Independent vs. Executive Agencies Explained: Why Some Agencies Answer to the President and Others Don't

Rough S1E6 Transcript — Independent Agencies

Gwen: Hello, and welcome to Administrative Remedies, because you can’t fix what you don’t understand. Brought to you in part by the University of Tulsa College of Law. I’m Gwendolyn Savitz, an associate professor here at TU and the associate dean of research and intellectual life.

Marc: And I’m Marc Roark. I’m the dean of the College of Law.

Gwen: We’ll be breaking down complex doctrines with real-life analogies and examples to demystify the world of administrative law for everyone trying to understand how government actually works.

Marc: Agencies are the main way the federal government gets things done. It’s not through Congress for reasons we’ll be addressing over the course of this series.

Gwen: Today, we’re talking about independent agencies, what they are, why Congress created them, how their structure works, and why we’re going to see them at the center of a major Supreme Court case soon. But first, let’s start with a story about a man in a boat.

Marc: Oh, I like boats.

Gwen: Excellent. So tell me what you know about college football and replays.

Marc: So they implemented the rule probably about 20 years ago that in certain instances, you can, as a coach, throw a flag. You can ask for a review of a play. Not every play is reviewable. Not every penalty is reviewable. Only certain kinds of plays are reviewable. Things like where the ball was placed can be reviewed and intentional targeting on a play. That’s always reviewable. But basic penalties like pass interference can’t be reviewed at all. And one other that’s definitely reviewable, if a player made a catch. But if you ask for a review and you get it wrong, you lose the timeout. So you only get a certain number of reviews per game.

Gwen: Would you say you trust the process generally?

Marc: Usually, yeah. I mean, I disagree and I see calls that I’m like, well, that’s a reasonable disagreement.

Gwen: So there has been a time when trust completely collapsed. That’s what we’re going to be talking about. 2018, there is a Pac-12 game. It’s Washington State versus USC. They’re reviewing whether a player should be ejected for a dangerous hit. Everything normal so far?

Marc: Normal process. Like every intentional hit to the head is reviewed as a potential targeting call and could result in somebody being ejected from the game.

Gwen: So the difference was that in this case, the conference’s general counsel, who was also a VP there, called in from a boat to overrule the replay officials.

Marc: Wait, from a boat? Like he wasn’t even at the game? He wasn’t in the replay center? He wasn’t up in the booths?

Gwen: No, watching it apparently from the boat. And the officials had made their call. Then he interfered in real time to change it.

Marc: That seems way outside the bounds of what is actually supposed to happen.

Gwen: Very much so, yes. This was absolutely a breach of Pac-12 protocol. They admitted it happened afterwards, apologized and rewrote the policy so administrators couldn’t do this. But by that point, the damage was done.

Marc: Well, yeah, because once everyone knows that someone upstairs or on a boat can change the call, then every decision that you don’t know how it’s going behind the scenes becomes suspect.

Gwen: Yes, exactly. Everybody stops trusting the process, the fans, the coaches, the players. It becomes about who has the power to interfere. And with that, the integrity of the entire system collapses.

Marc: Here’s the thing, though. The guy who made that phone call presumably thought he was making the right call.

Gwen: Yeah, but that’s exactly the problem. When you give people power, they’re going to use it even when they shouldn’t.

Marc: Right. So thinking about this, instances where people put prior restraints in place. So the literature version of that would be Odysseus and the sirens. Odysseus knew he wouldn’t be strong enough to resist their song. He told his crew to tie him up, to ignore everything he said once he was tied up to the mast. And because he knew future him would make terrible choices. It’s one of the oldest stories about self-control, admitting in advance that when temptation hits, you won’t be able to resist. So you take away your own power before you can abuse it.

Gwen: That’s what the Pac-12 people did after this incident. They wrote the rules to take away the administrator’s power. But we have a similar idea in our government, except the president doesn’t tie himself to the mast. Congress does.

Marc: So Congress is tying the president’s hands in advance.

Gwen: Yes. So for certain areas, Congress has decided that we need to have independent agencies. Those are Congress’s way of saying to the president, you are going to hear the siren call of short-term politics. But when you do, your hands will be tied.

Marc: Do you have a concrete example?

Gwen: Sure. The Federal Reserve. Anytime a president feels like the economy is getting wobbly, he could decide to cut rates and boost the economy, help win him reelection.

Marc: That’s the temptation to call from the boat to say you’re getting this wrong.

Gwen: Yes, exactly. So the president wants to be the guy phoning in to change the call. But with the Fed, they can’t. The president can appoint them, but once they’re in office, they’re independent. Even if the political pressure is enormous, the president literally cannot make that call. He can call and ask nicely, but he can’t make them do anything.

