219

Special Master for Troubled Asset Relief 

Program Executive Compensation

The Special Master for Troubled Asset Relief Program Executive Compensation is not a 

principal officer for purposes of the Appointments Clause and thus need not be appointed by the President, by and with the advice and consent of the Senate.

November 5, 2010

MEMORANDUM OPINION FOR THE GENERAL COUNSEL 

DEPARTMENT OF THE TREASURY

AND THE

SPECIAL INSPECTOR GENERAL 

TROUBLED ASSET RELIEF PROGRAM 

You have asked for our opinion whether the Special Master for Troubled Asset Relief Program Executive Compensation (“Special Master”) is 

a principal officer for purposes of the Appointments Clause, U.S. Const. 

art. II, § 2, cl. 2, and thus must be appointed by the President, by and with 

the advice and consent of the Senate.1 The position of Special Master was 

created by the Secretary of the Treasury, who has charged the Special 

Master with assisting in the enforcement of the executive compensation 

and corporate governance requirements established under the Emergency 

Economic Stabilization Act (“EESA”), Pub. L. No. 110-343, § 111, 122 

Stat. 3765, 3776–77 (2008) (as amended). See 31 C.F.R. § 30.16(a) 

(2010). For the reasons that follow, we conclude that the Special Master is 

not a principal officer.2

 

1 See Letter for David J. Barron, Acting Assistant Attorney General, Office of Legal 

Counsel, from Neil M. Barofsky, Special Inspector General, Office of the Special Inspector General for the Troubled Asset Relief Program (Aug. 20, 2010) (“SIGTARP Letter”). 

The Treasury Department General Counsel’s request was conveyed orally.

2 Both the Treasury Department General Counsel and the Special Inspector General for 

the Troubled Asset Relief Program (“SIGTARP”) premise their shared opinion request on 

the assumption that the Special Master is an officer of the United States. We take that 

assumption as a given for purposes of this memorandum.
34 Op. O.L.C. 219 (2010)

220

I.

On October 3, 2008, in the midst of a major crisis affecting the Nation’s financial system, Congress enacted the EESA to provide the Secretary of the Treasury with immediate authority and facilities “to restore 

liquidity and stability to the financial system of the United States.” 12 

U.S.C. § 5201(1) (2006 & Supp. III 2009). Generally speaking, the 

“EESA vests the Secretary with the flexibility and power to take bold 

actions necessary to stabilize the economy.” In re Motors Liquidation 

Co., 430 B.R. 65, 94 (S.D.N.Y. 2010).

Title I of the EESA authorizes the Secretary “to establish the Troubled 

Asset Relief Program (or ‘TARP’) to purchase, and to make and fund 

commitments to purchase, troubled assets from any financial institution, 

on such terms and conditions as are determined by the Secretary.” 12 

U.S.C. § 5211(a)(1). Section 111 of the EESA, as amended, see Pub. L. 

No. 111-22, § 403, 123 Stat. 1632, 1658 (2009); Pub. L. No. 111-5, 

§ 7001, 123 Stat. 115, 516–20 (2009), imposes requirements on TARP 

recipients related to corporate governance and executive compensation. 

See 12 U.S.C. § 5221. Subsections (b), (f), and (h) of that section are of 

particular relevance to determining the status of the Special Master. 

Subsection (b) provides that “[t]he Secretary shall require each TARP 

recipient to meet appropriate standards for executive compensation and 

corporate governance,” id. § 5221(b)(2); see also id. § 5221(b)(1) (“During the period in which any obligation arising from financial assistance 

provided under the TARP remains outstanding, each TARP recipient shall 

be subject to . . . the standards established by the Secretary under this 

section”), and it establishes a series of specific requirements that must be 

included in those standards, see id. § 5221(b)(3).3 Subsection (f) directs 

 

3 Those requirements include:

(A) Limits on compensation that exclude incentives for senior executive officers 

of the TARP recipient to take unnecessary and excessive risks that threaten the value of such recipient during the period in which any obligation arising from financial assistance provided under the TARP remains outstanding. 

(B) A provision for the recovery by such TARP recipient of any bonus, retention 

award, or incentive compensation paid to a senior executive officer and any of the 

next 20 most highly-compensated employees of the TARP recipient based on 
Special Master for Troubled Asset Relief Program Executive Compensation

221

 

statements of earnings, revenues, gains, or other criteria that are later found to be 

materially inaccurate. 

(C) A prohibition on such TARP recipient making any golden parachute payment 

to a senior executive officer or any of the next 5 most highly-compensated employees of the TARP recipient during the period in which any obligation arising from 

financial assistance provided under the TARP remains outstanding. 

(D) (i) A prohibition on such TARP recipient paying or accruing any bonus, retention award, or incentive compensation during the period in which any obligation 

arising from financial assistance provided under the TARP remains outstanding, 

except that any prohibition developed under this paragraph shall not apply to the 

payment of long-term restricted stock by such TARP recipient, provided that such 

long-term restricted stock—

(I) does not fully vest during the period in which any obligation arising 

from financial assistance provided to that TARP recipient remains outstanding; 

(II) has a value in an amount that is not greater than 1/3 of the total amount 

of annual compensation of the employee receiving the stock; and 

(III) is subject to such other terms and conditions as the Secretary may determine is in the public interest. 

(ii) The prohibition required under clause (i) shall apply as follows: 

(I) For any financial institution that received financial assistance provided 

under the TARP equal to less than $25,000,000, the prohibition shall apply 

only to the most highly compensated employee of the financial institution. 

(II) For any financial institution that received financial assistance provided 

under the TARP equal to at least $25,000,000, but less than $250,000,000, 

the prohibition shall apply to at least the 5 most highly-compensated employees of the financial institution, or such higher number as the Secretary may 

determine is in the public interest with respect to any TARP recipient. 

