Moreover, we argue that these mechanisms, even though they provide presidential involvement without plenary control, are consistent with the president's strategic political interests. Instead, we see a legally mandated partnership between an independent agency (either the Federal Reserve Board of Governors or a multi-member board) and the Secretary of the Treasury, a Cabinet official with direct access to and ultimate responsibility to the President. 6.
FINANCIAL AGENCIES IN THE CONTEXT OF
FINANCIAL AGENCIES IN THE CONTEXT OF ADMINISTRATIVE LAW This part lays the groundwork by describing financial agencies in
Independent Agencies vs. Executive-Branch
Some of the agencies in this group took over functions performed by former agencies or executive departments. This definition differs from some popular definitions of independence, such as "[those] agencies that exist outside the federal executive departments (those headed by a cabinet secretary)." See Independent agencies of the US government, www.wikipedia.org/.
Justifications for Independence
Promoting Agency Expertise
Expertise was needed to solve social and economic problems, and only independent agencies possessed the necessary kind. Congress lacked the kind of technical expertise to solve the problems for which independent agencies were created.
Inhibiting Short-Term or Narrow Interests 613
The ability to activate the private sector also has countervailing costs, such as the potential for conflicts of interest between the SEC and the SRO. Political pressure could cause the SEC to steer securities policy away from SROs and toward federal intervention.
The Political and Legal History of Independent
When the Fed was created, the Secretary of the Treasury and the Comptroller of the Currency were ex officio members of what was then only a five-member Board of Governors. For a historical description of presidential efforts to influence the decisions of the independent regulatory commission, see Moreno, supra note 23, at 481-88.
The Modern Era of Presidential Control
FINANCIAL AGENCIES AND PRESIDENTIAL PREFERENCES
Recent crises have indicated a need for reform in many areas, including market stability and securities regulation. When we examined legislative proposals for market stability reform, we were not disappointed: The Fed figured centrally in all of them. And the SEC remains at the forefront of securities regulation, even as new agencies such as the PCAOB emerge.
On closer examination, however, we were surprised to see mechanisms that made the Fed and SEC more responsive to presidential preferences on critical issues. We derive our mechanisms from the 2009 proposals for financial regulatory reform and from previous administration practices.
Market Stability
The Regulation of Market Stability
When successive waves of the financial crisis hit the US economy and revealed the depth of the market stability problem in 2008, the Fed was usually the first to respond. This development shows that the role of the regulator in the market stability arena is not only to develop standards for capital reserves or other protection against market stability risks. Critically, these proposals require the Fed to work with the Treasury Secretary on matters of policy interest and social importance.
The Senate proposal also includes as members an independent member from the insurance industry and the head of the new consumer agency. Restoring American Financial Stability, supra note 153, which describes the board's structure and its relationship with the Fed).
Political Interests
Bernanke and Geithner may have cast one shadow, but without formalization there is no guarantee that future officials will do the same.169 In addition to permanence, formalization of the relationship also adds a degree of visibility and seriousness. This is not to say that the cooperation requirement would necessarily be enforceable in court. These proposals therefore take an important step towards hybridizing the independent agencies and the executive agencies, and creating a spectrum along which agency independence takes place.
Geithner has these requisite political connections and, through constant contact with Bernanke, can produce decisions that have the support of the White House.172 Such support from the White House on broad economic issues is critical for Bernanke to win the support of the financial services sector, the public, and Congress. Thus, the president can strive for a degree of independence to become a credible commitment to solving a long-term problem such as market stability.
Accountability Levers
A president would not be able to direct policy outcomes backed by the threat of impeachment. As noted above, all agencies have a vested interest in securing the goodwill of the President to enlist the help of the CEO in budget battles with Congress.86 This interest is magnified in the financial context. We wonder if the president could use the failure or inadequacy of consultation as a reason to remove independent actors.
Second, a common set of interests between the Fed and the President reduces the need for stronger control. The president may have difficulty resisting short-term pressures to respect other interests and thus may require an independent regulator for stability.
Securities Transactions and Markets
The Regulation of Securities
The committee was appointed by the NASD board in November 1994 in the wake of the odd-eighths scandal. Public interest in the PCAOB increased recently when the Supreme Court heard oral arguments on the constitutionality of the entity's structure. The SEC adopted new rules shortly thereafter.2 19 To be sure, the rulemaking may have occurred without the influence of the Secretary.
Dep't of Treasury, Paulson Announces First Stage of Capital Markets Action Plan (May http://www.treas.gov/press/releasesthp408.htm. Dep't of Treasury, Remarks by Secretary Paulson on Blueprint for Regulatory Reform ( Mar http://www.treas.gov/press/releases/hp897.htm.
