Can the President Fire the Fed Chair?
The question of whether a U.S. President can fire the Federal Reserve Chair is a complex legal issue, balancing presidential authority with the need for an independent central bank. Here's a breakdown of the key factors:
1. Presidential Removal Power: The General Rule
- Generally, the President has the power to remove executive branch officials at will. This principle, established in cases like Myers v. United States (1926) and reaffirmed in Collins v. Yellen (2021), allows the President to ensure executive branch loyalty.
- However, this power is not absolute and is subject to congressional limitations.
2. Exceptions: Independent Agencies and "For Cause" Removal
- Congress has created exceptions for independent agencies like the Federal Reserve. To protect their independence, these agencies often have "for cause" removal provisions.
- Landmark cases like Humphrey's Executor v. United States and Seila Law LLC v. Consumer Financial Protection Bureau (2020) have upheld Congress's ability to limit presidential removal power for these agencies.
- Specifically, these cases clarify that for independent agencies, the President can only remove officials for reasons like "inefficiency, neglect of duty, or malfeasance in office."
The Humprey's Executor case is important. We dealt with this when our client Michael Savage was summarily removed from the Board of Directors of the Presidio Trust. President Biden cleaned house and eliminated all people whose political affiliation did not match "Democrat". Was this his right or was the board supposed to be independent. The Humprey's case was the key authority on this point.
Humphrey's Executor v. United States (1935): Presidential Power and Independent Agencies
Humphrey's Executor v. United States (1935) is a landmark U.S. Supreme Court case that set crucial limits on the President’s authority to remove officials from independent regulatory agencies.
Case Background
President Franklin D. Roosevelt dismissed William E. Humphrey, a commissioner of the Federal Trade Commission (FTC), due to his opposition to Roosevelt’s New Deal policies. However, the FTC Act specified that commissioners could only be removed for inefficiency, neglect of duty, or malfeasance in office. Humphrey’s estate sued to recover his lost salary.
Key Legal Question
Did the Federal Trade Commission Act unconstitutionally restrict the President’s power to remove officials?
Supreme Court Ruling
The unanimous decision held that Roosevelt’s removal of Humphrey was unjustified. The Court ruled that the President does not have unlimited removal power over officials in independent agencies like the FTC, which perform quasi-legislative and quasi-judicial functions. This case distinguished itself from Myers v. United States (1926), which had upheld the President’s removal power over purely executive officers.
Impact on U.S. Administrative Law
This ruling reinforced the separation of powers, ensuring that independent agencies remain free from direct presidential control. It remains a foundational case in administrative law and continues to shape debates on executive authority
3. Federal Reserve's Protected Independence
- The Federal Reserve is considered an independent agency.
- The Supreme Court has recognized the importance of financial regulators' independence, as seen in Collins v. Yellen (2021). This independence is vital for long-term economic stability.
- Therefore, the Fed Chair is protected by the "for cause" removal standard.
4. Recent Legal Clarifications
- The Seila Law LLC v. Consumer Financial Protection Bureau (2020) case further solidified that Congress can restrict the President's removal power for independent agency heads, provided these restrictions don't hinder the President's ability to execute laws.
Conclusion: The Fed Chair's Job Security
- Based on legal precedent, the President cannot fire the Federal Reserve Chair at will.
- The removal must be "for cause," meaning there must be a valid reason like incompetence or misconduct.
- This ensures the Federal Reserve's independence and protects its ability to make monetary policy decisions without undue political influence.