(III) For any financial institution that received financial assistance provided 

under the TARP equal to at least $250,000,000, but less than $500,000,000, 

the prohibition shall apply to the senior executive officers and at least the 10 

next most highly-compensated employees, or such higher number as the Secretary may determine is in the public interest with respect to any TARP recipient. 

(IV) For any financial institution that received financial assistance provided 

under the TARP equal to $500,000,000 or more, the prohibition shall apply 

to the senior executive officers and at least the 20 next most highlycompensated employees, or such higher number as the Secretary may determine is in the public interest with respect to any TARP recipient. 

(iii) The prohibition required under clause (i) shall not be construed to prohibit 

any bonus payment required to be paid pursuant to a written employment contract executed on or before February 11, 2009, as such valid employment contracts are determined by the Secretary or the designee of the Secretary. 
34 Op. O.L.C. 219 (2010)

222

the Secretary to “review bonuses, retention awards, and other compensation paid to the senior executive officers and the next 20 most highlycompensated employees of each entity receiving TARP assistance before 

February 17, 2009, to determine whether any such payments were inconsistent with the purposes of this section or the TARP or were otherwise 

contrary to the public interest.” Id. § 5221(f). Subsection (h) requires the 

Secretary to “promulgate regulations to implement this section.” Id.

§ 5221(h). 

Section 101(c) of the EESA provides that “[t]he Secretary is authorized 

to take such actions as the Secretary deems necessary to carry out the 

authorities in [the EESA].” 12 U.S.C. § 5211(c). These authorities include, “without limitation,” “direct hiring authority with respect to the 

appointment of employees to administer [the EESA],” id. § 5211(c)(1), 

and “[i]ssuing such regulations and other guidance as may be necessary 

or appropriate to define terms or carry out the authorities or purposes of 

[the EESA],” id. § 5211(c)(5). 

On June 15, 2009, the Secretary issued an Interim Final Rule on TARP 

Standards for Compensation and Corporate Governance (“Interim Rule”). 

See 74 Fed. Reg. 28,394–423 (codified at 31 C.F.R. pt. 30). The Interim 

Rule, which became effective on the day it was issued, see 74 Fed. Reg. at 

28,423; 31 C.F.R. § 30.17 (2010), elaborates the specific standards and 

other requirements relating to corporate governance and executive compensation that section 111 of the EESA establishes for TARP recipients.

To ensure that these requirements are applied “efficiently,” “consistently,” and “equitably,” the Interim Rule further provides that the Secretary “shall establish the Office of the Special Master for TARP Executive 

Compensation.” 74 Fed. Reg. at 28,403; 31 C.F.R. § 30.16(a). The Special 

Master is to “be appointed by, and serve at the pleasure of, the Secretary,” 

and “may be removed by the Secretary without notice, without cause, and 

prior to the naming of any successor Special Master.” Id. The Interim 

 

(E) A prohibition on any compensation plan that would encourage manipulation 

of the reported earnings of such TARP recipient to enhance the compensation of 

any of its employees. 

(F) A requirement for the establishment of a Board Compensation Committee that 

meets the requirements of subsection (c).

12 U.S.C. § 5221(b)(3).
Special Master for Troubled Asset Relief Program Executive Compensation

223

Rule delegates to the Special Master certain of the Secretary’s “powers, 

duties, and responsibilities” relating to enforcement of the Act. Id. These 

delegated functions include: (1) interpreting how the requirements on 

executive compensation and corporate governance established under 

section 111 of the EESA, the Interim Rule, and any other applicable 

guidance apply to TARP recipients and their employees; (2) determining 

whether compensation paid to employees of TARP recipients prior to 

February 17, 2009 was “inconsistent with the purposes of section 111 of 

[the] EESA or TARP, or otherwise contrary to the public interest,” and, 

if so, negotiating with the TARP recipient and the compensated employee for appropriate reimbursement to the government; (3) determining 

whether to approve compensation payments to, and compensation structures for, certain highly compensated employees of TARP recipients 

receiving financial assistance defined by the Interim Rule as “exceptional 

financial assistance”; and (4) issuing advisory opinions on compensation 

payments to, and compensation structures for, certain employees of TARP 

recipients generally. Id. § 30.16(a)(1)–(4). In making determinations 

under paragraphs (2) or (3) and in offering opinions under paragraph (4), 

the Special Master must follow a set of principles outlined in the Interim 

Rule. See id. § 30.16(a)(2)–(4).4

 

4 The Interim Rule provides:

In reviewing a compensation structure or a compensation payment to determine 

whether it is inconsistent with the purposes of section 111 of EESA or TARP or is 

otherwise contrary to the public interest, the Special Master shall apply the principles enumerated below. The principles are intended to be consistent with sound 

compensation practices appropriate for TARP recipients, and to advance the purposes and considerations described in EESA sections 2 and 103, including the maximization of overall returns to the taxpayers of the United States and providing stability and preventing disruptions to financial markets. The Special Master has 

discretion to determine the appropriate weight or relevance of a particular principle 

depending on the facts and circumstances surrounding the compensation structure 

or payment under consideration, such as whether a payment occurred in the past or 

is proposed for the future, the role of the employee within the TARP recipient, the 

situation of the TARP recipient within the marketplace and the amount and type of 

financial assistance provided. To the extent that two or more principles may appear 

inconsistent in a particular situation, the Special Master will determine the relative 

weight to be accorded each principle. In the case of any review of payments already 

made under paragraph (c)(2) of this section, or of any rights to bonuses, awards, or 

other compensation already granted, the Special Master shall apply these principles 
34 Op. O.L.C. 219 (2010)

224

 

by considering the facts and circumstances at the time the compensation was granted, earned, or paid, as appropriate.

