Who Controls the Fed?

The Question After Slaughter and Cook

Article II begins with vesting, and that verb supplies the first rule for every later argument over independence, expertise, banking practice, and congressional design.^[1] The Framers placed executive power in one President because divided executive authority conceals fault, weakens responsibility, and leaves the people without an identifiable officer to praise or blame when federal law is executed.^[2]

That choice governs the question left by Slaughter and Cook, because the constitutional issue turns on the officer exercising federal power and the character of the power Congress seeks to protect from presidential control.^[3] Slaughter treated the independent-agency model as incompatible with Article II when federal officers investigate private parties, issue binding rules, prosecute enforcement actions, adjudicate violations, impose penalties, and sue in the name of the United States.^[4]

Cook preserved a harder problem by accepting that the Federal Reserve occupies a distinct historical position, while leaving unresolved how far central-banking history can protect the modern Board when it exercises coercive regulatory authority.^[5] That exception, therefore, needs sharper boundaries, since early banking practice can justify only the kind of independence that practice involved, and cannot carry every federal command imposed on the Board of Governors.^[6]

Treating that history as sufficient would allow Congress to preserve insulated executive power after Slaughter by placing it within the one institution the Court hesitates to treat as ordinary administration.^[7]

I The Independent Agency Model Breaks at Execution

For much of the twentieth century, the Federal Trade Commission supplied the standard defense of independent administration, with multimember structure, staggered terms, partisan balance, and statutory protection against removal except for inefficiency, neglect of duty, or malfeasance in office.^[8] Humphrey’s Executor upheld that arrangement by describing the Commission’s duties as quasi-legislative and quasi-judicial, which allowed the Court to avoid treating its commissioners as ordinary officers executing federal law for the President.^[9]

Slaughter rejected that description because the modern Federal Trade Commission promulgates rules with legal force, investigates suspected violations, prosecutes enforcement proceedings, conducts internal adjudications, and files civil suits to secure relief under federal law.^[10] Those acts belong to execution because they apply federal commands to private conduct through governmental force, even when Congress channels that force through procedures resembling legislation or adjudication.^[11]

The Decision of 1789 gives that structure early practical meaning, because the First Congress treated removal as a constitutional consequence of executive vesting.^[12] Madison argued that executive power included the authority to remove executive officers, since responsibility for faithful execution would be empty if the President could be held answerable for officers he could not displace.^[13]

The contrary view would make the President responsible for execution while allowing Congress to determine which executive officers could resist his direction, an arrangement that turns accountability into ceremony.^[14] Once the Court described the Commission by the power it exercised, Humphrey’s Executor lost the premise on which independent-agency doctrine had rested for nearly a century.^[15]

The Commission did not sit outside Article II because Congress preferred expertise, continuity, or political balance, since those design choices cannot revise the constitutional character of law enforcement.^[16] Free Enterprise Fund and Seila Law had already confined Humphrey’s Executor by refusing to extend its logic to modern agency arrangements that concentrated executive power beyond presidential control.^[17]

Slaughter completed that narrowing by holding that federal officers who exercise executive power must remain within the President’s authority, unless a specific historical exception covers the power in dispute.^[18] That reasoning reaches beyond the Federal Trade Commission, because an agency that binds private parties through federal law presents the same Article II defect regardless of professional expertise, statutory pedigree, or institutional sensitivity.^[19]

Congress retains broad authority to create offices, assign duties, appropriate funds, demand Senate confirmation, specify procedures, and require reasons for official action, although those authorities do not include severing execution from presidential responsibility.^[20]

II Why the Fed Is the Hard Case

Among modern institutions, the Federal Reserve presents the hardest remaining case because its defenders invoke historical practice reaching from the Bank of North America through the First and Second Banks of the United States.^[21] That argument carries weight where the function at issue concerns public credit, money, and confidence, since the founding generation understood that monetary institutions can suffer when each decision appears to follow immediate presidential command.^[22]

