Court Opinion

ID: 4119628
Source: CourtListenerOpinion
Date Created: 2017-01-27 22:41:26.649029+00
Date Added: 2024-06-11T14:47:00.007435
License: Public Domain

Removal of Holdover Officials Serving on the Federal Housing
     Finance Board and the Railroad Retirement Board
The President m ay rem ove, w ithout cause, m em bers o f the Federal H ousing Finance Board and the
   Railroad R etirem ent B oard who are serving in holdover capacities and do not enjoy express tenure
   protection by statute.

                                                                                                    August 1, 1997

                 M e m o r a n d u m O p in io n f o r t h e C o u n s e l t o t h e P r e s id e n t

   You have asked for our opinion about the President’s power to remove, without
cause, members of the Federal Housing Finance Board (“ FHFB” ) and Railroad
Retirement Board ( “ RRB” ) who are serving in holdover capacities. Members of
neither board enjoy express tenure protection.1 Your question therefore requires
us to address whether, in the face of congressional silence, a restriction on the
President’s power to remove the board members should be inferred. See Wiener
v. United States, 357 U.S. 349 (1958). Without such an implied removal restric­
tion, the President may remove the board members without cause even before
their terms have expired. See Myers v. United States, 272 U.S. 52 (1926).
   We conclude that although there is some small risk that a court would find
a tenure protection during the holdover period, the clearly better legal view is
that such a protection should not be inferred. The President may therefore remove,
without cause, the board members serving in holdover capacities.

                                                          I.

   In a thorough review of removal jurisprudence from the early days of the
Republic to the present, our Office concluded that tenure protection should no
longer be inferred when Congress is silent. See The Constitutional Separation of
Powers Between the President and Congress, 20 Op. O.L.C. 124 (1996); see also
id. at 168 n.115 (explaining that rationale of Wiener, in which Court inferred
a removal restriction for a quasi-adjudicatory officer, is suspect in light of subse­
quent cases, but continues to be followed by some courts). In accordance with
this position, there would be no implied tenure protection during FHFB or RRB
directors’ regular terms, let alone during their holdover periods.
   Nevertheless, some courts have continued to suggest that tenure protection may
sometimes be inferred when Congress is silent. See, e.g., Swan v. Clinton, 100
F.3d 973, 981-84 (D.C. Cir. 1996); FEC v. NRA Political Victory Fund, 6 F.3d
821, 826 (D.C. Cir. 1993), cert, dismissed , 513 U.S. 88 (1994). These courts have
   1 By “ tenure protection,” we mean a prohibition against removal without cause See, e.g., 5 U S C § 121 I (1994)
(“ The Special Counsel may be removed by the President only for inefficiency, neglect of duty, or malfeasance
in office ” )

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held that such protection is justified whenever Congress has indicated, through
the functions it has vested in an agency or through legislative history or statutory
language, that the agency must be insulated from the control of the President
in order to perform its functions adequately. This rationale does not necessarily
extend to board members serving in holdover capacities, however, as they by defi­
nition are subject to the President’s ability, with the Senate’s advice and consent,
to appoint successors to their positions. See Swan, 100 F.3d at 984. In holdover
situations, therefore, a court may first ask (as did the court in Swan, despite the
objections of the concurring judge, 100 F.3d at 990 (Silberman, J.)) whether tenure
protection should be inferred during board members’ terms of office. See id. at
981-83. If the court finds that tenure protection should be inferred, it asks whether
such protection should also be inferred during holdover periods. See id. at 984—
87. In answering this second question, courts are likely to require some rationale
other than the one supporting tenure protection during appointed terms. See id.
at 984. We have examined the question of removal of FHFB and RRB holdovers
under this methodology in order to be as thorough as possible, although it is our
view that removal is not limited even during the directors’ terms, in light of the
congressional silence on the question.

                                               II.