(i) Risk. The compensation structure should avoid incentives to take unnecessary or excessive risks that could threaten the value of the TARP recipient, including incentives that reward employees for short-term or temporary increases 

in value, performance, or similar measure that may not ultimately be reflected 

by an increase in the long-term value of the TARP recipient. Accordingly, incentive payments or similar rewards should be structured to be paid over a time 

horizon that takes into account the risk horizon so that the payment or reward reflects whether the employee's performance over the particular service period has 

actually contributed to the long-term value of the TARP recipient.

(ii) Taxpayer return. The compensation structure, and amount payable where 

applicable, should reflect the need for the TARP recipient to remain a competitive enterprise, to retain and recruit talented employees who will contribute to 

the TARP recipient's future success, and ultimately to be able to repay TARP 

obligations.

(iii) Appropriate allocation. The compensation structure should appropriately 

allocate the components of compensation such as salary, short-term and longterm incentives, as well as the extent to which compensation is provided in cash, 

equity or other types of compensation such as executive pensions, other benefits, 

or perquisites, based on the specific role of the employee and other relevant circumstances, including the nature and amount of current compensation, deferred 

compensation, or other compensation and benefits previously paid or awarded.

The appropriate allocation may be different for different positions and for different employees, but generally, in the case of an executive or other senior level 

position a significant portion of the overall compensation should be long-term 

compensation that aligns the interest of the employee with the interests of shareholders and taxpayers.

(iv) Performance-based compensation. An appropriate portion of the compensation should be performance-based over a relevant performance period. Performance-based compensation should be determined through tailored metrics 

that encompass individual performance and/or the performance of the TARP recipient or a relevant business unit taking into consideration specific business objectives. Performance metrics may relate to employee compliance with relevant 

corporate policies. In addition, the likelihood of meeting the performance metrics should not be so great that the arrangement fails to provide an adequate incentive for the employee to perform, and performance metrics should be measurable, enforceable, and actually enforced if not met. The appropriate allocation 

and the appropriate performance metrics may be different for different positions 

and for different employees, but generally a significant portion of total compensation should be performance-based compensation, and generally that portion 

should be greater for positions that exercise higher levels of responsibility.

(v) Comparable structures and payments. The compensation structure, and 

amount payable where applicable, should be consistent with, and not excessive, 
Special Master for Troubled Asset Relief Program Executive Compensation

225

When acting under paragraphs (2) and (3), the Special Master must 

make an “initial determination” within 60 days of receiving a “substantially complete submission” from a TARP recipient. Id. § 30.16(c)(1). 

The TARP recipient then has 30 days to request reconsideration of the 

initial determination, and the Special Master must provide a “final determination” in writing within 30 days thereafter, setting forth the facts 

and analysis that formed the basis for the determination. Id. If the 

TARP recipient does not request reconsideration within 30 days, the 

initial determination “shall be treated as a final determination.” Id.

The Interim Rule also specifies the effects of the Special Master’s decisions. The Interim Rule provides that “[i]n the case of any final determination that the TARP recipient is required to receive, the final determination of the Special Master shall be final and binding and treated as 

the determination of the Treasury.” Id. § 30.16(c)(2). “An advisory opinion of the Special Master,” however, “shall not be binding upon any 

TARP recipient or employee, but may be relied upon by a TARP recipient 

or employee if the advisory opinion applies to the TARP recipient and 

the employee and the TARP recipient and employee comply in all respects with the advisory opinion.” Id. § 30.16(c)(3).

Finally, the Interim Rule provides that the Special Master “shall have 

such other duties and powers related to the application of compensation 

issues arising in the administration of [the] EESA or TARP as the Secretary or the Secretary’s designate may delegate to the Special Master, 

including, but not limited to, the interpretation or application of contrac-

 

taking into account compensation structures and amounts for persons in similar 

positions or roles at similar entities that are similarly situated, including, as applicable, entities competing in the same markets and similarly situated entities 

that are financially distressed or that are contemplating or undergoing reorganization.

(vi) Employee contribution to TARP recipient value. The compensation structure, and amount payable where applicable, should reflect the current or prospective contributions of an employee to the value of the TARP recipient, taking 

into account multiple factors such as revenue production, specific expertise, 

compliance with company policy and regulation (including risk management), 

and corporate leadership, as well as the role the employee may have had with respect to any change in the financial health or competitive position of the TARP 

recipient.

31 C.F.R. § 30.16(b).
34 Op. O.L.C. 219 (2010)

226

tual provisions between the Federal government and a TARP recipient as 

those provisions relate to the compensation paid to, or accrued by, an 

employee of such TARP recipient.” Id. § 30.16(a)(5).5

II.

The Appointments Clause states: 

[The President] . . . shall nominate, and by and with the Advice and 

Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law: but the 

Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of 

Law, or in the Heads of Departments.

U.S. Const. art. II, § 2, cl. 2. As the Clause thus makes clear, officers of 

the United States fall into two basic categories: principal officers and 

inferior officers. See, e.g., United States v. Germaine, 99 U.S. (9 Otto) 

508, 509 (1878) (“The Constitution for purposes of appointment . . . 

divides all its officers into two classes.”); see also Morrison v. Olson, 

487 U.S. 654, 670 (1988). Principal officers must be appointed by the 

President, by and with the advice and consent of the Senate. Inferior 

officers must be appointed in the same manner, unless Congress “by 

Law vest[s] the[ir] Appointment . . . in the President alone, in the Courts 

of Law, or in the Heads of Departments.” U.S. Const. art. II, § 2, cl. 2;

see Morrison, 487 U.S. at 670–71; Buckley v. Valeo, 424 U.S. 1, 132 

 

5 The preamble to the Interim Rule characterizes the Special Master’s residual authority as limited to matters arising under section 111 of the EESA. It states that “[t]he scope 

of the Special Master’s authority and responsibility is limited to compensation and 

corporate governance matters under section 111 with respect to TARP recipients, and the 

Special Master has no authority to provide guidance or review any submissions with 

respect to matters other than compensation and corporate governance matters under 

section 111, or to provide guidance or review any submissions with respect to compensation or corporate governance matters of employers that are not TARP recipients.” 74 Fed. 