Cook accepted that frame when the Court refused to stay an injunction preventing the President from removing Governor Lisa Cook while litigation over cause and process continued.^[23] The Court read the phrase for cause against the background of common-law removal concepts, statutory structure, and a tradition of central-banking independence that it treated as constitutionally relevant.^[24]

That reasoning gave the Federal Reserve a position unlike the Federal Trade Commission, because the Court viewed central banking as linked to early practice rather than New Deal innovation.^[25] Yet the historical frame also creates its own boundary, because independence supported by early banking practice reaches only powers comparable to those historically kept at some distance from presidential direction.^[26]

The First Bank and Second Bank lent money, received deposits, issued notes, held federal funds, and assisted public finance through corporate charters that connected national credit to private capital.^[27] Those institutions influenced money and credit, although their directors did not wield the same sovereign authority now exercised by the Board of Governors, which regulates banks, requires reports, examines records, issues orders, and imposes penalties.^[28]

The modern Board differs from chartered banking corporations because it is a federal agency whose members are appointed by the President, confirmed by the Senate, and protected by statutory removal restrictions.^[29] The difference governs the analogy because historical practice cannot be stated with the highest level of generality, especially since central banking, as a broad category, encompasses monetary, supervisory, regulatory, and coercive functions.^[30]

The Constitution requires a closer match between the old practice and the modern power, since Article II asks whether the officer executes federal law, rather than whether Congress placed that officer inside an institution with a familiar banking name.^[31]

III The Board Is the Actor

For removal purposes, the Governors themselves supply the constitutional actor, because they hold protected terms while exercising statutory authority over private institutions, Reserve Banks, reports, examinations, rules, sanctions, and enforcement proceedings.^[32] Institutional design contains Reserve Banks, the Federal Open Market Committee, and other components, yet the Board remains the federal body whose members claim insulation from presidential removal.^[33]

That point prevents the analysis from dissolving into the phrase the Fed, which can obscure the difference between monetary operations and sovereign commands directed at private parties.^[34] The Board can examine accounts, books, and affairs of Reserve Banks and member banks, require reports and statements, supervise Reserve Banks, prescribe rules, and suspend or remove certain Reserve Bank officers.^[35]

Federal banking law also gives regulators enforcement tools that include notices stating charges, hearings, removal orders, prohibition orders, and civil money penalties against institution-affiliated parties.^[36] When Governors participate in that system, they help apply federal law to particular persons and institutions, creating legal consequences through authority that private actors cannot ignore without further sanction.^[37]

Those powers match the features Slaughter treated as executive, because they involve investigation, rule-bound application, enforcement, penalties, and legal consequences imposed under federal law.^[38] The Board’s monetary role does not convert those enforcement powers into nonexecutive authority, just as the Federal Trade Commission’s internal adjudications did not convert its enforcement program into judicial power.^[39]

Nor can the constitutional character of enforcement change because the regulated field is banking, since Article II concerns the exercise of federal power and leaves economic importance outside the constitutional inquiry.^[40] For that reason, the Federal Reserve exception cannot rest on institutional prestige, market reliance, or the understandable desire to shield monetary policy from immediate political pressure.^[41]

That inquiry also prevents the exception from becoming an instrument of migration.^[42] Congress cannot take power that would be executive in the Federal Trade Commission, the Securities and Exchange Commission, or the Consumer Financial Protection Bureau, move it into the Federal Reserve Board, and then claim that the power changed character because the Board also participates in monetary policy.^[43] Article II follows the power, not the agency label.^[44]

IV History Must Match Power

The strongest defense of Federal Reserve independence begins with early practice, which deserves serious treatment because the first Congresses and early Presidents operated close to ratification and understood the constitutional settlement they helped implement.^[45] Historical practice can illuminate constitutional meaning when it began early, was sustained by public acceptance, and addressed the same constitutional problem rather than a superficially similar institutional concern.^[46]

