AuthorChabot, Chrisine Kexel

INTRODUCTION 2 I. THE INDEPENDENT STRUCTURE OF THE OPEN MARKET COMMITTEE 7 II. ORIGINALIST CHALLENGES 14 A. Original Removal Power 15 1. Originalist Arguments in Leading Judicial Opinions 16 2. Nascent Originalist Theory 18 3. Original Public Meaning and the Underdetermined Nature of the Text 20 4. Recovering Original Meaning and Law Through Evidence of Early Historical Practice 23 a. The Decision of 1789 23 b. The Independence of Obscure Domestic Commissions 27 B. Original Appointments Clause Requirements 30 III. THE CREATION AND OPERATION OF THE SINKING; FUND COMMISSION 32 A. Secretary Hamilton's Proposal 33 B. The Sinking Fund Art of August 12, 1790 39 C. The Sinking Fund Commission's Independent Decisions to Purchase Public Debt 13 IV. THE SINKING FUND COMMISSION PROVIDES A DIRECT FOUNDING-ERA PRECEDENT FOR THE FEDERAL OPEN MARKET COMMITTEE 17 CONCLUSION 52 INTRODUCTION

President Trump has been greatly vexed by his inability to control the Federal Reserve's monetary policy decisions. (1) This should come as no surprise, as the Federal Reserve's Federal Open Market Committee has more power over the national economy (and perhaps over the upcoming presidential election) than any other agency. The President might ask the Supreme Court for help, and his request would find support in originalist arguments that the Committee's independence unconstitutionally restricts the President's executive power (2) and circumvents the Appointments Clause. (3) According to leading originalists, independent agencies, such as the Open Market Committee, have relatively recent pedigrees that cannot possibly be "ascertain[ed by] the original meaning of the U.S. Constitution" or supported by "sources such as James Madison, Thomas Jefferson, and Alexander Hamilton." (4) The Federal Reserve's critics contend that the original meaning of Article II precludes an independent structure and requires the President to "determine the policies" pursued by the Federal Reserve. (5)

This Article demonstrates that Alexander Hamilton, the First Congress, and President George Washington did not share these assumptions about the unconstitutionality of independent agencies. Alexander Hamilton himself proposed an obscure independent agency, known as the Sinking Fund Commission, which conducted the same open market purchases of U.S. securities as today's Open Market Committee. The Commission's independent structure was also passed by the First Congress and signed into law by President Washington. (6) In its "Act Making Provision for the Reduction of the Public Debt," Congress authorized open market purchases of debt, in the form of U.S. securities, "under the direction of the President of the Senate, the Chief Justice, the Secretary of State, the Secretary of the Treasury, and the Attorney General." (7) This statute thereby established an independent structure in which Founders who occupied key principal offices became ex officio members of the Sinking Fund Commission: John Adams (President of the Senate/Vice President), John Jay (Chief Justice), Thomas Jefferson (Secretary of State), Alexander Hamilton (Secretary of the Treasury), and Edmund Randolph (Attorney General).

The Sinking Fund Commission carried out open market purchases of U.S. securities with substantial independence from the President. President Washington had no power to initiate open market purchases without approval of a majority of the Commission, and the Commission's multimember structure allowed it to make purchasing decisions independently of a unified executive policy. The Commission's decisions reflected diversity of opinion and even cabinet members' public disagreement, as reflected in Thomas Jefferson's dissent from purchases urged by Alexander Hamilton. (8) Congress also circumvented the President's appointments power by designating existing officers as ex officio Commissioners. In addition, Congress eliminated the President's power to replace or remove Commissioners when it placed the Chief Justice and Vice President on the Commission.

The Sinking Fund Commission's independent structure was not merely enacted into law, but it was proposed by Alexander Hamilton, who was both a Framer of the Constitution and President Washington's Secretary of the Treasury. The legislation was then passed by the First Congress, with opportunity for votes and input from many members who "had helped to compose or to ratify the Constitution itself," (9) and subsequently signed into law by President George Washington. One would expect all of these actors to have a clear grasp on the original public meaning of the Constitution, (10) as well as a strong dedication to the structural commitments established therein. (11) Their decisions to form an independent Sinking Fund Commission belie the notion that an independent agency structure violated the newly minted Constitution.