Reg. at 28,404 (emphasis added). The Treasury Department General Counsel’s Office has 

informed us that the Secretary has not assigned any additional functions to the Special 

Master under this provision. 
Special Master for Troubled Asset Relief Program Executive Compensation

227

(1976) (per curiam). “[T]he terms of the Appointments Clause set out the 

only means by which Congress may provide for the appointment of ‘Officers of the United States,’” The Constitutional Separation of Powers 

Between the President and Congress, 20 Op. O.L.C. 124, 139 (1996) 

(citing Buckley, 424 U.S. at 124–37), and “[n]either Congress nor the 

Executive can agree to waive this structural protection,” Freytag v. 

Comm’r, 501 U.S. 868, 880 (1991).

The Special Inspector General for the Troubled Asset Relief Program 

(“SIGTARP”) questions whether the Special Master is a principal officer 

because, in his view, “the Secretary appears to be without authority to 

control the actions of the Special Master in any . . . meaningful manner” 

other than removal. SIGTARP Letter at 5.6 If the Special Master were 

indeed a principal officer, his appointment by the Secretary would not be 

in conformity with the Appointments Clause. 

In our view, the Special Master is not a principal officer. The Supreme 

Court has “not set forth an exclusive criterion for distinguishing between 

principal and inferior officers for Appointments Clause purposes.” Edmond v. United States, 520 U.S. 651, 661 (1997). But in three decisions 

over the past quarter century the Court has set out a number of important 

guideposts by which to distinguish principal from inferior officers. 

In Morrison v. Olson, 487 U.S. 654 (1988), the Supreme Court considered whether an independent counsel appointed pursuant to the Ethics in 

Government Act of 1978, 28 U.S.C. §§ 591–599 (1988), was an inferior 

officer. It concluded that she was, based on four considerations. First, the 

Court noted that the independent counsel was “subject to removal by a 

higher Executive Branch official” (the Attorney General). Morrison, 487 

U.S. at 671. The Court explained that this factor weighed in favor of 

viewing the independent counsel as an inferior officer even though “she 

possesse[d] a degree of independent discretion to exercise the powers 

delegated to her under the Act.” Id. Second, the Court relied on the fact 

 6 The Office of the Special Inspector General for the Troubled Asset Relief Program 

was created by the EESA. 12 U.S.C. § 5231(a). The Office is headed by a Special Inspector General—the SIGTARP—who is appointed by the President, with the advice and 

consent of the Senate. Id. § 5231(b). The duties of the SIGTARP include conducting 

audits and investigations of the Secretary’s purchase, management, and sale of assets 

under the TARP and of the Secretary’s management of the TARP, as well as conducting 

audits and investigations of other actions taken under the EESA. Id. § 5231(c)(1), (4).
34 Op. O.L.C. 219 (2010)

228

that the independent counsel performed what it considered only “limited 

duties” because she was “restricted primarily to investigation and, if 

appropriate, prosecution for certain federal crimes.” Id. The Court 

acknowledged that the Ethics in Government Act gave the independent 

counsel “full power and independent authority to exercise all investigative and prosecutorial functions and powers of the Department of Justice,” but thought it significant that “this grant of authority does not 

include any authority to formulate policy for the Government or the 

Executive Branch, nor does it give appellant any administrative duties 

outside of those necessary to operate her office.” Id. at 671–72. Third, 

the Court stressed that the independent counsel’s jurisdiction was relatively narrow, both because the Ethics in Government Act itself was 

“restricted in applicability to certain federal officials suspected of certain 

serious federal crimes” and because “an independent counsel can only act 

within the scope of the jurisdiction that has been granted by the Special 

Division pursuant to a request by the Attorney General.” Id. at 672. 

Fourth, the Court pointed out that the independent counsel’s tenure was 

“limited” because while her office had no fixed term, it was “‘temporary’ in the sense that an independent counsel is appointed essentially to 

accomplish a single task, and when that task is over the office is terminated.” Id.

Almost a decade after Morrison, the Court returned to the distinction 

between principal and inferior officers in Edmond v. United States, 520 

U.S. 651 (1997). Edmond concerned civilians appointed by the Secretary 

of Transportation to serve as military judges on the Coast Guard Court of 

Criminal Appeals. The Supreme Court concluded that the judges were 

inferior officers, but it characterized the factors it had relied on in Morrison as not “definitive” and adopted a somewhat different approach. Id. at 

661.

The Court acknowledged that judges on the Coast Guard Court of 

Criminal Appeals did not have a “narrow” jurisdiction or “limited” tenure, 

as those terms had been used in Morrison, and that the third and fourth 

considerations discussed in Morrison thus cut against characterizing the 

judges as inferior officers. Id. It nonetheless deemed them inferior officers because their work was “directed and supervised at some level by 

other [officers] who were appointed by Presidential nomination with the 

advice and consent of the Senate.” Id. at 663. That supervision, the Court 
Special Master for Troubled Asset Relief Program Executive Compensation

229

explained, was carried out by two Executive Branch actors. The Judge 

Advocate General of the Coast Guard (the Secretary of Transportation’s 

subordinate) “exercise[d] administrative oversight over the Court of 

Criminal Appeals” in that the Judge Advocate General established the 

court’s rules of procedure, could order any of its decisions submitted for 

review, and could remove judges without cause. Id. at 664, 666. And the 

Court of Appeals for the Armed Forces (an Executive Branch tribunal) 

could review and reverse the lower tribunal’s decisions, and prevent any 

final order from being issued. Id. at 664–65. Thus, “[w]hat is significant,” 

the Supreme Court explained, “is that the judges of the Court of Criminal 

Appeals have no power to render a final decision on behalf of the United 

States unless permitted to do so by other Executive officers.” Id. at 665.

