The Supreme Court today, in a 5-4 decision with the majority opinion issued by Chief Justice Roberts, struck down as unconstitutional aspects of a Public Company Accounting Oversight Board that had been created by the Sarbanes-Oxley Act. The majority ruled that the Public Company Accounting Oversight Board members were too insulated from the authority of the president.
The dissent, by Justice Breyer, lists a host of other federal agencies and boards whose appointees are similar insulated from presidential control, among them, the Federal Reserve Board, of which, the dissent notes, "Each member shall hold office for a term of fourteen years from the expiration of the term of his predecessor, unless sooner removed for cause by the President."
The Public Company Accounting Oversight Board was problematic in part because there was a double layer of removal from presidential authority -- its members could be removed only by the Securities and Exchange Commission rather than by the president directly. That doesn't apply to the Federal Reserve, and Chief Justice Roberts, in his majority opinion, pointedly notes that the court was not here revisiting its 1935 decision, Humphrey's Executor v. United States, which held that, as Justice Roberts summarized it, Congress "can, under certain circumstances, create independent agencies run by principal officers appointed by the President, whom the President may not remove at will but only for good cause."
Reading between the lines, though, one gets the sense that the five-justice majority in Free Enterprise Fund v. PCAOB might have decided Humphrey's Executor differently had it been up to them at the time, and that they might even be tempted, by the right case at the right time, to overturn it. At the very least, they'd give a president wide latitude as to what constitutes "cause" for the purposes of removing a federal official.
The irony is that Humphrey was an FTC official fired by Franklin Roosevelt; in that case a conservative Supreme Court had been curbing presidential power. Today, the conservatives on the court, and conservative legal scholars generally, back a more expansive view of presidential power, which has the also somewhat ironic effect of limiting the president's ability to delegate that power (President Bush signed Sarbanes-Oxley, and the Obama administration defended it) to a board he doesn't fully control.
Anyway, that's a long way of getting around to the idea that the "independence of the Fed," so prized by, among others, the editorialists of the Wall Street Journal, poses some real hard-core constitutional problems. What Congress and the White House were trying to do with this Public Company Accounting Oversight Board is create an entity like the Fed, not subject to political interference. But the five-justice Supreme Court majority today that's unconstitutional.
