Richard H. Pildes (New York University School of Law) has posted Separation of Powers, Independent Agencies, and Financial Regulation: The Sarbanes-Oxley Act (NYU Journal of Law and Business) on SSRN. Here is the abstract:
In the aftermath of the last financial crisis, involving the collapse of Enron, WorldCom, and others, Congress enacted the Sarbanes-Oxley Act of 2002. The Act's centerpiece was a new regulatory body, located within the Securities and Exchange Commission, with the power to regulate and oversee the accounting industry in the United States.
The constitutionality of the novel administrative structure Sarbanes-Oxley created is now being challenged. One judge has called this challenge "the most important separation-of-powers case regarding the President's appointment and removal powers to reach the courts in the last 20 years." The issues pit Congress' desire to insulate regulatory bodies from Presidential control against unitary-executive branch theories of the Constitution. Judicial resolution of this conflict will determine not only the constitutionality of regulatory oversight of the accounting industry that Sarbanes-Oxley sets up. That resolution will determine the kinds of options Congress has for designing politically-insulated administrative structures to deal with the current financial crisis and with other major regulatory needs in the coming years.
This article argues that the administrative institutions created in Sarbanes-Oxley are consistent with the constitutionally-defined relationship between Congress, the President, and administrative agencies.
And from the text:
The claim that the President must have direct “for cause” removal power over Board members is the claim that the President must have “for cause” removal power over all government officials who act as “inferior officers” of the United States. But such a principle would be radically inconsistent with longstanding political practice, as well as Supreme Court precedent. Indeed, such a principle is at odds with the basic practice and legal understanding of the administrative state. This claim goes well beyond even an attack on independent agencies alone: it is an attack on the structure of nearly all administrative agencies, both those whose heads serve at the pleasure of the President (purely executive agencies) and those whose heads the President can remove only for cause (independent agencies). For generations, the President has not had, and has not been constitutionally required to have, the direct power to remove inferior officers of the United States, for cause or under any other standard.
Highly recommended.