Rather than listing a number of non-exclusive factors as it had done in 

Morrison, then, the Court in Edmond appeared to offer one overall standard for identifying inferior officers. “Generally speaking,” the Court 

stated, “the term ‘inferior officer’ connotes a relationship with some 

higher ranking officer or officers below the President: Whether one is 

an ‘inferior’ officer depends on whether he has a superior.” Id. at 662. At 

the same time, the Court indicated that determining whether an officer has 

a superior in this sense may well require considering a number of factors, 

including whether the officer is removable by an Executive Branch official below the President and whether the officer’s work “is directed and 

supervised at some level by others who were appointed by Presidential 

nomination with the advice and consent of the Senate.” Id. at 663.

Earlier this year, the Supreme Court followed the Edmond approach 

for distinguishing inferior from principal officers in Free Enterprise 

Fund v. Public Company Accounting Oversight Board, 130 S. Ct. 3139 

(June 28, 2010). In Free Enterprise Fund, the Court considered separation of powers and Appointments Clause challenges to the structure of 

the Public Company Accounting Oversight Board (“PCAOB”), a statutorily created entity with “expansive powers to govern [the accounting] industry.” Id. at 3147. The statute establishing the PCAOB, the 

Sarbanes-Oxley Act of 2002, 15 U.S.C. §§ 7211–7219 (“SOX Act”), 

provided for the Securities and Exchange Commission (“SEC”) to appoint 
34 Op. O.L.C. 219 (2010)

230

the PCAOB’s members.7 The SOX Act also granted the SEC “[b]road 

power over [the PCAOB] functions,” id. at 3148, including approving the 

PCAOB’s budget, issuing regulations that bind it, relieving the PCAOB 

of authority, amending and denying approval for PCAOB sanctions and 

rules, and enforcing PCAOB rules on its own. See id. at 3158. Under the 

SOX Act as enacted, however, the SEC could remove PCAOB members 

only “‘for good cause shown,’” “‘in accordance with’” specified procedures. Id. at 3148 (quoting 15 U.S.C. § 7211(e)(6)). The Court held that 

the resulting dual for-cause limitations on the President’s ability to 

remove PCAOB members—with the SEC Commissioners removable by 

the President only for good cause, and the PCAOB members removable 

by the SEC only for another, more restrictive type of good cause specified in the SOX Act—was “contrary to Article II’s vesting of the executive power in the President,” and therefore violated the separation of 

powers. Id. at 3147, 3154. To remedy the infirmity, the Court excised 

from the SOX Act the provision making PCAOB members removable 

only for cause, thus rendering them removable by the SEC at will.

Turning to the Appointments Clause challenge under this modified 

statutory structure, the Court concluded that the PCAOB’s members were 

properly appointed inferior officers. “Given that the Commission is 

properly viewed, under the Constitution, as possessing the power to 

remove Board members at will,” the Court explained, “and given the 

Commission’s other oversight authority, we have no hesitation in concluding that under Edmond the Board members are inferior officers.” Id.

at 3162.

Both Edmond and Free Enterprise Fund indicate that the level of direction and supervision exercised by a superior over a subordinate need not 

be total for the subordinate to qualify as an inferior officer. In Edmond, 

for example, the Court acknowledged that the scope of substantive review 

that the Court of Appeals for the Armed Forces exercised over the Court 

of Criminal Appeals “is narrower than that exercised by the Court of 

Criminal Appeals,” because “so long as there is some competent evidence 

 

7 The parties stipulated that SEC Commissioners could not be removed by the President except for “‘inefficiency, neglect of duty, or malfeasance in office,’” and the Court

decided the case based on that understanding. Free Enterprise Fund, 130 S. Ct. at 3148–

49.
Special Master for Troubled Asset Relief Program Executive Compensation

231

in the record to establish each element of the offense beyond a reasonable 

doubt, the Court of Appeals for the Armed Forces will not reevaluate the 

facts.” 520 U.S. at 665. What was “significant” in concluding that the 

Court of Criminal Appeals judges nonetheless were inferior officers, 

however, was that they “have no power to render a final decision on 

behalf of the United States unless permitted to do so by other Executive 

officers.” Id. Similarly, in Free Enterprise Fund, the Court rejected the 

proposition that the SEC’s power over the PCAOB’s activities was “plenary.” 130 S. Ct. at 3159. Rather, the Court observed, the PCAOB “is 

empowered to take significant enforcement actions, and does so largely 

independently of the Commission”; indeed, “the Act nowhere gives the 

Commission effective power to start, stop, or alter individual Board 

investigations.” Id.; see also id. at 3159 (“The Board . . . has significant 

independence in determining its priorities and intervening in the affairs 

of regulated firms (and the lives of their associated persons) without 

Commission preapproval or direction.”). Thus, Edmond and Free Enterprise Fund make clear (as had Morrison) that an executive official can 

exercise some level of independent authority and still qualify as an inferior officer, so long as it can be said that the official “is directed and supervised at some level by others who were appointed by Presidential nomination with the advice and consent of the Senate.” Edmond, 520 U.S. at 663 

(emphasis added).

III.