  The FHFB is an “ independent agency in the executive branch.” 12 U.S.C.
§ 1422a(a)(2) (1994). It is composed of the Secretary of Housing and Urban
Development and four other directors appointed by the President with the advice
and consent of the Senate. See id. § 1422a(b)(l). The four appointed directors
must have “ extensive experience or training in housing finance” or “ a commit­
ment to providing specialized housing credit.” Id. § 1422a(b)(2)(A). At least one
of the directors must also be chosen from an “ organization with more than a
2-year history of representing consumer or community interests on banking serv­
ices, credit needs, housing, or financial consumer protections.” Id.
§ 1422a(b)(2)(B). No more than three of the directors, including the Secretary,
may be of the same political party. See id. § 1422a(b)(2)(A). No more than one
of the appointed directors may be from any single district of the Federal Home
Loan Bank System. See id.
   The four appointed directors of the FHFB serve seven year terms, see id.
§ 1422a(b)(l)(B), unless appointed to fill a vacancy occurring prior to the expira­
tion of a director’s term, in which case they serve for the remainder of the original
term, see id. § 1422a(d)(l). Vacancies “ shall be filled in the manner in which
the original appointment was made.” Id. Upon expiration of a director’s term,
that director “ may continue to serve until a successor has been appointed and
qualified.” Id. Directors enjoy no express tenure protection. See id. § 1422a.

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    Rem oval o f H o ldover O fficials Serving on the F ederal H ousing Finance B oard a n d the R ailroad
                                               R etirem ent Board

   The primary duty of the FHFB is to ‘‘ensure that the Federal Home Loan Banks
operate in a financially safe and sound manner.” Id. § 1422a(a)(3)(A). Specifi­
cally, the FHFB supervises the Federal Home Loan Banks and ensures that they
carry out their housing finance mission and stay adequately capitalized in the cap­
ital markets. See id. § 1422a(a)(3)(B). To carry out these duties, the FHFB may
promulgate and enforce regulations and orders, may suspend or remove for cause
Federal Home Loan Bank employees, may assess the Banks for the Board’s
expenditures, and may use the United States mails. See 12 U.S.C. § 1422b(a)
(1994).
  The FHFB is in many ways indistinguishable from the Board of the National
Credit Union Administration ( “ NCUA” ) at issue in Swan, a recent case consid­
ering tenure protection during holdover periods. In that case, the D.C. Circuit
found that although it might infer tenure protection for NCUA Board members
during their fixed terms, it would not infer such protection during holdover
periods. See 100 F.3d at 988. The D.C. Circuit made these determinations by
examining the NCUA Board’s structure, function, and legislative history, much
of which is similar to that of the FHFB.2
   Like the NCUA Board, nothing in the statutory language establishing the FHFB
or its legislative history explicitly grants any protection from Presidential control.
Moreover, the FHFB explicitly resides within the executive branch and is not
among the “ independent regulatory agenc[ies]” listed in the Paperwork Reduction
Act, 44 U.S.C. §3502(10) (1994), which identifies many of the agencies whose
members are thought to have tenure protection.3 Two aspects of the FHFB, how­
ever, suggest that Congress may have wanted the FHFB’s directors to be inde­
pendent from the President. These aspects are shared with the NCUA Board and
were cited by the D.C. Circuit as indicators of independence. First, members of
both boards serve for fixed terms of office. Although fixed terms alone do not
provide removal protection, Parsons v. United States, 167 U.S. 324, 338-39
(1897), they may offer evidence of agency independence when combined with
other factors. See Swan, 100 F.3d at 982. Second, the FHFB and NCUA Board
serve similar functions in that both Boards regulate financial institutions. The D.C.
Circuit determined that this type of function often is a sign of independence from
the President as “ people will likely have greater confidence in financial institu-

  2 The D C Circuit refrained from making any actual holding about the tenure protection of Board members during
their ordinary terms On the other hand, the district court had ‘‘decline[dj to infer a restriction upon the President’s
power to remove NCUA Board members where none was expressly provided for by Congress.” Swan v. Clinton,
932 F Supp 8, 13 ( D D C 1996) (footnote omitted) This holding apparently would have extended to removal
dunng a Board m em ber’s regular term, as well as during the holdover penod
  3 The FHFB could, however, fall within the “ other similar agency” language of the Paperwork Reduction Act.
44 U S C §3502(10) (1994)

