Notice & Comment

The Fed’s Appointment with (Politicized) Destiny

Financial regulators are reshaping themselves into tools of climate policy, and this transformation presents myriad problems—some legal, some practical. And the controversy surrounding recent nomination to the Federal Reserve remind us of yet another problem—one that seems to be catching some observers by surprise, but which is all too familiar to those of us who follow the Supreme Court.

Reporting yesterday on the Senate’s consideration of nominee Sarah Bloom Raskin, Politico‘s Morning Money column observed that the Senators’ pointed criticism “underscores how polarized Federal Reserve nominations have become over the past decade or so.”

Politico continued:

The Senate used to routinely confirm Fed nominees — put forward by presidents of both parties — with large bipartisan support. Raskin is likely to need every last Democratic vote to win confirmation. …

“Even though it’s the Fed … it just feels to me like it’s been turned into a CFPB-like vote in that it’s going to be more partisan in the future because of its bank supervisory role, and the fact that it’s an uber regulator,” said one financial services lobbyist and former Senate aide.

Surely this is true. The Federal Reserve’s job, administering its famous dual statutory mandate, is difficult enough, and the Fed is no stranger to controversy. (We were reminded of that a few years ago, in Peter Conti-Brown’s excellent book and the Notice and Comment symposium that it inspired.) The Fed’s ever growing weight in American government, from the last financial crisis onward, only increases its gravity on the other parts of government.

And the Fed’s latest step, toward becoming a major climate policymaker, is particularly portentous; the advocates and critics of that step disagree on many things, but they certainly agree on the gravity of this change.

Expanding the Fed’s agenda to encompass climate policy raises major questions of law, of agency capacity, and of expertise. And because climate policy—like all policy—involves not just expert scientific judgments but also prudential judgments and value judgments, the Fed’s foray into this policy arena will attract the attention of Senators, among many others.

In that respect, the Raskin nomination—and the Senate debates that it spurred—calls to mind a famous judicial opinion on a very different subject.

When Justice Scalia dissented from the Court’s decision in Planned Parenthood v. Casey, he warned that the Court’s decision would reverberate through other institutions, especially the Senate. In an era when Supreme Court appointments were suddenly becoming much more politically controversial, Scalia warned that those controversies were just the echoes of the Court’s own choices:

What makes all this relevant to the bothersome application of “political pressure” against the Court are the twin facts that the American people love democracy and the American people are not fools.

As long as this Court thought (and the people thought) that we Justices were doing essentially lawyers’ work up here—reading text and discerning our society’s traditional understanding of that text—the public pretty much left us alone. Texts and traditions are facts to study, not convictions to demonstrate about.

But if in reality our process of constitutional adjudication consists primarily of making value judgments; if we can ignore a long and clear tradition clarifying an ambiguous text, as we did, for example, five days ago in declaring unconstitutional invocations and benedictions at public high school graduation ceremonies; if, as I say, our pronouncement of constitutional law rests primarily on value judgments, then a free and intelligent people’s attitude towards us can be expected to be (ought to be) quite different.

The people know that their value judgments are quite as good as those taught in any law school—maybe better. If, indeed, the “liberties” protected by the Constitution are, as the Court says, undefined and unbounded, then the people should demonstrate, to protest that we do not implement theirvalues instead of ours. Not only that, but confirmation hearings for new Justices should deteriorate into question and answer sessions in which Senators go through a list of their constituents’ most favored and most disfavored alleged constitutional rights, and seek the nominee’s commitment to support or oppose them.

Value judgments, after all, should be voted on, not dictated; and if our Constitution has somehow accidently committed them to the Supreme Court, at least we can have a sort of plebiscite each time a new nominee to that body is put forward. Justice Blackmun not only regards this prospect with equanimity, he solicits it.

(Citations omitted; emphasis in original, paragraphing modified because no one likes to read extremely long paragraphs on a blog.)

To be sure, climate policy is not simply a matter of value judgments. (Neither is abortion policy.) But climate policies necessarily entail value judgments, often weighty and divisive ones. And those decisions will become all the more controversial when they are imposed through financial regulators’ “supervisory” powers, one of the federal government’s most sensitive, discretionary, and prudential exercises of power, rather than through new legislation or through the reasonable administration of existing legislation. If the Fed’s work begins to look less and less like the normally sleepy stuff of prudential bank supervision, and more the stuff of climate legislation, then other parts of government will begin to recalibrate their own actions accordingly.

The expansion of Supreme Court power on abortion and similar issues helped to shatter the process for appointing new justices. (I was reminded of this throughout my work on President Biden’s Commission on the Supreme Court.) We should brace ourselves for a similar new era in appointing federal regulators.

Adam J. White is a senior fellow at the American Enterprise Institute, and co-director of GMU’s Gray Center for the Study of the Administrative State.

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