Applying the principles established by the Supreme Court, we think it 

clear that the Special Master is not a principal officer. If one looks to the 

four Morrison factors—removal, duties, jurisdiction, and tenure—they all 

point in favor of the conclusion that the Special Master is not a principal 

officer. The Special Master is subject to at-will removal by the Secretary 

(without “notice” or “cause”). 31 C.F.R. § 30.16(a). The Special Master’s 

duties are limited. As indicated above, they consist of interpreting EESArelated requirements on TARP recipients’ executive compensation and 

corporate governance, negotiating reimbursements for improper compensation payments made by TARP recipients before February 17, 2009, 

determining whether to approve compensation payments and structures 

relating to certain employees of TARP recipients receiving “exceptional 

financial assistance,” and issuing advisory opinions. See supra pp. 222–
34 Op. O.L.C. 219 (2010)

232

226 & note 4. Like the independent counsel in Morrison, the Special 

Master thus lacks both “authority to formulate policy for the Government 

or the Executive Branch” and significant administrative duties. 487 U.S. 

at 671–72.8 While the Special Master is entrusted with authority to 

interpret section 111 of the EESA, the Interim Rule, and related guidance, the Special Master is authorized to do so only in applying those 

provisions to the compensation practices of particular TARP recipients 

and certain of their employees. The Special Master’s jurisdiction is limited to TARP recipients’ executive compensation and corporate governance. See id. And the Special Master’s tenure is limited to the duration of 

the Secretary’s authority under section 111 of EESA, namely “the period 

in which any obligation arising from financial assistance provided under 

the TARP remains outstanding.” 12 U.S.C. § 5221(b)(1). The Special 

Master, then, bears each of the marks of inferior officer status attributed 

to the independent counsel in Morrison. 

If one looks not to the Morrison factors, but instead to the Edmond

considerations of whether the Special Master is removable by an officer 

other than the President and whether the Special Master’s work is subject 

to “some level” of “direct[ion] and supervis[ion]” by an official appointed by the President, with the advice and consent of the Senate—here, the 

Secretary of the Treasury—again we think it clear that the Special Master 

is not a principal officer. 520 U.S. at 663.

First, the Special Master is removable by the Treasury Secretary at will. 

The Special Master serves “at the pleasure of the Secretary, and may be 

removed by the Secretary without notice, without cause, and prior to the 

naming of any successor Special Master.” 31 C.F.R. § 30.16(a). As the 

Supreme Court has remarked more than once, “[t]he power to remove 

 

8 Under the Interim Rule’s residual clause, the Special Master may also be given those 

“duties and powers related to the application of compensation [and corporate governance] 

issues arising in the administration of [the] EESA or TARP as the Secretary or the 

Secretary’s designate may delegate to the Special Master.” Id. § 30.16(a)(5). But while 

the outer limit of those potential duties—none of which has been granted—is not precisely defined, the clause by its terms encompasses only the “application” of compensation 

issues. Id. Accordingly, we do not believe that the clause contemplates the Secretary’s 

delegation to the Special Master of authorities under section 111 that might be characterized as more closely resembling policymaking, such as the establishment of executive 

compensation and corporate governance standards. Cf. 12 U.S.C. § 5221(b)(2).
Special Master for Troubled Asset Relief Program Executive Compensation

233

officers . . . is a powerful tool for control.” Edmond, 520 U.S. at 664 

(citing Bowsher v. Synar, 478 U.S. 714, 727 (1986) and Myers v. United 

States, 272 U.S. 52 (1927)); see Free Enterprise Fund, 130 S. Ct. at 3162 

(“‘[t]he power to remove officers’ at will and without cause ‘is a powerful 

tool for control’ of an inferior” (quoting Edmond)).

Second, the Treasury Department has reasonably construed the Interim 

Rule as not precluding the Treasury Secretary from reviewing and revising the Special Master’s determinations should the Secretary choose to 

exercise that authority.

Whether the Interim Rule permits the Special Master’s determinations 

to be reviewed by the Treasury Secretary is a point of contention between 

the SIGTARP and the Treasury Department. The SIGTARP argues that 

the Interim Rule insulates the Special Master’s determinations from 

secretarial review. He notes that the Interim Rule “does not expressly 

authorize any internal approval or review of the Special Master’s actions.” 

SIGTARP Letter at 8. Instead, by making the “final determinations” of 

the Special Master “final and binding” and “treated as the determination 

of the Treasury,” the SIGTARP contends, the Interim Rule precludes 

further review. Id. The Treasury Department, by contrast, takes the view 

that the Special Master’s “decisions remain subject to further review 

within the Treasury.”9

Our approach to this question is informed by the familiar principle that 

the Secretary’s interpretation of his own regulations is entitled to deference “unless plainly erroneous or inconsistent with the regulation.” Auer 

v. Robbins, 519 U.S. 452, 461 (1997) (quoting Robertson v. Methow 

Valley Citizens Council, 490 U.S. 332, 359 (1989), in turn quoting Bowles 

v. Seminole Rock & Sand Co., 325 U.S. 410, 414 (1945)). We think the 

Treasury Department’s interpretation of the Interim Rule readily meets 

that standard.