Although Alexander Hamilton was in general a proponent of a singular and energetic executive, (12) Hamilton's writings about sinking funds acknowledge the countervailing importance of insulating the Commission's purchases from political influence. By the time Hamilton proposed a sinking fund in the United States, sinking funds had already had a lengthy track record in England. Problems with the misuse of funds in England were well known and described in widely read treatises such as Adam Smith's The Wealth of Nations. (13) Hamilton echoed Adam Smith's concerns when he questioned whether funds set aside for repayment of debt would tempt political actors to wrongfully divert funds to more politically expedient uses. (14) The Commission's independent structure marks a deliberate and important decision not to entrust a single elected President with absolute control over the execution of federal laws. Hamilton proposed that the Commission have complete authority to authorize open market purchases within the parameters set by Congress. (15) While Congress ultimately granted the President power to approve these purchases, the President still shared approval power with the Commission. He had no ability to initiate open market purchases without approval of a majority of the Commission, (16) just as the President today has no power to lower interest rates unless a majority of the Open Market Committee agrees to take action to expand the money supply.

The Sinking Fund Commission's independent structure provides a direct precedent in support of an independent Federal Open Market Committee. In statutes creating both the Sinking Fund Commission and the Open Market Committee, Congress empowered each agency to initiate open market purchases of U.S. securities. In both instances, Congress insulated open market purchases from presidential control by requiring a multimember agency to approve all purchases. (17) Just as the President's current demands for lower interest rates depend on a majority of the Federal Open Market Committee to take action to expand the money supply, in 1790 President Washington had no power to initiate open market purchases without approval of a majority of the Sinking Fund Commission. (18) The multimember structures of the Sinking Fund Commission and of the Open Market Committee have allowed members of each agency to check the President and also one another by presenting divergent views and dissenting from disputed purchases. (19)

Congress also protected members of the Sinking Fund Commission and Open Market Committee from removal by the President. (20) The Open Market Committee's twelve voting members include seven Federal Reserve Governors, who may be removed by the President only "for cause," and five Federal Reserve bank presidents, who can be removed by the Governors at will. (21) This arrangement affords the President greater control over Governors and bank presidents than the President had over some members of the Sinking Fund Commission. The President was incapable of removing or replacing the Sinking Fund Commissioners who already occupied the offices of the Chief Justice and President of the Senate (or Vice President), and served as ex officio members of the Commission. (22)

Further, statutory provisions establishing ex officio Sinking Fund Commissioners suggest that presidents of Federal Reserve banks may serve on the Open Market Committee without being appointed by the President. (23) The First Congress did not allow the President any discretion in making appointments to the Commission and specified that certain officers would become ex officio Commissioners. (24) Congress's decision to make the Secretaries of State and Treasury and Attorney General ex officio Commissioners may have been a permissible expansion of duties germane to existing executive offices. (25) But the Chief Justice was a different matter. The statute placed the Chief Justice on the Commission automatically, even though his preexisting appointment was in the judicial branch and involved adjudicatory functions wholly unrelated to purchase of debt. (26) The First Congress failed to provide any appointments process before placing the Chief Justice in an executive office. This suggests that not all members of a multimember agency need to be appointed as executive officers, at least when they serve alongside principal officers properly appointed to the executive branch.

This Article proceeds to address the Federal Open Market Committee's constitutionality as follows. In Part I, it describes the independent structure of the Federal Open Market Committee, and in Part II, the Article outlines originalist arguments that this independent structure violates Article II of the U.S. Constitution. In Part III, the Article describes the independent Sinking Fund Commission, as it was originally proposed by Secretary of the Treasury, Alexander Hamilton, enacted by the First Congress and President Washington, and operated by a five-member Commission comprised of Alexander Hamilton, John Jay, Edmund Randolph, Thomas Jefferson, and John Adams...

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