That final condition limits the Federal Reserve exception because early banks addressed questions about national credit and banking corporations, whereas the modern Board addresses questions about officers exercising sovereign command.^[47] Hamilton’s defense of the First Bank described a corporation capable of holding property, lending money, and assisting public finance, which differs from a federal board that issues binding legal commands to regulated parties.^[48]

McCulloch confirmed Congress’s implied power to create the Bank as a means of carrying fiscal powers into execution, although the case did not hold that federal officers exercising executive power could be insulated from presidential removal.^[49] Jackson’s war against the Second Bank proves a political contest over banking power, yet it does not prove that bank directors exercised sovereign executive authority comparable to that of modern federal regulators.^[50]

The early banking tradition therefore supports an argument for institutional distance in monetary and credit functions, while leaving ordinary regulatory and enforcement power subject to the Article II rule Slaughter reaffirmed.^[51] If the exception were framed more broadly, Congress could attach enforcement authority to any historically respected institution and then defend its insulation by invoking pedigree rather than power.^[52]

That move would recreate the very mistake Slaughter corrected, shifting the inquiry from what the officer does to what Congress calls the institution that houses him.^[53] Courts applying Article II cannot accept that substitution, because constitutional accountability turns on the execution of federal law rather than congressional packaging.^[54]

V The Cost of Congress’s Design

Properly confined, the exception must be function-specific and historically matched to the particular power Congress seeks to protect from presidential removal.^[55] That rule gives Cook its strongest possible reading without undoing Slaughter, since central-bank independence can persist where history supports it and gives way where the Board executes federal law against private parties.^[56]

Monetary policy presents a distinct question because early practice involved national banking institutions operating at some distance from immediate presidential direction on questions of credit and money.^[57] Regulation, supervision, examination, removal orders, prohibition orders, and civil penalties present the ordinary Article II question because those powers bind private parties through sovereign law.^[58]

Removal attaches to the office rather than each vote, which creates the principal difficulty for any function-specific account of the Federal Reserve exception.^[59] That difficulty does not defeat the function-specific account, because it identifies the cost of Congress’s own design.^[60] When Congress placed monetary judgment and coercive enforcement in the same protected office, it created an Article II problem that cannot be solved by expanding central-banking history beyond the powers that history can bear.^[61]

Where Congress combines monetary and enforcement powers in one protected office, Article II pressure falls on Congress’s choice to aggregate those powers inside the same insulated Board.^[62] The Constitution does not require courts to extend central-banking history to executive enforcement merely because Congress lodged both authorities in one office.^[63]

Courts applying that line ask whether the challenged removal protection covers a function historically associated with independent central banking or instead covers federal officers executing law against private parties.^[64] Where the removal dispute concerns monetary judgment, Cook supplies the historical path the Court reserved for the Federal Reserve, while coercive enforcement brings the Article II rule Slaughter restored.^[65]

This approach also avoids turning central-bank independence into a constitutional tunnel through which Congress can move ordinary executive power away from presidential control.^[66] The exception remains tied to the history that created it, while executive enforcement remains tied to the officer whom the Constitution makes responsible for faithful execution.^[67]

Congress can still choose expertise, continuity, procedure, and institutional distance for legitimate purposes, provided those choices do not place coercive federal power beyond the President’s removal authority.^[68]

When Central Banking History Runs Out

Central banking can occupy a distinct place in constitutional law because it has a historical pedigree that ordinary independent agencies lack.^[69] The constitutional question changes when the Board regulates, supervises, examines, penalizes, and excludes private parties from banking, since those acts execute federal law through sovereign authority.^[70]

Cook can survive Slaughter only if the Federal Reserve exception follows the historical practice that justifies it, because bank history cannot bear the full weight of the authority now lodged in the modern Board.^[71] When the Board exercises monetary judgment, the Court faces the historical question reserved in Cook; when the Board executes federal law against private parties, central-banking history runs out, and Article II supplies the rule.^[72]