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tions if they believe that the regulation of these institutions is immune from polit­
ical influence.” Id. at 983.4
   In addition to these features, the Swan court relied on legislative history to sug­
gest that tenure protection might be inferred for NCUA Board members. See id.
at 982-83. It is less clear from the legislative history of the FHFB that tenure
protection should be inferred. The NCUA Board was created in 1978 to replace
the NCUA Administrator who had explicitly served at the pleasure of the Presi­
dent. The amendments creating the NCUA Board deleted all reference to the Presi­
dent’s removal power. The D.C. Circuit interpreted this silence after an explicit
reference as bolstering the inference of tenure protection during NCUA Board
members’ terms. In contrast, the directors of the FHFB, or its predecessor body,
never explicitly served at the pleasure of the President. Early versions of the bill
establishing the FHFB did provide that the President could remove the Board’s
directors at his discretion. See S. 413, 101st Cong. § 702(b) (1989). The proposed
removal provision was later dropped without comment and the reports accom­
panying the enacted bill were silent on removal. See H.R. Conf. Rep. No. 101—
209, at 427-29 (1989). This change in a draft of a bill is less indicative of congres­
sional intent than an amendment to an already enacted law. The change prior
to enactment, however, might lend some support to the argument that at least
some members of Congress did not want to give the President express discretion
to remove directors at will.5
   The FHFB therefore shares some, but not all, of the features of the NCUA
Board that led the D.C. Circuit to state that it would likely infer tenure protection
during NCUA Board members’ fixed terms of office. See Swan, 100 F.3d at 983-
84.6 Even if a court were to reach a similar conclusion with the FHFB, however,
the D.C. Circuit held that such features did not necessitate tenure protection during
holdover periods. See id. at 988. The reasoning behind this holding applies equally
to the FHFB as to the NCUA Board. The D.C. Circuit found that inferring hold­
over protection was not necessary to ensure the independence of NCUA Board
members because holdover members can be replaced by a Senate-confirmed suc­
cessor at any time, including a time when the President disagrees with the mem­
   4 As the district court in Swan observed, however, the Comptroller o f the Currency and the Office of Thrift Super­
vision “ perform similar functions . . albeit w ith respect to other financial instituuons,” but “ Congress has not
. . . found it necessary to insulate these entities from executive control.” 932 F. Supp at 13 n.8 (citations omitted).
   5 O ther aspects o f the A ct’s legislative history, however, indicate that Congress was not primarily concerned with
the FH FB ’s independence from the Executive. Even though Congress explicitly describes the Board as an “ inde­
pendent agency,” 12 U.S.C. § I422a(a)(2), Congress was more concerned about the Board’s independence from
the banking industry and the Department of the Treasury than from the President, see S Rep. No. 101-19, at 5 -
6 (1989), H.R. Conf. Rep. No. 101-209, at 428. Indeed, the President's involvement with the Board was designed
to help ensure independence from the banking industry and Treasury Department. See S Rep. No 101-19, at 5.
All that should be inferred from the status o f an “ independent agency” is that the entity is not located within
another department or agency
   6 A major difference between the two boards is that the Secretary o f Housing and Urban Development serves
on the FHFB, and one o f the directors of the FHFB is, therefore, necessarily subject to the plenary supervision
of the President. This structural feature may indicate that independence from the Executive is not necessary for
the FHFB to carry out its functions However, it may also indicate an increased need to insulate the FHFB’s other
directors from the pow er o f the President

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    R em oval o f H oldover Officials Serving on the F ederal H ousing F inance Board a n d the R ailroad
                                              R etirem ent B oard

