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Fire When Ready

The Constitution doesn't limit the president's authority to fire SEC commissioners.

3:15 PM, Sep 19, 2008 • By ADAM J. WHITE
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AT A RALLY in Iowa on Thursday, John McCain said that Chris Cox, chairman of the Securities Exchange Commission (SEC), should be fired. "Mismanagement and greed became the operating standard while regulators were asleep at the switch," McCain said. "The Chairman of the SEC serves at the appointment of the President and has betrayed the public's trust. If I were President today, I would fire him."

Within hours, McCain's statement came under fire. His critics focused less on his assignment of blame than on his proposed remedy: as ABC's Jake Tapper put it, "the president does not have the power to fire the SEC chairman." The regular chorus of McCain critics quickly echoed the refrain. Citing Tapper, a blogger for The Atlantic wrote that although the president could pressure the SEC chairman to quit, he "still couldn't 'fire' him."

Keith Olbermann went still further, accusing McCain of proposing an outright violation of Constitution. Responding to McCain's statement, Professor Olbermann lectured,

Maybe [Palin] could brief Senator McCain on constitutional law ... the president appoints the members of independent agency commissions, like the FCC and the SEC, then they are confirmed. But once he has appointed them to those commissions, he cannot simply fire them outright. That is what the Supreme Court said in 1935, having ruled that President Roosevelt could not dump a conservative member of the Federal Trade Commission. Members of the commission can always be fired for cause, like gross neglect to a malfeasance, but not just because the president disagrees with the way they vote or run their agencies.

These criticisms miss the mark. Indeed, they're as wrongheaded as they are vehement.

The president can fire SEC commissioners. As the U.S. Court of Appeals for the D.C. Circuit stated last month in Free Enterprise Fund v. Public Company Accounting Oversight Board, "[m]embers of the [SEC] . . . are appointed by the President with the advice and consent of the Senate and subject to removal by the President for cause; its chairman is selected by and serves at the pleasure of the President." Thus, it is an error to suggest that the president cannot fire an SEC commissioner, including Chairman Cox. The president can SEC commissioners, at least for cause (a limitation subject to dispute, as described below), and he certainly can demote the SEC Chairman at pleasure.

Similarly, Olbermann errs in citing the Supreme Court's 1935 decision, Humphrey's Executor v. United States, for the proposition that the Constitution limits the president's power to fire the SEC chairman. In Humphrey's Executor, the Court merely concluded that a federal statute (the Federal Trade Commission Act) expressly limited the President's authority to remove FTC commissioners except for "inefficiency, neglect of duty, or malfeasance in office," and that such statutory limitations upon the president were not themselves unconstitutional.

Unlike the FTC Act, the statute creating the SEC (i.e., Securities Exchange Act of 1934) does not expressly limit the president's removal authority; thus, contra Olbermann, Humphrey's Executor does not control removal of SEC commissioners. And the Constitution itself certainly imposes no such limits upon the president; no court ever has come close to issuing such a broad rule.