 

9 Letter for Bryan Saddler, Chief Counsel, SIGTARP, from Timothy G. Massad, Chief 

Counsel, Office of Financial Stability, at 2 (Mar. 26, 2010); see Letter for Bryan Saddler, 

Chief Counsel, Special Inspector General for the Troubled Asset Relief Program, Department of the Treasury, from Timothy G. Massad, Chief Counsel, Office of Financial 

Stability, at 1 (July 29, 2010) (“the decisions of the Special Master are subject to review 

(i.e., can be reviewed) by other officials within Treasury”). The Treasury Department 

General Counsel’s Office has confirmed for us that these statements reflect the view of 

the Secretary of the Treasury.
34 Op. O.L.C. 219 (2010)

234

The Interim Rule’s lack of an express authorization for secretarial review of the Special Master’s determination does not imply preclusion of 

such review. On the contrary, by statute the Secretary is “the head of the 

Department,” 31 U.S.C. § 301(b), and is vested with the “[d]uties and 

powers of the officers and employees of the Department,” id. § 321(c). In 

our view, these statutes create a strong presumption that officials within 

the Department are subject to the Secretary’s supervision, including the 

authority to review and reverse their decisions. This default rule may be 

overcome, we have suggested, when there is “specific and explicit reservation of ‘final decisionmaking power’ in a subordinate official,” in the 

sense of a preclusion of the presumptive reviewing authority possessed by 

the department head. Memorandum for the Deputy Attorney General from 

Leon Ulman, Deputy Assistant Attorney General, Office of Legal Counsel, Re: Authority of the Attorney General Over the National Institute of 

Justice and the Bureau of Justice Statistics at 2 (Oct. 14, 1980) (“NIJ/BJS 

Memo”) (emphasis added); see also Under Secretary of Treasury for 

Enforcement, 26 Op. O.L.C. 230, 232–33 (2002) (applying similar principle to Treasury Department). But we think it reasonable to conclude that 

the Interim Rule lacks a clear enough preclusion of secretarial review to 

overcome the presumption of secretarial supervisory authority.

To be sure, the Interim Rule characterizes the Special Master’s final 

determinations as “final and binding” and directs that they be “treated as 

the determination of the Treasury.” 31 C.F.R. § 30.16(c)(2). But those 

phrases by themselves do not necessarily, or even most naturally, amount 

to the sort of specific and explicit reservation of decision-making power 

in the Special Master that would insulate the Special Master’s final 

determinations from secretarial review. Indeed, on at least two occasions 

we have concluded that similar phrases were inadequate to demonstrate 

an intent to insulate subordinate officials’ decisions from review by the 

head of a Department. See Memorandum for Alan C. Raul, General 

Counsel, Department of Agriculture, from Doug R. Cox, Deputy Assistant Attorney General, Re: Secretary of Agriculture Review of ALJ Decisions (Feb. 20, 1991) (statute providing that subordinate officials’ decisions “shall be final” and “shall take effect” thirty days after notice of 

their delivery did not prohibit issuance of regulations providing for 

secretarial review); Secretary of Education Review of Administrative Law 

Judge Decisions, 15 Op. O.L.C. 8, 10–13 (1991) (“Secretary of Educa-
Special Master for Troubled Asset Relief Program Executive Compensation

235

tion Review”) (statute providing that an administrative law judge’s decision “shall be considered to be a final agency action” did not preclude 

further agency review). As we explained in the earlier of those opinions, 

when a statute (or regulation) refers to a decision as “final agency action” 

it is often “understood to mean that action which is necessary and sufficient for judicial review” under the Administrative Procedure Act even 

though the decision may be “subject to reconsideration or appeal to a 

higher authority within the agency.” Id. at 10–11; cf. Darby v. Cisneros, 

509 U.S. 137, 144–47 (1993) (explaining that agency decisions may be 

final for purposes of judicial review even though additional, optional 

levels of administrative review may be available). As we made clear in 

the later of those prior opinions, we have concluded that it was reasonable to attach the same interpretation to a statute (or regulation) that 

characterizes an official’s decision as “final.” Secretary of Agriculture 

Review, 15 Op. O.L.C. at 1–2.10

 

10 The SIGTARP contends that our opinion in Secretary of Education Review of ALJ 

Decisions is “largely inapposite” because the statute at issue there and the Interim Rule 

differ in two material respects. SIGTARP Letter at 6. First, the SIGTARP points out that 

the statute at issue in Secretary of Education Review used the phrase “shall be considered 

to be a final agency action,” whereas the Interim Rule provides that “final determinations” 

of the Special Master “shall be final and binding and treated as the determination of the 

Treasury.” SIGTARP Letter at 6–7. We do not think, however, that the absence of the 

verb “considered” is decisive (particularly given the Interim Rule’s use of the similar verb 

“treated”). Indeed, we have previously rejected such a distinction. Admittedly, in Secretary of Education Review, we determined that Congress’s use of “shall be considered” 

instead of the more unequivocal “shall be” made it easier to conclude that Congress did 

not intend to preclude further agency review. 15 Op. O.L.C. at 10. “[L]anguage that the 

ALJ’s decision ‘shall be the final agency action’,” we explained, “would, at a minimum, 

present a question as to whether Congress intended for the ALJ decision to be final in the 

sense that no further agency review is available.” Id. at 10 n.3. Nevertheless, we concluded that it was “unlikely that we would construe even this language to express an intent to 

foreclose secretarial review, absent affirmative evidence that Congress so intended.” Id. 

A month later we made good on that prediction by finding that a statute using the phrase 

“shall be final”—without the “considered” phrasing—also did not preclude secretarial 

review. Secretary of Agriculture Review at 1–2. Second, the SIGTARP emphasizes that 

the statute at issue in Secretary of Education Review used the phrase “final agency 

action,” a term borrowed almost directly from the Administrative Procedure Act, see

5 U.S.C. § 704 (“final agency action for which there is no other adequate remedy in a 

court [is] subject to judicial review”), while the Interim Rule uses “final determination” 

and “final and binding.” See SIGTARP Letter at 7. Again, we hardly think that difference 

is decisive, as our memorandum on Secretary of Agriculture Review, which addressed a 
34 Op. O.L.C. 219 (2010)

236

Similarly, the Interim Rule’s characterization of the Special Master’s 

final determinations as “final and binding” may reasonably be understood 

as intended not to insulate the Special Master’s decisions from secretarial 

review, but instead to make clear when the Special Master’s decisions 

take effect and thus become ripe for judicial review. This understanding 

draws support from the Interim Rule’s distinction between “initial determinations” and “final determinations.” 31 C.F.R. § 30.16(c)(1). After the 

Special Master renders an “initial determination,” the TARP recipient has 

30 days to request reconsideration, and the Special Master must provide a 

“final determination” in writing within 30 days thereafter, setting forth 

the facts and analysis that formed the basis for the determination. Id. If 

the TARP recipient does not request reconsideration within 30 days, the 

initial determination “shall be treated as a final determination.” Id. Initial 

determinations trigger a deadline for a reconsideration request; final 

determinations impose an obligation to abide by the Special Master’s 

directives and thus signal an entitlement to seek judicial review. Given 

these other legal effects, we do not see any reason to conclude that the 

terms “final and binding” in the Interim Rule must be read to have the 

additional effect of insulating the Special Master’s decisions from further 

review by the Secretary.

