My earlier posts on Dodd-Frank contain a bad mistake that requires correction before it turns into an urban legend. In Free Enterprise Fund v. Public Company Accounting Oversight Board (2010), I wrote, the Supreme Court invalidated an arrangement under which officers of the PCAOB, an agency housed in and under the SEC (an independent agency), enjoyed “double-layer” protection against removal: the President (the Court stipulated) could not fire SEC Commissioners except for good cause, and the SEC could not fire PCAOB officers except for good cause. So far, so accurate. Dodd-Frank’s Bureau of Consumer Financial Protection (CFPB) is an independent agency nested “in” another independent agency (the Fed), just like the PCAOB. Also correct. However, as “Admin Guy” notes in his comment, the CFPB’s Director, unlike the PCAOB’s members pre-Free Enterprise Fund, does not enjoy double-layer protection: he is removable, “for cause,” by the President. That is so, and my statement to the contrary was wrong.   Apologies for the embarrassing error (all the more idiotic because I quote and cite the pertinent provision before ignoring it), and thanks for the correction.

Does this mean that the CFPB poses no Free Enterprise Fund problem? The majority of the AdLaw profession has read the case as a this-day-and-train only decision about (some, not all) “double-layer” removal protections. On that account, the CFPB Director may face clear sailing: being removable “for cause” by the President, he appears on a par with the independent agency commissioner of Humphrey’s Executor fame.

However, Free Enterprise Fund may well stand for more than just that narrow holding. In an earlier post on this blog, Tom Christina (discussing a powerful law review article by Neomi Rao) has argued that Free Enterprise Fund reflects broader concerns about presidential authority and agency accountability. Putting aside speculation about the continued viability of Humphrey’s Executor aside (and Tom and Neomi argue that Free Enterprise Fund deliberately invites such speculation), it’s very plausible to read the decision as saying that Congress may not lard up “independent,” Humphrey’s-style officers with additional protections—another layer of removal protection (PCAOB); placement “in” another independent agency, which is then prohibited from overseeing the junior organization (CFPB); independence from any meaningful budget control (again, CFPB). The Dodd-Frank plaintiffs’ complaint suggests such an argument, and I think it makes sense as a matter of precedent and constitutional logic.

It’s a very good thing that I personally have nothing to do with the Dodd-Frank challenge: the lawyers who are handling the case won’t be able to afford any mistakes. And one has to wish them success.  Dodd-Frank saddles an incoming President with a quasi-sovereign Director with jurisdiction over the products and practices of the entire financial industry. (The current Director, Richard Cordray, has announced his intent to serve out his recess appointment term until the end of 2013, regardless of the election outcome.) If that isn’t unconstitutional, it ought to be.