Here is a guest post from Rick Pildes:

A new issue about who holds effective power over the bailout has emerged in the recently-released “discussion draft” of the bailout bill. Congress is now proposing a structure in which actions of the Secretary of the Treasury can be vetoed by an entity the bill would create, the “executive committee” of the newly created Financial Stability Oversight Board. This committee will consist of the Chairs of the Fed. Reserve Board, the SEC, and the FDIC Board. According to Section 103 of the draft bill, this committee may “direct, limit, or prohibit” the activities of the Secretary… to the extent the Committee determines that such activities are not in accordance with the purposes of this Act.” This is a new provision not in earlier versions, as far as I know.
Here’s what’s unusual about this structure. It reflects a merger, or blurring, of government power between executive and independent agencies in a way that I believe is unique. The Secretary of the Treasury is a political official who serves at the pleasure of the President. The troika of Chairs are, instead, heads of independent agencies: the President cannot remove them at his pleasure but only for certain specified “good cause” reasons (although the President has the power to determine who serves as the Chair of these entities). So this proposal subordinates one of the President’s most essential cabinet members to the control of independent officials, that is, officials outside the control of the Executive Branch. It’s one thing for Congress to require consultation among a group like this, but this bill actually gives the troika the power to “direct, limit, or prohibit” actions of the Secretary.
The first thing to note is just how unusual this structure of power is. I’m not sure I’ve seen it in American government before, where such a broad swath of major policymaking is involved, but perhaps someone else knows of examples that don’t come to my mind. Think about in similar contexts: suppose Congress were to say the Secretary of Defense’s decisions in some area could be vetoed by a group of independent officials not located in the executive branch. At a minimum, this kind of blurring of executive and independent agencies is going to create a lot of legal confusion down the road. Most of federal law has separate regimes for independent agencies versus executive branch departments and agencies; now we have a hybrid actor making decisions. But those issues can be untangled down the road. More importantly, the structure takes a prime agent of the President, the Secretary of the Treasury, and now gives the Secretary two masters: the President and, with respect to these issues, the troika.
This unusual power-sharing arrangement generates constitutional questions that reflect concerns about effective structures of government whenever the lines of policymaking authority get blurred. I have no doubt Congress could give all these powers directly to the troika. Unitary executive branch purists would object to that, to be sure, but the Supreme Court long ago upheld the constitutionality of independent agencies like the Fed. and the SEC. So if Congress instead gives the initial decisionmaking power to the Secretary, subject to override by this troika, what’s the big deal, one might ask. The concern, however, will be that Congress has now given the troika a source of enormous leverage over the Secretary of the Treasury — hence the ability, potentially, to influence the Secretary’s decisions on a whole range of issues. Accountability for the bailout is divided between the Secretary (and hence the President) and this troika. All are responsible to some extent. If the Secretary strongly believes a certain action is necessary, but a couple members of the troika resist, the Secretary might find it expedient to accept their influence over other issues, including unrelated ones. This fragments the Secretary’s loyalties and incentives: no longer is he or she only responsible to the President.
The merger of executive and independent agencies in this proposal has arisen only in the most recent draft of the bailout. One can understand why Congress is drawn to a structure like this. Congress is concerned about putting all this power in the hands of the Secretary, who is a political actor, and on top of everything else, we have an election looming and hence no knowledge of whom the new Secretary will be, with what kind of philosophical orientation. Congress wants the benefit of a single actor able to make decisions, with relevant experience on the issues involved, but wants some kind of oversight check from more independent actors as well. It’s also easy to see how Congress backed into this structure. Initially, this new Financial Stability Oversight Board was supposed to be just that: an oversight body. Now it has real legal power.
I have no desire to introduce obstacles to resolving the current crisis. I also have not digested the full bill, so perhaps the complete story will look a bit different. But this apparent new structure of policymaking is quite unusual, at the least, and it is important that its implications be thought through.
–Rick Pildes