Comments on Free Enterprise Fund v. PCAOB


Lost in yesterday’s headlines about guns, guns, guns, and God vs. the University, was another important case, Free Enterprise Fund v. Public Company Accounting Oversight Board.  The PCAOB was created by the dreaded Sarbanes-Oxley Act, which was just the last time Congress over-reacted to a financial crisis.  SARBOX, as it is lovingly known in the securities world, created a federal regulator of the entire accounting industry, the PCAOB, but didn’t want the President to control it — so SARBOX placed the power to remove the PCAOB members in the Securities Exchange Commission, and only then “for cause.”  The SEC’s commissioners cannot themselves be removed by the President except for cause too.  These types of Rube Goldberg-esque designs are sadly, all too common in the administrative state, which is designed to remove the basic policy decisions governing broad areas of the economy — think of the FCC and the internet, or the SEC and securities — out of the hands of Congress or the President.  Politicians don’t want to take political responsibility for hard and potentially unpopular policy choices, but they want the ability to pressure the bureaucrats, behind the scenes, to give out favors to their allies.  And politicians wonder why the electorate is frustrated with the lack of transparency and accountability.

The Supreme Court, this time, said enough was enough.  It has allowed the heads of independent agencies, like the FCC, FTC, SEC, you name it, to be insulated from direct presidential control, and even allowed the same with second-tier officers, like the independent counsel (remember Ken Starr).  Both earlier decisions, I think, were mistaken, and have created a destructive distortion on the purity of the Constitution’s original division of the government into three branches.  But at least this time, a 5-4 majority said that Congress couldn’t combine the two, and say that an inferior officer could be protected from removal from an independent commission itself insulated from presidential control.  This would, the Court, found, interfere with the President’s constitutional responsibility to see that the laws are faithfully executed.  Of course, under this logic, the independent agencies would be unconstitutional, as well as the independent counsel.  Let’s hope that the Court begins to move in this direction again — as it had in the early 1980s, until its terribly wrong decision in Morrison v. Olson upholding the independent counsel.

There are 2 comments.

Become a member to join the conversation. Or sign in if you're already a member.
  1. Profile Photo Inactive

    For all you Nostradamus fans out there, I highly recommend Justice Scalia’s dissent in Morrison v. Olson. His argument against the independent counsel statute was eerily prescient. I studied the opinion around the time of the Kenneth Starr investigation, and it was as if Justice Scalia wrote the dissent while seeing 12-13 years into the future through a crystal ball.

    • #1
  2. Profile Photo Member

    Professor Yoo, you answered my plead. Thank you! It really is wonderful to read SCOTUS reaction from such great professors as yourself and Professor Epstein.

    • #2
Become a member to join the conversation. Or sign in if you're already a member.

Comments are closed because this post is more than six months old. Please write a new post if you would like to continue this conversation.