A comparison of the Interim Rule with a regulation the Supreme Court 

has found to impose a limitation on review by the head of a department 

underscores the point that the Treasury Department’s understanding of 

the Interim Rule as not involving such elimination of secretarial review is 

reasonable. In United States v. Nixon, 418 U.S. 683 (1974), the Court 

found that a regulation delegating authority in certain matters to a Special 

Prosecutor and providing that “[t]he Attorney General will not countermand or interfere with the Special Prosecutor’s decisions or actions” 

shielded the Special Prosecutor’s decisions from revision by the Attorney 

General. Id. at 694 n.8. That language is much more direct and specific 

than the language in the Interim Rule. It constitutes the sort of “specific 

and explicit reservation of ‘final decisionmaking power’” that we have 

indicated would be necessary to shield a subordinate official’s decisions 

from review by a Department head.

 

statute characterizing officials’ decisions as “final” (rather than as “final agency action”), 

indicates.
Special Master for Troubled Asset Relief Program Executive Compensation

237

For all these reasons, we think the Treasury Department’s interpretation 

of the Interim Rule as not precluding secretarial review of the Special 

Master’s determinations is not plainly erroneous or inconsistent with the 

Interim Rule.11

A third consideration, not necessary to our analysis, may offer some 

further support for the conclusion that the Special Master is not a principal officer. The Secretary has established the specific functions of the 

Special Master by regulation and thus may alter the Special Master’s 

powers, or even abolish the position, by regulation. The degree of incremental control this regulatory power over the Special Master affords the 

Secretary is not clear, given both that (i) were the Secretary to eliminate 

or modify the position of Special Master, he would need to do so by 

regulation, and that revising regulation would have to conform to statutes 

 

11 We do not mean to suggest that use of the term “final,” when considered in context 

and in conjunction with other considerations, may never lead to the conclusion that a 

statute or regulation was intended to insulate a subordinate official’s decisions from 

review by the head of a Department. In at least one instance, for example, we have 

advised that an explicit statutory delegation of “final authority over all grants, cooperative 

agreements, and contracts” to the “Directors” of certain entities established by statute 

within the Department of Justice precluded the Attorney General from overturning the 

Directors’ decisions. NIJ/BJS Memo at 2. But our reasoning in reaching that conclusion 

only confirms the reasonableness of interpreting the Interim Rule as not precluding 

secretarial review.

First, the statute at issue in that earlier memorandum did not characterize the subordinate officials’ individual decisions as “final,” let alone contrast such “final determinations” with “initial determinations,” as the Interim Rule does. Rather, that statute endowed those officials with “final authority” over several classes of decisions. Id. at 1

(emphasis added). The latter wording is not easily understood as simply identifying 

certain decisions as ready for judicial review; instead it is much more readily understood 

as granting certain officials the last word in the Department. Second, as we noted, the 

legislative history of the statute at issue in that memorandum supported the conclusion 

that Congress intended the Directors created by the statute to be protected from reversal 

by the Attorney General. See id. Third, the Directors, unlike the Special Master, were 

appointed by the President, with the advice and consent of the Senate. Id. That eliminated any concern rooted in the Appointments Clause that might have counseled against 

finding that the Directors’ decisions were shielded from review by the Attorney General. 

Here, such constitutional avoidance concerns would, if anything, support the reasonableness of reading the Interim Rule as not precluding secretarial review of the Special 

Master’s decisions. See generally Application of 28 U.S.C. § 458 to Presidential Appointments of Federal Judges, 19 Op. O.L.C. 350, 352 (1995) (describing avoidance 

canon and noting its use in Executive Branch legal interpretation).
34 Op. O.L.C. 219 (2010)

238

placing procedural limits on the Secretary’s rulemaking authority and 

that (ii) the Special Master is already subject to removal by the Secretary 

without cause.12 But this power may represent some small additional 

lever of “direct[ion] and supervis[ion].” Edmond, 520 U.S. at 663.

IV.

Accordingly, whether we apply the Morrison or the Edmond analysis, 

the Special Master is not a principal officer and therefore need not be 

appointed by the President, by and with the advice and consent of the 

Senate.

JONATHAN G. CEDARBAUM 

Acting Assistant Attorney General

Office of Legal Counsel

 

12 Compare Morrison, 487 U.S. at 721 (Scalia, J., dissenting) (characterizing power of 

“amending or revoking [an authorizing] regulation” as a means of at-will removal); and In 

re Sealed Case, 829 F.2d 50, 56–57 (D.C. Cir. 1987) (Attorney General’s ability to 

abolish position of Iran-Contra Independent Counsel by rescinding authorizing regulation 

supports conclusion that Independent Counsel is not a principal officer), with Free 

Enterprise Fund, 130 S. Ct at 3158–59 (“[A]ltering the . . . powers of an agency as a 

whole is a problematic way to control an inferior officer. The Commission cannot wield a 

free hand to supervise individual members if it must destroy the Board in order to fix it.”).