The Supreme Court appeared uncertain Tuesday about whether to give President Donald Trump and future presidents more power to fire the heads of semi-independent agencies, including the Consumer Financial Protection Bureau, created in the wake of the Great Recession.
The consumer agency was created by the Democratic-controlled Congress in 2010. To insulate it from political pressure, the Dodd-Frank Act said the director would be appointed by the president and confirmed by the Senate to “serve for a term of 5 years,” and would be subject to “removal for cause.” This meant the president could “remove the director for inefficiency, neglect of duty or malfeasance in office,” but not for purely political reasons.
The justices struggled Tuesday with the question of whether Congress has the power to structure agencies as it sees fit, or whether the president, as head of the executive branch, has the power to exercise day-to-day control over the top officials of all executive branch agencies, including the ability to fire them at will.
While the court’s five conservatives lean toward executive power, it was not clear on Tuesday they agreed among themselves on how to rule in this case. Liberal justices are expected to support Congress’ ability to create semi-independent agencies.
The dispute began three years ago when a small Orange County law firm came under scrutiny from the CFPB for allegedly charging consumers illegal upfront fees for debt relief services. The Seila Law firm not only disputed the allegation and refused a demand for documents, it argued that the consumer bureau itself was unconstitutional because its director was not subject to control by the president.
Judge Josephine Staton in Santa Ana and the 9th Circuit Court sitting in Pasadena rejected the constitutional challenge, relying on high court decisions that had upheld independent agencies. The Supreme Court agreed last year to hear Seila Law v. CFPB and decide the issue of executive power.
The court’s decision could reach beyond the CFPB. For more than a century, Congress has created agencies, such as the Federal Reserve and the Securities and Exchange Commission, with a degree of independence from political control, even though their heads are appointed by the president. In some instances, the directors have a fixed term or are part of a governing board.
But some conservatives cite the so-called “unitary executive” theory and argue that the Constitution requires that all agency executives must come under the direct, day-to-day control of the president. This theory has attracted the attention of the court’s conservatives.
Solicitor General Noel Francisco, representing the Trump administration, refused to defend the CFPB on the grounds that its appointment provision infringes the executive power of the president. Instead, he argued on the side of the Orange County law firm and said the court should rule that the CFPB director may be removed at the wishes or the whim of the president.
The Constitution gives the president “unrestricted authority to remove principal officers” across the government, he told the justices. “If the director (of the CFPB) is insulated from presidential oversight, then her exercises of executive power are insulated from democratic control. And that’s not the structure that our Constitution creates and requires,” he said.
If there are no limits on Congress, he added, it could give Cabinet officers fixed terms in office and forbid a new president from removing them.
Washington attorney Paul Clement, who served as solicitor general under President George W. Bush, was asked to defend the CFPB. He said Congress may create an agency somewhat insulated from politics.
“Take the Fed, for example,” he said. “We don’t want the president to juice up interest rates right before a presidential election, so we’re going to give that to somebody who is insulated. … In the current situation, you see people are trying to make a political football out of dealing with a pandemic disease. So maybe Congress decides: Let’s have the head of (Centers for Disease Control and Prevention) be protected by for-cause removal because that’ll make sure people get good advice and it doesn’t become political. That is the kind of sensible decision that Congress has been making for over 100 years.”
But Justice Brett M. Kavanaugh noted that if a new president were elected in November, he or she could be required to keep in place Trump’s appointee for three more years. Kavanaugh said that was a strong reason for striking down the current provision and ruling that the president may replace the bureau’s director.
Currently, the CFPB is headed by Kathy Kraninger, a protege of acting White House chief of staff Mick Mulvaney. The agency was created at the urging of then-Harvard professor Elizabeth Warren, now a senator from Massachusetts and Democratic presidential contender.
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