Supreme Court Restricts Presidential Removal Power Over FTC, Upholds Fed Independence

Why it matters locally: The Supreme Court's decisions on presidential removal power over the Federal Trade Commission and the Federal Reserve System could indirectly impact businesses and financial institutions in Nevada due to potential shifts in federal regulatory enforcement and monetary policy stability.

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WASHINGTON D.C. — The Supreme Court issued two rulings last week, *Trump v. Slaughter* and *Trump v. Cook*, that delineate the President's authority over independent agencies. These decisions build on a series of prior cases challenging federal agency structure and removal protections. In *Trump v. Slaughter*, the Court found that the President holds the power to dismiss commissioners of the Federal Trade Commission (FTC) at will. This decision specifically addressed *Humphrey’s Executor v. United States*, a 1935 Supreme Court case that established Congress's ability to grant agencies like the FTC independence from full presidential control by limiting removals to 'for cause' reasons. President Franklin Roosevelt expressed strong disagreement with the *Humphrey* ruling after the Court invalidated his dismissal of an FTC commissioner. Chief Justice John Roberts authored the majority opinion in *Slaughter*, stating the FTC's powers, regardless of their labels, function as executive actions. Roberts cited the FTC's authority to create substantive rules with legal force, investigate and enforce statutes, and initiate civil lawsuits on behalf of the United States. He characterized these functions as inherently executive. This perspective aligns with previous Court decisions, including 2009's *Free Enterprise Fund v. PCAOB* and 2020's *Seila Law v. CFPB*, both written by Roberts, which narrowed the application of *Humphrey's Executor*. Conversely, the Court's decision in *Trump v. Cook* affirmed Congress's constitutional ability to protect the independence of the Federal Reserve System. This ruling prevents presidents from removing Federal Reserve governors without cause. Chief Justice Roberts distinguished the Federal Reserve from other regulatory bodies, noting its primary engagement in monetary and banking activities, which he stated have not historically been subject to unchecked executive power. Justices Samuel Alito, joined by Justice Neil Gorsuch, and Justice Amy Coney Barrett each wrote dissenting opinions in *Cook*, declining to address the constitutionality of the Federal Reserve's structure. Justice Clarence Thomas also dissented, arguing the Federal Reserve exercises significant executive power through its regulation of the private sector. Roberts's majority opinion in *Cook* suggests a potential avenue for future challenges to the Federal Reserve's regulatory functions. In a footnote, Roberts indicated that while upholding the Fed's current structure, the ruling does not imply Congress could assign the agency additional regulatory powers unrelated to monetary policy. This comment raises the possibility of future litigation questioning specific regulatory powers granted to the Fed that operate independently from full presidential control. Roberts further suggested that if a constitutional flaw were found in such powers, the Court would likely sever those specific powers rather than challenge the Fed's overall independence. The implications of *Slaughter* extend to the appointment process for multi-member agencies. Federal law requires bipartisan representation on commissions like the FTC, stipulating that no more than three of five commissioners can belong to the same political party. Historically, this has involved cooperation between the President and the opposing party's Senate leader for minority-party appointments. The *Slaughter* ruling, by removing removal protections for such appointees, may alter this dynamic. Additionally, the decisions introduce considerations for presidential transitions. A President outgoing from office, particularly to an opposing party's successor, could potentially dismiss all remaining commissioners from the next President's party. This action would prevent the incoming administration from immediately appointing acting chairpersons from existing members, potentially leaving agencies without operational quorums for extended periods until new commissioners receive Senate confirmation.