trump administration is relying to defend a lot of its more … aggressive … efforts to take over every aspect of the federal bureaucracy is the “unitary executive”—the idea that, insofar as Article II, Section 1 of the Constitution vests the “executive power” in a single “President of the United States,” that officer must have the ability to control the conduct (and identity) of every single person who works in the executive branch. One of the most important Supreme Court precedents standing in the way of that argument is a 1935 decision, Humphrey’s Executor v. United States, in which a unanimous Court upheld for-cause removal restrictions for commissioners on the Federal Trade Commission—a linchpin in the constitutionality of “independent” agencies. After all, if the President can remove FTC commissioners, or SEC commissioners, or members of the National Labor Relations Board only “for cause,” then it will be harder for him to direct those agencies to do his bidding rather than what is in the best interests of the agency’s mandate.

Humphrey’s Executor is, by all accounts, on life support at the Supreme Court. The Court has already taken a series of significant bites out of it, including by distinguishing independent agencies run by a single director (like the Consumer Financial Protection Bureau) in Seila Law v. CFPB. Those agency heads, the Court has concluded, can’t be insulated from direct presidential control. Indeed, that’s why the government may well win the Dellinger case I wrote about on Monday—because the Office of Special Counsel is one such agency. But despite a slew of cert. petitions asking the justices to overrule Humphrey’s Executor directly, and despite the Acting Solicitor General informing Congress last week that the Justice Department will no longer defend it, the Court, so far, has been unobliging.

The best guess for why the Court has been squeamish about Humphrey’s Executor is because of the collateral damage overruling it would inflict on what might be the most important independent agency out there—the Federal Reserve. The not-very-well-kept secret is that the justices are (understandably) wary about handing down a ruling that would allow any President, and perhaps this one in particular, to exercise direct control over U.S. monetary policy by controlling who sits on the Federal Reserve Board. Indeed, an analogous concern was presented to a lesser degree last term in the CFPB funding case—where the entire case effectively came down to whether the challengers could distinguish how the CFPB is funded from how The Fed itself is funded (spoiler alert: they couldn’t).

And even the controversial executive order President Trump signed on Tuesday, purporting to assert direct control over rulemaking by independent agencies, expressly exempted any action by the Fed relating to monetary policy—and only that. Trump could make such an exception with the stroke of a pen. But until and unless someone can come up with a plausible ground on which the Fed can be distinguished for constitutional purposes from other independent agencies headed by multi-member boards, overruling Humphrey’s Executor could thus have massive (and massively negative) effects on the health and stability of the U.S. economy.

Below the fold, I lay out both why there appears to be an unspoken central bank exception to the unitary executive theory, and why that exception, insofar as it’s real, does quite a bit to undermine the persuasiveness of the theory writ large. In a nutshell, if the reason for a central bank exception is because U.S. monetary policy is just too important to be subject to changing political whims, one can imagine lots of comparable arguments about the importance of other things that other independent agencies do and have done. It turns out that a unitary executive theory that carves out even one executive branch agency from direct presidential control isn’t much of a theory, after all.

For those who are not paid subscribers, the next free installment of the newsletter will drop on Monday morning. For those who are, please read on.