Knocking Woodrow Wilson (and His Administrative State) Down a Few Pegs
Woodrow Wilson’s legacy suffered a few blows recently. Not only did Princeton announce it will remove his name from their School of Public and International Affairs, but the Supreme Court rejected his vision of the federal government: antagonistic toward the Constitution’s separation of powers and desirous of administrative efficiency. In Seila Law, LLC. v. Consumer Financial Protection Bureau, the Court decided that the structure of the CFPB, an independent agency created as part of the Dodd-Frank Act of 2010, was unconstitutional.
Administrative agencies are organizations within the executive branch that often engage in executive, legislative, and adjudicative functions because they conduct investigations, issue regulations, and hold hearings led by administrative law judges. Independent agencies are administrative agencies whose top officials are protected from removal without cause by the President.
Wilson casts a shadow over many aspects of Seila Law. Wilson gained national prominence as a political scientist who criticized the separation of powers and called for a more efficient government run by apolitical administrators. After his meteoric rise from President of Princeton to President of the United States, Wilson, the progressive reformer, signed legislation that created the Federal Reserve System and the Federal Trade Commission. Both played a role in Seila Law.
The FTC is led by a multi-member board whose members could not be removed by the President except for "inefficiency, neglect of duty, or malfeasance in office." When FDR later tried to remove a holdover Republican commissioner, a conservative Supreme Court ruled against him in Humphrey’s Executor v. United States. The Court cited the FTC’s “quasi-legislative” and “quasi-judicial” functions as well as their description of it as an apolitical body staffed by experts as reasons to uphold the removal restriction. This was a departure from the general understanding since the founding era that the president has the power to fire his principal officers, like cabinet secretaries, for purely political reasons and without Congress’s approval. That case paved the way for the rise of the administrative state: a fourth branch of government that blurs the lines of the separation of powers and is often protected from presidential removal and thus political accountability.
Less than a century later, another progressive academic from the Ivy League appeared on the national stage advocating expansion of Washington’s regulatory power. In 2007, Harvard Law Professor Elizabeth Warren proposed a new regulatory body akin to the Consumer Products Safety Commission for consumer finance. Congress adopted her idea and created the Consumer Financial Protection Bureau, centralizing regulation of eighteen consumer finance statutes under one roof and transferring regulatory power from the Federal Reserve and a half dozen agencies like the FTC. Congress included the Humphrey’s Executor protection from presidential removal for the CFPB’s leadership, but went far beyond prior agencies to make it independent. Instead of a multi-member board, it was led by a single director, appointed for a five-year term. (Presidents could thus find themselves saddled with their predecessor’s choice for their entire term.) The single director was given massive regulatory power with reduced oversight from the executive branch. In addition, Congress set the CFPB’s funding on auto-pilot, making it an independent bureau within the notoriously opaque Federal Reserve and allowing it to draw money automatically through the Fed without having to go to Congress for annual appropriations.
One suspects Wilson would have loved the CFPB. This was all too much for Chief Justice Roberts. As he wrote in an earlier case involving multiple levels of removal protection, Free Enterprise Fund v. PCAOB, “The growth of the Executive Branch, which now wields vast power and touches almost every aspect of daily life, heightens the concern that it may slip from the Executive's control, and thus from that of the people." In Seila Law, in his trademark minimalist style, he held that the CFPB’s director’s removal restriction was unconstitutional, but declined to take the next step and overturn Humphrey’s Executor. In the short term, the case will directly affect an ongoing challenge to the Federal Housing Finance Agency’s structure, another independent agency with a single director. But given the Chief Justice’s limited opinion, the fight to assert the boundaries of the separation of powers will have to go on.
Matthew Forys is the Edwin Meese Legal Counsel and Associate General Counsel at the Landmark Legal Foundation.