Marc: That’s the point. We’ve created the system where the president’s short-term desires can’t win out over this desire for long-term stability in the area the independent agency regulates.

Gwen: So independent agencies are democracy’s pre-commitment system. Not because we don’t trust any specific president, although most people probably could name a president at some point they don’t trust, but because we understand human nature. Power and temptation travel together, especially when you’re in a position like the presidency where you’re facing these enormous political challenges. However, not everyone agrees this structure is constitutional. That’s what we’re going to be looking at pretty soon.

Marc: OK, so before we go further, let me make sure I understand the basics. What exactly is an independent agency?

Gwen: An independent agency is an organization in the government that the president can appoint the members of, but the president cannot fire them at will. So the EPA administrator, head of FDA, they could be fired tomorrow. The FTC chair cannot. The members of the Fed cannot.

Marc: So it’s all a question about who has the power to remove.

Gwen: At its core, yes, but as part of this protection, we have an entire structure.

Gwen: So the first real independent agency was the Interstate Commerce Commission. But we really think in general that the model sort of took off with the Federal Trade Commission in 1914.

Marc: So what was going on in 1914 that made it necessary?

Gwen: At that point, Standard Oil had just been broken up. There’s still the American Tobacco Trust, the meatpacking giants, the money trusts on Wall Street. Congress could see that unfair competition couldn’t be handed over to whoever happened to be in office because each president had their own political incentives. And in part because they had also had an office in the executive branch directly that was supposed to be dealing with this and hadn’t done a very good job.

Marc: So why not just have the Justice Department handle it?

Gwen: These trusts were super powerful. They had money, influence, and connections. If the president could fire anyone investigating them, every big business would just lobby the president to remove these troublesome prosecutors. They wanted referees who couldn’t be removed just for making unpopular calls. These tend to be areas where there will be a lot of unpopular calls. And again, they could see that the predecessor of the FTC, the Bureau of Corporations, hadn’t done its job, whereas the independent Interstate Commerce Commission had broken the railroad robber barons.

Marc: How did they decide to do it?

Gwen: All right. So this is part of the original FTC Act in 1914. Can you read this section?

Marc: The Commission shall be composed of five commissioners who shall be appointed by the President, by and with the advice and consent of the Senate. Not more than three of the commissioners shall be members of the same political party. Any commissioner may be removed by the President for inefficiency, neglect of duty, or malfeasance in office.

Gwen: Notice what it says and what it doesn’t say. It lists specific reasons for removal. But it doesn’t say “at the pleasure of the president” or “for any reason.”

Marc: Right. And we can contrast that with true executive agencies where the law generally just says nothing about removal, meaning they just serve at the pleasure of the president, or that they can explicitly be removed at will.

Gwen: Here, Congress is trying to create a body that can regulate business without being captured by either political party.

Marc: How do we know that’s what they intended?

Gwen: We can see it in the legislative history. Here’s part of the Senate report. Can you read this section?

Marc: One of the chief advantages of the proposed commission over the Bureau of Corporations lies in the fact that it will have greater prestige and independence, and its decisions, coming from a board of several persons, will be more readily accepted as impartial and well-considered. For this reason also, it is essential that it should not be open to the suspicion of partisan direction, and this bill provides, therefore, that not more than three members of the commission shall belong to any one political party.

Gwen: So that’s straight from Congress. They’re not just building an agency. They’re trying to build increased credibility. They want an institution that people can trust.

Gwen: One of the bill’s sponsors explained what they were thinking.

Marc: The administration of the Antitrust Act has been lame and halting, changing with the shifting incumbents of the Attorney General’s office and according to the requirements of political exigencies. As a result, practically no progress has been made in the control of the trusts. Experience should teach us that with reference to interstate trade, a commission or board should be organized similar to the Interstate Commerce Commission, with powers of investigation, of condemnation, and of recommendation.

Gwen: Congress is saying that they needed a permanent body that wouldn’t shift with every administration. Another senator put it even more clearly.

Marc: There should be an administrative tribunal of high character, nonpartisan, or rather bipartisan, and independent of any department of the government. We want traditions. We want a fixed policy. We want trained experts. We want precedents. We want a body of administrative law built up. Such work must be done by a board or commission of dignity, permanence, and ability, independent of executive authority except in its selection, and independent in character.

Gwen: They’re trying to create a permanent institution with integrity.

Marc: So they were creating referees for markets.

Gwen: Yes. Referees that might not be popular with businesses but that would be trusted. And that’s because the game depends on that trust.