ber’s decisions. See id. at 984. “ [H]oldover members know that even if they
cannot be removed directly, an unpopular decision may lead the President to nomi­
nate a successor immediately or encourage the Senate to speed up confirmation
hearings.” Id. Similarly, FHFB directors serving in holdover capacities can be
replaced at any time. See 12 U.S.C. § 1422a(d)(l). Therefore, during the holdover
period there is no independence to be protected by restricting removal by the
President.
   The FHFB holdover clause is somewhat different from the NCUA Board hold­
over clause, however. The FHFB clause permits a director to serve until a suc­
cessor has been “ appointed and qualified,” id., whereas the NCUA Board hold­
over clause permits a member to serve until a successor has “ qualified,” see
12 U.S.C. § 1752a(c) (1994). The D.C. Circuit suggested in Swan that the use
of “ appointed and qualified,” as opposed to just “ qualified,” may indicate
Congress’s intent to keep holdovers in office until the Senate has confirmed the
President’s appointees. See Swan, 100 F.3d at 986. Congress’s intent presumably
would be both to provide that the office would not be “ vacan[t]” for purposes
of the Recess Appointment Clause, so that there would be no ground for a recess
appointment by the President, see Wilkinson v. Legal Services Corp., 865 F. Supp.
891, 900 (D.D.C. 1994), rev’d on other grounds, 80 F.3d 535 (D.C. Cir.), cert,
denied, 519 U.S. 927 (1996); Mackie v. Clinton, 827 F. Supp. 56, 57-58 (D.D.C.
 1993), vacated as moot, 1994 WL 163761 (D.C. Cir. 1994), and to grant tenure
protection against removal during holdover periods. It seems unlikely, however,
that Congress had this intent with the FHFB. First, in suggesting such an intent,
the D.C. Circuit relied on the fact that Congress explicitly changed the NCUA
Board holdover clause from “ appointed and qualified” to “ qualified.” In con­
trast, Congress never made any changes to the FHFB holdover clause. Indeed,
Congress was completely silent on the issue and in the absence of clear and
express legislative intent, a court should not assume that Congress intended to
restrict the President’s recess appointment powers. Cf. Franklin v. Massachusetts,
505 U.S. 788, 800-01 (1992) (textual silence insufficient to subject President to
Administrative Procedure Act); see also Application o f 28 U.S.C. §458 to Presi­
dential Appointments of Federal Judges, 19 Op. O.L.C. 350 (1995). Second, con­
trary to the D.C. Circuit’s suggestion, the “ qualified” in “ appointed and quali­
fied” does not have to mean confirmed in order to avoid being surplusage. Rather,
nominees qualify when they take their oaths and are sworn in to office, regardless
if they have been confirmed by the Senate or have taken office through a recess
appointment.7 See Brief for Appellees at 39 n.7, Swan v. Clinton, 100 F.3d 973
(D.C. Cir. 1996) (No. 96-5193). We therefore conclude that tenure protection
should not be inferred for FHFB directors serving in holdover capacities.

   7 It would not be possible to argue that the requirement that FHFB vacancies “ shall be filled in the manner
in which the original appointment was made,” 12 U S.C § 1422a(d)(l), indicates Congress’s intent to bar recess
appointments and keep holdovers in office. See, e .g , Staebler v. Carter, 464 F Supp. 585, 590-91 (D D C. 1979).

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                                               III.

  The RRB is an “ independent agency in the executive branch.” 45 U.S.C.
§231f(a) (1994). It is composed of three members appointed by the President
with the advice and consent of the Senate. The President must choose one member
from recommendations made by representatives of railroad employees and another
member from recommendations made by representatives of railroad employers.
The President appoints the final member, the Chairman, without recommendation.
All three members serve five year terms, unless appointed to fill a vacancy occur­
ring prior to the expiration of a Board member’s term, in which case they serve
for the remainder of the original term. Upon expiration of a member’s term, that
member “ shall continue to serve until his successor is appointed and shall have
qualified.” Id. Members of the Board enjoy no express tenure protection. See
id.
   The Board is charged with exercising all duties and powers necessary to admin­
ister the Railroad Retirement Act. See id. §231f(b). These duties and powers
include determining what portion o f the taxes collected under the Railroad Retire­
ment Tax Act should be credited to the various benefit accounts, determining who
receives annuities and death benefits, making decisions upon issues of law and
fact relating to such benefits, arranging payment, keeping records of eligibility
and payments, and developing rules and regulations to oversee the process. See
id.
   Nothing in the statutory language establishing the Board or its legislative history
explicitly indicates a determination by Congress that the Board’s functions require
it to be independent of the President’s plenary supervision. Moreover, the Board’s
structure contains features that militate against such independence. The Board is
within the executive branch, see id. §231f(a), and is not listed as an “ independent
regulatory agency” in the Paperwork Reduction Act, 44 U.S.C. §3502(10). In
addition, the statutory language explicitly provides that “ [vacancies in the Board
shall not impair the powers or affect the duties of the Board or of the remaining
members of the Board, of whom a majority of those in office shall constitute
a quorum for the transaction of business.” 45 U.S.C. §231f(a). This provision
could militate against independence because it could eviscerate the employer/
employee balancing requirement whenever the employer or employee seat is
vacant.
   On the other hand, the Board’s structure contains features that have been consid­
ered indicators of independence. First, the Board members serve for fixed terms.
See Swan, 100 F.3d at 982; but see Parsons, 167 U.S. at 338-39 (fixed terms
alone do not provide removal protection). Second, the Board has some quasi­
judicial functions, which until Morrison v. Olson, 487 U.S. 654 (1988), was a
determining factor in declaring an agency independent and therefore protecting
its board members from arbitrary removal. See Wiener, 357 U.S. at 353-56.

