Many posts have discussed regulation and the administrative state.
In a 2020 case called Seila Law v. Consumer Financial Protection Bureau (CFPB), the Supreme Court created a legal foundation for the president’s control of the independent regulatory agencies, including the Fed.
The Court said in that case that in the US governmental system all the agencies of the government must be responsible to the president—the only official elected by all the people—and that the CFPB, which had a single administrator whose term of office the president could not terminate at will, was thus unconstitutionally structured because the president could not appoint his own director.
The Federal Reserve Board is headed by seven directors appointed for fixed but staggered terms of 14 years, and thus cannot be dismissed by the president under current law, unless the Supreme Court holds that the Fed is subject to the same rules as the other independent regulatory agencies.
In creating the Fed, Congress was careful to make sure that the agency was completely independent of the president and Congress. This was because the Fed’s control of the major elements of the economy—the money supply, interest rates, and the banking system—would all be important for a president (and his party) running for re-election. The Fed, for example, could lower interest rates and increase economic growth before an election, with major political implications for the president and his political party.
Accordingly, if the president is to be given control over the independent regulatory agencies, the Court must find some other way to assure that the Fed will remain independent of any president.
In Seila Law itself, before the Court decided whether the administrator of the CFPB could be removed and replaced by the president, it considered whether Congress would have created the CFPB in the first place, if it had known that the president would be able to take control of the agency.
The Court concluded that there was nothing in the legislative history of the CFPB to suggest that Congress cared whether the president controlled the agency or not. Accordingly, the Court allowed the agency to continue operations under the president’s control.
In the case of the Fed, however, the Court’s answer would almost certainly be different. It would be clear from the congressional debates over the Fed’s creation—and the extraordinary financial power of the Fed—that its independence from the president was a key in its establishment.