Political Interests and Accountability
Although the SEC makes independent decisions to pursue civil enforcement actions, as Elena Kagan has written, the Department of Justice and the relevant US imply that the White House owns agency decisions.243 Such recommendations from the Treasury Secretary to the SEC can have a major impact. similar effect. As noted above, this relationship is critical to a workable securities policy, and a workable securities policy is in the mutual interest of the President and the SEC.
Engaging in SEC policy is likely to bring the SEC closer to executive branch agencies. The SEC cannot ignore securities markets and market participants because the success of the regulatory regime depends on them.
Monetary Policy
CONSTITUTIONAL IMPLICATIONS
Our main purpose in this article is to highlight and evaluate the hybridization of independent and executive branch agencies in the financial context. Although the Supreme Court long ago upheld the constitutionality of independent agencies, 259 new forms are likely to present new challenges. Indeed, the Court heard arguments during the current Term in a case challenging the constitutionality of the PCAOB.260 Our purpose in this Part is not to beat the Court to a decision in this case, but rather to challenge the thinking about it and to inform the future. incidents.
We offer the following discussion to connect the political and normative with the constitutional.
The Constitutional Framework
34; to increase their own powers at the expense of the executive branch. The court stated that the law in question did not give Congress a role in the decision-making of the independent advisers, but instead "placed the power of removal directly in the hands of the executive branch."280 it also casts previous removal cases in a different light. 34;reasonable" limitation did not confer any additional powers on Congress at the expense of the executive branch. 282. Ethics in Government Act's removal limitation would be invalidated if character.
The Court also rejected arguments that the law constituted judicial usurpation of executive power by granting the special division of D.C. The Court ultimately upheld the removal restriction, but did so in a way that sharpened the question of how much insulation these protections provide.287 It suggested that the functions' centrality to the president's duties matters, though it said no more.
The Open Questions
Market Stability
Although the Fed already has the authority to supervise financial institutions, the expansion to non-financial institutions would be significant because this category encompasses a huge portion of the economy. Moreover, the President, through the Secretary of the Treasury, would have a means other than removal power to influence the Fed's decisions. In the Morrison case, the Court considered it significant that the Attorney General had means other than removal power to shape the authority of the independent counsel.294 For example, the Court took into account the role of the public prosecutor.
Generally in requesting an independent counsel and in defining the counsel's jurisdiction.295 These roles were sufficient to ensure that the authority of the independent counsel did not undermine that of the President. By virtue of the removal restriction, the Fed is able to override the president's judgment on certain policy decisions.
Securities Transactions and Markets
In addition, the president can appoint the chairman of the SEC, providing another important “lever[] of influence.”300 In addition, the D.C. Justice Kavanaugh, strongly dissenting, argued that the president's control over the PCAOB is too indirect to pass constitutional muster because it can be removed by an agency over which the president has limited control.307 As Justice Kavanaugh stated, “the president is two 308 Although the majority believed the case to be similar to Humphrey's, Judge Kavanaugh wrote that the PCAOB presents an entirely unique situation in which the agency is essentially a government unto itself. Nor can any agency be expected to create adequate accounting standards without the extensive participation of accounting firms.
As previously stated, the Court did not clarify how the need for isolation plays into the constitutional analysis, but when increased presidential control defeats the purpose of the. This does not mean that Congress could not have granted authority to set auditing standards to a traditional independent agency, such as the SEC, instead of the PCAOB, because to do so would make statutory purposes vulnerable to politics.
NONFINANCIAL APPLICATIONS
At the same time, other mechanisms of presidential involvement in fiscal policy are more interesting because they are, in a sense, more conventional than the PCAOB. Instead of filing an agency in an independent agency, they pair an independent agency with an executive branch official. Thus, the PCAOB is relatively less important, although the Supreme Court uses it as a means of making major constitutional laws.
Health Care
Other priorities included health insurance reform and providing basic consumer protections. Regarding coverage, the Health Choices Administration ("HCA"), which would have allocated health care services as part of the so-called "public option" for providing health care services, was included in the House bill but did not make it . the final legislation. The House health care bill made no reference to that specific section of the Social Security Act.
To the extent that health care imposes high costs, the president may even have interests that are detrimental to the institution now or over time. It could also mean no regulation at all if the president needs independence to make a credible promise for a publicly funded health care system.
Climate Change
President Obama also made personnel decisions that would help his administration take control of climate change. Yet this legislation does not anchor the issue of climate change solely to the executive. Although the EPA has the most prominent role, independent agencies have an important role in the new climate change regulatory space.
Broder, House Passes Bill to Address Climate Change Threat, N.Y. containing new Clean Air Act § 732 for offsets). Alongside these explanations, there is an indisputable element of climate change policy that requires the President's official seal.
