The Call of the Siren and Federal Agency Independence: Independence from Whom?, by Anna Williams Shavers

by Guest Blogger — Monday, Apr. 11, 2016

When an independent agency is created, from whom does it gain independence – the President, Congress, or the people? Maybe the better question is whether it is really independent at all. One thing in particular that caught my eye is Peter Conti-Brown’s focus in Part III on the independence of the Federal Reserve Board (Fed) demonstrated by its “institutional design” and its relationship with three “sirens”, the President, Congress and those who are affected by or seek to influence the policy of the Federal Reserve Board. This discussion in some ways demonstrates the uniqueness of the Fed but also helps establish a method by which we might assess other independent agencies. Perhaps, as Conti-Brown suggests, this assessment from time to time might lead to a conclusion either that the institutional design of a particular independent agency is no longer serving the purposes envisioned by Congress at the time of the agency’s creation or that the design needs to be rethought. This could either because the agency is being thwarted in some way because of the actions of three sirens or that the desired independence raises constitutional questions.

As Conti-Brown suggests, the assessment should include an examination of the appointment process and an inquiry into whether the political process is being appropriately used at that stage rather than at the level of policy execution. For example, appointments to the National Labor Relations Board (NLRB) created by National Labor Relations Act (Wagner Act), (1935), as well as its policy-making has been subjected to a number of challenges recently. Because of the difficulty of getting appointments approved to the NLRB, President Obama’s attempts to use a broad interpretation of “recess appointments” led to the constitutional challenge in NLRB v. Canning, 573 U.S. ___ (2014). A unanimous Supreme Court held that the President had made an impermissible construction of the Recess Appointments Clause. But the Court’s decision raises a number of questions that might be addressed through Conti-Brown’s analysis. Is the NLRB unfairly accused of developing policies that favor union organization? Does the characterization of the agency as a politicized body captured by the Unions influence the tenure of those who accept appointments and dissuade others from accepting at all, resulting in the need to make frequent appointments and providing an opportunity for all of the Board members to be appointed by one President? Does the recent experience with the current institutional design of the NLRB suggest that an executive branch agency model might be more appropriate? The NLRB describes itself on its website as “an independent federal agency that protects the rights of private sector employees to join together, with or without a union, to improve their wages and working conditions.” Does the institutional design reflect this view?

Two more recent creations, the Public Accounting Oversight Board (PCAOB) created by Congress as part of the Sarbanes-Oxley Act of 2002 and the Consumer Financial Protection Bureau (CFPB), established by Congress through the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) can also benefit from Conti-Brown’s siren analysis.

Are the institutional design and the reasons for creating PCAOB reflected in what has actually materialized? Although the PCAOB is technically not an independent agency, but a private-sector, nonprofit corporation housed within an independent agency, the Securities and Exchange Commission (SEC), it was created with many of the features of an independent agency such as the removal for good cause provision which was declared unconstitutional in Free Enterprise Fund v. Public Company Accounting Oversight Board (PCAOB), 561 US 477 (2010). The relationship of the sirens could perhaps be more carefully scrutinized when the Congress decides to create a government entity which is not controlled by the President. Is it really necessary for the entity to perform its functions without the threat of at-will removal by the President?

This last question has now been raised with respect to the CFPB, PHH Corp. et al. v. Consumer Financial Protection Bureau, case #15-1177, D.C. Cir. (2015), along with the question of whether an independent agency can be headed by one person. As Conti-Brown states in Chapter 11, the creation of the CFPB which is housed in the Fed demonstrates that an assessment of the relationship between an agency and its sirens and what has evolved since the creation of the agency may lead to the conclusion that more players should be added to the regulatory mix. Here it was the lack of focus on consumers. The question now is whether the institutional design was the appropriate one.

I join others in thanking Chris Walker for the opportunity to participate in this symposium and Peter Conti-Brown for writing a thought provoking book.


Anna Williams Shavers is the Cline Williams Professor of Citizenship Law at the University of Nebraska College of Law.

This post is part of an online symposium reviewing Peter Conti-Brown’s new book The Power and Independence of the Federal Reserve. You can read the entire series, as well as other posts on the Federal Reserve, here.

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