The Consumer Protection Agency Is Unusual. It's Not Unconstitutional.

The agency's sole director may be rare. The Supreme Court probably won't care.

Not how the agency really works.

Photograph: Hulton Archive/Getty Images

In one of the most stunning rulings in recent years on separation of powers, the prestigious federal court of appeals in Washington, DC, on Tuesday struck down the law creating the Consumer Financial Protection Bureau -- at least as the independent agency that Congress designed. To cure what it saw as a constitutional defect, the court ruled that the bureau’s head must not be independent of the president, but must serve at his pleasure and be subject to his complete control.

It’s an appealing idea, elaborated with an unusual level of scholarship, clarity, and even passion. But as a matter of constitutional law, it’s a bit wild. The Supreme Court shouldn't accept it -- and probably won't.

The decision turned on a simple principle, associated with Alexander Hamilton and popularized during the George W. Bush administration: Under the Constitution, the executive power is “unitary,” meaning it resides in the president alone, and certainly not in lower-level officials.

In a defining 1926 decision, the Supreme Court embraced the idea of a unitary executive, ruling that under the constitution, all officials who implement federal law work under the president and must be entirely subject to his will. It would seem to follow that the Constitution makes no room for “independent” agencies -- and that the Secretary of State, the Attorney General, the Secretary of Transportation, and the Administrator of the Environmental Protection Agency must all be subordinate to the president.

In 1935, the court backtracked. Rebuffing President Franklin Roosevelt’s effort to fire a member of the Federal Trade Commission, the justices said that Congress could indeed create independent regulatory commissions, whose members are not subject to the president’s control, and who do not serve at his pleasure.

Since that time, American government has had what some people call a “headless fourth branch” -- an unruly assortment of independent agencies such as the Federal Communications Commission, the National Labor Relations Board, the Nuclear Regulatory Commission, the Consumer Product Safety Commission and the Federal Reserve Board.

Many people believe that by allowing such agencies, the court made a colossal constitutional blunder. But there is some historical support for the opposite view: that from the very start, the Constitution was understood to allow Congress to make executive officials independent of the president.

Which brings us to the CFPB. Unlike almost all independent agencies, it is headed not by a group of five or more people, but a single director (currently Richard Cordray). To many lawyers, that’s irrelevant to the constitutional question: The Supreme Court has permitted Congress to create independent agencies, and it shouldn’t matter whether the leadership consists of one person or several.

The court of appeals emphatically disagreed. It argued that the CFPB's director "possesses more unilateral authority -- that is, authority to take action on one’s own, subject to no check -- than any single commissioner or board member in any other independent agency in the U.S. Government.” In fact, the director "enjoys more unilateral authority than any other officer in any of the three branches of the U.S. Government, other than the President.”

The court insisted that from a constitutional point of view, that’s fatal. What legitimates the FTC, and other independent agencies, is that their members are “accountable to and checked by their fellow commissioners or board members.” Unlike the head of the CFPB, they are part of deliberative bodies, which reduces the risk of abuse of power and ultimately safeguards liberty.

The structure of the CFPB is therefore unconstitutional. What’s the remedy? The court gave a simple answer: Its director must serve at the pleasure of the president, subject to general supervision and control of the White House. That’s a big win for the presidency, and purely as a matter of policy, it’s an attractive idea. Whether or not you like the current president, he’s elected, and it usually makes sense to put him in charge of those who execute the law.

But as a matter of constitutional law, the court’s decision lacks support in precedent, and it is unlikely to stand.

Here’s why. More than 80 years after allowing Congress to create independent agencies, the Supreme Court has never so much as hinted that such agencies are acceptable only if they are headed by multiple members. The distinction between an independent agency with five heads, and an independent agency with one head, is pretty thin.

It’s not even clear that the former is better than the latter. True, a multi-member body is more deliberative. But if you care about accountability -- also a central constitutional value -- you might well favor a single head, on the grounds that if things go wrong people know exactly whom to blame.

In any case, the director of the CFPB is hardly a free agent. He must follow the law as enacted by Congress, and his decisions can always be overturned in court.

A careful reading of the lower court’s opinion suggests that its real objection is not to the CFPB in particular; it is to the whole idea of independent agencies.  But since the 1930s, the Supreme Court has not questioned that idea. It’s unlikely to start doing so now.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.