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,
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.
In the absence of express statutory limits upon the president, some courts have concluded or assumed that at least some limitations apply to the president’s removal of SEC commissioners. In SEC v. Blinder (1988), the U.S. Court of Appeals for the Tenth Circuit assumed that “that it is commonly understood that the President may remove a commissioner only for ‘inefficiency, neglect of duty or malfeasance in office.'” Two years later, in SEC v. Bilzerian, the federal trial court in the District of Columbia accepted a defendant’s concession that the president could remove SEC commissioners for, at a minimum, “inefficiency, neglect of duty, or malfeasance in office.” (Thus, the court held open the possibility that the president could fire SEC commissioners for lesser reasons.) Most recently, in the Free Enterprise Fund decision quoted above, the D.C. Circuit stated that the president may remove SEC commissioners “for cause,” citing Blinder and the Supreme Court’s decision, in Wiener v. United States (1958), that the president could fire a member of a purely “adjudicatory body” such as the War Claims Commission only “for cause,” and not “merely because he wanted his own appointees on such a Commission.” In short, the president’s removal authority over SEC commissioners remains untested–the subject of speculation but no precise judicial decision.
Even assuming that the president’s removal authority over SEC commissioners is limited to removal “for cause,” or for “inefficiency, neglect of duty, or malfeasance in office,” such standards are not difficult to satisfy. According to the D.C. Circuit, “the Supreme Court has interpreted [such removal authority] broadly,” such that Bilzerian‘s standards “could sustain removal . . . for any number of actual or perceived transgressions.”
And the term “for cause” is all the broader: for example, Richard Pierce, one of the highest-regarded scholars of administrative law (and by no means a proponent of unfettered executive authority), wrote in 1988 that “for cause” places limits upon the president’s removal authority: it “must include failure to comply with any valid policy decision made by the President[.]”
McCain’s grievances against Chairman Cox, whether sound or unsound, fit those categories. This is not a case (by contrast to Wiener) where a president would attempt to remove an officer solely because the president wanted to put his own friends in office. McCain’s grievances go to the question of whether Chairman Cox was “asleep at the switch” and thus partly culpable for an apparent Wall Street meltdown. At the very least, McCain alleges “neglect of duty,” if not “inefficiency” or “malfeasance in office.” He would fire Cox “for cause,” not without cause.
Adam White is an attorney and writer in Washington, D.C.