Gwen: So we’ve talked about why Congress wanted independent agencies and talked about the basic core definition. But let’s talk about what you actually need to make an agency independent. There are five main protections we’ll generally see. Not every independent agency has all of them. So the first one we talked about, that’s that for-cause removal. The president can’t fire a member of this agency just because he doesn’t like the decision. They can only do it for inefficiency, neglect of duty, or malfeasance in office.

Marc: Those terms seem pretty vague, though.

Gwen: They really are vague, and that’s kind of intentional. We’ll be talking more about exactly what they mean next episode. But what matters now is that it can’t just mean “I disagree with your policy choices.”

Gwen: So the second requirement is fixed terms. You don’t serve at the pleasure of the president. Once you’re appointed, you serve for a set number of years.

Marc: So how long are these terms?

Gwen: It depends on the agency. The FTC commissioners are seven years. The Fed gets 14.

Marc: So in this case, even if we have a president serving two consecutive terms, they cannot appoint every member of the Fed.

Gwen: That seems to be the point, though, right? That these terms are designed to outlast any single administration, meaning it’s not political.

Marc: It is political in the sense of who is being appointed, but it’s not political in the sense that the president directly controls it. A governor of the Fed who’s appointed today will serve under three or four presidents generally.

Gwen: But the terms aren’t quite as long for some of the other agencies. They’re still pretty lengthy, though. SEC commissioners have five years. FERC commissioners have five. The Nuclear Regulatory Commission also has five years.

Marc: So fixed terms, for-cause removal. What else?

Gwen: The other one we’ve already been talking about, just not saying it explicitly, multi-member boards. The Fed has seven board members. The FTC has five commissioners. The SEC has five.

Marc: Why not just one person? Wouldn’t that be more efficient?

Gwen: If we have an entire group, it’s going to be a lot harder to capture or influence each person. We’re also going to get diverse perspectives. They can check each other. And it means that no single person will have too much power of themselves. It also means that we’re going to be rotating so that the membership of the board will change, but it will change relatively slowly.

Marc: Okay. So then what’s the fourth element?

Gwen: Most of the time, there’s also a bipartisan requirement. This one doesn’t apply to the Fed. But the FTC can have no more than three members from one political party. The FCC, same thing. The Federal Election Commission is split 3-3. But even a president who serves for two full terms, even if they could theoretically pick every one of these members, they can’t pack it with members from their party.

Marc: So built-in political diversity, though I imagine that also can cause some problems.

Gwen: It certainly can. The FEC has been deadlocked 3-3 for years because of this bizarre bipartisan structure. Notice most of the time the boards have an odd number of people.

Marc: So let me ask, is the political bipartisan structure just a function of realism? Because we have in states, for example, judges who run as non-political, politically elected officers. The reality is that we know judges are Democrats and Republicans and they vote certain ways. They just can’t advertise that as they are running for office. So why not have that as a secondary level to this bipartisan requirement? What is the right word here?

Gwen: We generally will think of them as bipartisan. It’s acknowledging that people do have political viewpoints and trying to ensure that we can’t use a cloak of neutrality to prevent the board from actually having diverse viewpoints.

Marc: Okay. So then what is the fifth element?

Gwen: So the last one, we’ve also kind of hinted at, and that’s staggered terms. One member of the Fed, their term expires every two years. One FTC commissioner’s term expires every year. And again, that is because it means that when we’re changing the composition of these groups, it’s going to change slowly.

Marc: So it’s like the Senate.

Gwen: Yes. Only a third of the Senate is up for election every cycle. So we’ve got some continuity within the system.

Marc: Let me just make sure I understand the combined effect. If I’m the president and I appoint someone to the Fed board for 14 years and then they start making decisions I hate.

Gwen: You are absolutely stuck with them unless they commit actual misconduct. You chose them, but once they’re confirmed by the Senate and have taken office, they are independent. You can talk to them, you can pressure them, but you can’t actually fire them for policy disagreements.

Marc: That seems like it could backfire spectacularly.

Gwen: And indeed it can. Presidents can become really frustrated with their choices.

Marc: Why do we need these referee agencies at all? Why not just have everything be accountable to the president? That seems more democratic. We elect a president. The president should control the executive branch.

Gwen: Politicians have much shorter time horizons, and we could already see this danger years ago. This was what was at issue in Humphrey’s Executor in 1935, a big year as we’ve seen in this podcast so far. So here the court explained why some agencies have to operate independently. Can you read this section?

Marc: The Federal Trade Commission is an administrative body created by Congress to carry into effect legislative policies embodied in the statute in accordance with the legislative standard therein prescribed, and to perform other specified duties as legislative or as judicial aid. Such a body cannot in any proper sense be characterized as an arm or an eye of the executive. Its duties are performed without executive leave, and in the contemplation of the statute must be free from executive control. It is quite evident that one who holds his office only during the pleasure of another cannot be depended upon to maintain an attitude of independence against the latter’s will. The Federal Trade Commission occupies no place in the executive department. The Commission acts in part quasi-legislatively and in part quasi-judicially. To the extent that it exercises any executive function, it does so in the discharge and effectuation of its quasi-legislative or quasi-judicial powers.

