The "history and tradition" test, originally developed for Second Amendment cases like U.S. v. Rahimi, was unexpectedly applied to create a special exception for the Federal Reserve's independence, while simultaneously dismantling it for other agencies.
The Court's "Hamilton exception" is based on a flawed premise. Hamilton advocated for a private, investor-owned commercial bank, not a government regulatory body. Therefore, the historical analogy used to protect the Fed from presidential power is fundamentally incorrect.
The push to dismantle the "administrative state" is now powered by an alliance between traditional conservative legal thinkers and newly radicalized tech figures. Their anger towards regulators like Gary Gensler (SEC) and Lina Khan (FTC) has made them receptive to theories that give the President total control.
The theory that the President has absolute removal power over executive officers challenges the 1803 Marbury v. Madison precedent, which established that the President is under the law and can be compelled by courts to follow it. This shift risks creating a scenario where presidential orders supersede statutory law.
Despite its perceived importance, the Federal Reserve Act offered weaker legal protection against presidential removal than other independent agencies. Its independence was upheld more by norms and tradition than by explicit statutory language.
The Fed primarily regulates banks. Actions like adjusting equity capital requirements are not just regulatory; they are stimulative or restrictive, functioning as monetary policy. This complicates any legal attempt to separate the Fed's monetary and regulatory functions.
The Federal Reserve Board funds itself by levying assessments on the regional Federal Reserve Banks, which can create money. This unique power insulates it entirely from the congressional appropriations process, giving it a degree of financial independence unmatched by other agencies.
Although the decision protecting the Fed was 5-4, only two justices (Roberts and Kavanaugh) actually support the underlying legal logic. The three liberal justices joined to save the outcome while dissenting on the principle, making the Fed's special status highly unstable.
The pandemic highlighted a flaw in our hierarchy of agency independence. The ability for scientists at the CDC to provide credible, independent forward guidance could have saved hundreds of thousands of lives, suggesting its insulation from political pressure was more vital than the Fed's.