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   Rem oval o f H o ldover O fficials Serving on the F ederal H ousing F inance Board a n d the R ailroad
                                              Retirem ent Board

   We do not believe these features, without more, are enough to conclude that
Congress intended the Board to possess that independence conferred by tenure
protection. The Board is far from the War Claims Commission at issue in Wiener.
For example, unlike the Board, see 45 U.S.C. § 23lg (1994), that Commission
was not subject to judicial review. The Board is more like the Social Security
Administration, when it was part of the Department of Health and Human Serv­
ices, than the War Claims Commission. Even if a court concluded, however, that
the Board’s functions require independence and Board members therefore need
tenure protection to carry out these functions, it would not necessarily follow that
the Board members would enjoy tenure protection while serving in holdover
capacities. See Swan, 100 F.3d at 984. Rather, a court would most likely require
that the nature of the holdover capacity or language and history of the holdover
clause also provide some evidence of Congress’s intent to provide tenure protec­
tion. See id.
   The Board’s holdover clause provides little evidence of an intent to grant tenure
protection during holdover periods. First, holdover members can be replaced by
a successor at any time, including a time when the President and Senate disagree
with the member’s decisions. See id. Second, tenure protection under the holdover
clause is not necessary to ensure the Board’s continuity, as the Board may con­
tinue to function with one or two members. See 45 U.S.C. §231f(a). Third, Con­
gress did not seem to be contemplating tenure protection when it added the hold­
over clause in 1968. See Amendments to the Railroad Retirement Act, Pub. L.
No. 90-257, § 106, 82 Stat. 16, 21 (1968). In a report explaining the 1968 amend­
ments, the House’s only explanation of the holdover clause was that its “ purpose
is apparent and is similar to provisions for other agencies.” H.R. Rep. No. 90—
1054, at 27 (1968), reprinted in 1968 U.S.C.C.A.N. 1622, 1649.
   The only possible indication of holdover tenure protection is the language of
the holdover clause itself. One court has held that the use of “ shall,” as opposed
to “ may,” in a holdover clause indicates Congress’s intent that an office occupied
by a holdover official not be considered vacant for purposes of recess appoint­
ments until the Senate has confirmed the President’s appointees. See Wilkinson,
865 F. Supp. at 900. Arguably, an additional consequence of the reading might
be to grant tenure protection during holdover periods. However, because the
statute here does not limit the holdover period, this reading of the holdover clause
would give the Senate the power to keep holdovers in office indefinitely by simply
refusing to confirm the President’s appointees. See Swan, 100 F.3d at 986-87;
Staebler, 464 F. Supp. at 590-91. While there is at least an argument (although
not one we would endorse) that such power may be justified when Congress has
explicitly stated the need to keep the agency free of political pressures, see
Wilkinson, 865 F. Supp. at 900, it is unjustified when Congress has not explicitly
stated that need, see Swan, 100 F.3d at 986; Staebler, 464 F. Supp. at 591. There­

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fore, holdover tenure protection should not be inferred from the use of the word
“ shall” in the holdover clause.
   Nor should holdover tenure protection be inferred from the “ appointed and
qualified” language of the holdover clause. As discussed above, the D.C. Circuit
has suggested that the use of these terms, as opposed to just “ qualified,” may
indicate Congress’s intent to bar recess appointments and keep holdovers in office
until the Senate has confirmed the President’s appointees. See Swan, 100 F.3d
at 986. However, the legislative history of the Board’s holdover clause does not
support an inference of this intent. The House’s description of the clause states
that it “ provide[s] that a Board member would continue to serve until his suc­
cessor has qualified.” H.R. Rep. No. 90-1054, at 27, reprinted in 1968
U.S.C.C.A.N. at 1649. The House thus appears to have made no distinction
between “ appointed and qualified” and “ qualified.” The language of the Board’s
holdover clause therefore provides little evidence of Congress’s intent to give
Board members tenure protection during their holdover periods. If it did, it would
apply to recess appointments too. In the absence of clear and express legislative
intent, a court should not assume that Congress intended to restrict the President’s
recess appointment powers. See, e.g., Staebler, 464 F. Supp. at 590-91. We there­
fore conclude that tenure protections should not be inferred for members of the
RRB serving in holdover capacities.

                                                              RICHARD L. SHIFFRIN
                                                       Deputy Assistant Attorney General
                                                           Office of Legal Counsel

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