Gwen: So here the court was saying that some functions aren’t really executive at all. When the FTC is investigating antitrust violations, it’s acting like a court. When it’s making rules, it’s acting like a legislature.

Marc: But it’s still in the executive branch organizationally.

Gwen: It certainly didn’t seem like it was in the mind of the court then. But functionally, everybody would put it within the executive branch now. That tension and the shift in how it’s viewed is partly why Humphrey’s Executor is on such shaky ground now.

Marc: This is getting pretty philosophical. Can you give me something a little bit more concrete?

Gwen: The Consumer Product Safety Commission recalls dangerous toys. We don’t want whether toys have lead to depend on whether the company making the toy has political connections.

Marc: Yeah, kids’ safety shouldn’t be political.

Gwen: Congress has decided some decisions should be based on expertise and facts, not politics. The SEC’s stability in the middle of the GameStop surge was critical to controlling the chaos we had then. That was the independent model working. And it also takes years to understand monetary policy or securities regulation or telecommunications technology. If we could fire all of these people every four years, we would completely lose all this institutional knowledge.

Marc: So which agencies are actually independent? Let’s get a lineup.

Gwen: We’ve talked about some of them. The Federal Reserve, they control interest rates and monetary policy. They’re 14-year terms. The Securities and Exchange Commission, they police the stock market. They have five-year terms. The Federal Trade Commission, the FTC, they’re consumer protection and antitrust. They have seven-year terms.

Marc: What else?

Gwen: Oh, the list goes on. The FCC, the Federal Communications Commission, they regulate broadcasting, internet, and phones. The National Labor Relations Board, the NLRB, it protects the right to unionize. The Consumer Product Safety Commission. This is why your kids’ toys don’t have lead paint. The Federal Energy Regulatory Commission oversees energy markets and the electrical grid.

Marc: So these all basically touch our daily lives.

Gwen: Yes. These affect so many parts of our daily life.

Marc: What about agencies like the EPA and the FDA?

Gwen: Those are executive agencies, not independent agencies. The heads of those agencies can be fired by the president at will. They’re part of the president’s team implementing the president’s agenda. The EPA administrator could be fired tomorrow. The FTC chair cannot. That’s the difference.

Marc: It is a policy choice that Congress has made. They’ve decided that environmental policy should be responsive to elections. People vote for presidents for a lot of reasons, but it’s going to be partly based on their views on the environment. But they thought that monetary policy should be more insulated from political pressures.

Gwen: But Congress could change this if they wanted to.

Marc: Yes, they can. And they do occasionally, not very often.

Gwen: The Consumer Financial Protection Bureau was created in 2010. But the Supreme Court said in 2020 that the structure was unconstitutional. That only had a single director. So now, instead, that director serves at the pleasure of the president.

Marc: So it’s no longer an independent agency.

Gwen: It isn’t. This was the first step the courts took to sort of killing off independent agencies. A big difference between an agency that’s being run by one person and one that’s being run by a board, which is why the rest of the independent agencies have survived so far. But this could dramatically change the landscape of administrative law.

Marc: And I’m sure we’re going to talk about this next episode, but why would courts be concerned about independent agencies?

Gwen: This is where we’re going to be talking about the unitary executive theory.

Marc: Well, before we get there, let’s see if we can recap what we covered today. All right, go for it.

Gwen: Okay, so we started with independent agencies are agencies whose leaders can’t be fired at will. We talked about their origins with the FTC in 1914. We covered how their structure works, fixed terms, for-cause removal, multi-member boards, bipartisan requirements, staggered terms. And we discussed why Congress built them this way, to keep certain decisions based on expertise and facts rather than short-term politics.

Marc: Exactly. These are referees who can’t be fired for making unpopular calls. This has been critical to creating the kind of stable markets that we would want in a modern democracy.

Gwen: Though it is a weird structure. It does seem to violate basic constitutional principles like all executive power is supposed to be vested in the president.

Marc: That does create tension, and that likely means we are not going to have this structure for very much longer. But as of this recording, independent agencies still exist.

Gwen: Well, and because without independence, everything now becomes political.

Marc: Yes, everything becomes political.

Gwen: And in our next episode, we’ll be talking about the removal power. We’ll talk about specifically what for-cause means in practice. And we’ll start talking more specifically about what is leading up to the major Supreme Court case.

Marc: How could you not look forward to that? We’ll see you next time on Administrative Remedies.

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