Is the Pay Czar Unconstitutional?

Former 10th Circuit Judge and current Stanford Law Professor Michael McConnell has a good editorial in the Wall Street Journal today.

In it, he questions whether Ken Feinberg‘s job as Pay Czar is unconstitutional, in light of the actions he took last week.

Time Magazine describes what Feinberg is tasked to do:

The Treasury established Feinberg’s position after Congress passed the American Recovery and Reinvestment Act in February. Feinberg has jurisdiction over the 100 highest-paid employees at the seven firms that the government deemed “exceptional assistance recipients”: insurer AIG, financial firms Bank of America and Citigroup, auto companies Chrysler and General Motors and their former finance arms Chrysler Financial and GMAC.

That’s just the start. Feinberg will oversee the pay at the firms until each has repaid the government — or until he quits, and he has no plans to do so anytime soon. Having established a set of principles on which to base compensation for these execs, Feinberg says it will be easier to pass judgment on next year’s pay packages, a process he pledges to start in January.

McConnell’s question considers whether, in light of Buckley v. Valeo,  this task can constitutionally be accomplished absent either appointment of a Pay Czar as an officer of the United States by and with the consent of the Senate OR Congressional directive authorizing appointment of a Pay Czar as an “inferior officer.” The core of his argument is:

As part of the hastily enacted and seldom-read legislation establishing the Troubled Asset Relief Program (TARP), Congress authorized the Secretary of the Treasury to “require each TARP recipient to meet appropriate standards for executive compensation.” To carry out this task, last June the Treasury promulgated an emergency “Interim Final Rule,” waiving ordinary requirements for a public comment period.

As part of this emergency rule, Treasury Secretary Timothy Geithner created the office of “Special Master” for compensation, delegated his TARP authority to set compensation standards to this officer, and appointed Mr. Feinberg (a lawyer and mediator) to this position, without obtaining Senate confirmation.

Therein lies the problem. The Appointments clause of the Constitution, Article II, section 2, provides that all “Officers of the United States” must be appointed by the president “by and with the Advice and Consent of the Senate.” This means subject to confirmation, except that “the Congress may by Law vest the Appointment” of “inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments.”

There is no doubt that Mr. Feinberg is an “officer” of the United States. The Supreme Court has defined this term (Buckley v. Valeo, 1976) as “any appointee exercising significant authority pursuant to the laws of the United States.” Mr. Feinberg signed last week’s orders setting pay levels for executives at Bank of America, AIG, Chrysler Financial, Citigroup, GMAC, General Motors and Chrysler. They have the force of law and are surely an exercise of “significant authority” pursuant to an Act of Congress. He is not a mere “employee,” acting at the direction of a superior. That means his office is subject to the requirements of the Appointments Clause.

While somewhat more disputable, Mr. Feinberg’s is probably an “inferior” officer, defined as one subject to supervision and removal by a member of the cabinet. Although he has substantial discretion and independence, Mr. Feinberg reports to the secretary of the Treasury, who can fire him any time for any reason. This means that Congress could, if it wished, vest the appointment of the pay czar in the secretary, without any need for Senate confirmation.

But Congress has not done so. On the contrary, it vested the authority to implement TARP’s compensation provision in the secretary of the Treasury. The secretary may sub-delegate that power to someone else—but that someone must be an “officer” properly appointed “by and with the advice and consent of the Senate.”

The WSJ Law Blog points out that McConnell seeks to impose an overly formalistic view of the constitutional appointment power during a time of national crisis, though suggests that McConnell’s answers this at the end of his piece by pointing to how the Pay Czar’s vast power completely undermines the purpose of the appointments clause to prevent abuse by the Executive.

But can’t Congress oversee Feinberg’s actions by holding Geithner’s feet to the fire? Or does the breadth of the Pay Czar’s power actually give the Treasury Secretary too much plausible deniability when the Czar abuses his power?

And why on earth do we have so many freaking Czars? And doesn’t the fact that we call them Czars suggest, on its face, that we’ve given these unappointed, unconfirmed officials far too much unbridled authority?

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