Would Trump’s proposed moratorium on Dodd-Frank regulations be unconstitutional?

In his recent speech at the Detroit Economic Club on August 8th, Republican presidential nominee Donald Trump provided some detail as to what his administration’s economic plan would entail. In addition to tax cuts for economic elites (i.e., his proposal to abolish the estate tax, which only matters for individuals with assets of roughly $5.5 million and couples with assets over $10 million), what caught my eye was his proposed moratorium on Dodd-Frank Act regulations. Crucially, I doubt the constitutionality of such a move across the board, but it really would boil down to the specific underlying statutory language used as the basis for a potential regulation. Additionally, his influence over relevant agency officers would be limited because the most important agencies under Dodd-Frank are independent agencies.

Even though the president is the head of the executive branch and executive agencies are the ones tasked with promulgating regulations, that does not mean that the president is constitutionally permitted to ignore statutory directives to create such regulations. Most importantly, Art. II, § 3 of the Constitution (known as the Take Care clause) demands that the president “take care that the laws be faithfully executed.” Admittedly, constitutional law scholars are undecided as to what exactly that language requires. However, in the case that an authorizing law (here, the Dodd-Frank Act) demands regulatory action, there is Supreme Court precedent that cuts against Trump’s proposal.

In Massachusetts v. EPA, 549 U.S. 497 (2007), the Supreme Court took the George W. Bush-era Environmental Protection Agency to task for refusing to promulgate rules regulating new vehicle emissions simply because doing so “would conflict with other administration priorities.” Thus, the unitary executive principle must give way when faced with a congressionally imposed requirement to regulate.

Cutting the other way, however, is Heckler v. Chaney, 470 U.S. 821 (1985), which defers to an agency’s decision not to regulate if “agency action is committed to agency discretion by law.”

With that in mind, whether agency inaction is unconstitutional would hinge on what exactly the authorizing provision in Dodd-Frank says. For example, if the statute states that a certain agency shall do X, a court would likely find it unconstitutionally arbitrary and capricious to not do X. However, if a Trump-era agency opted not to promulgate a regulation based on a Dodd-Frank provision that merely states that it should do Y, that would surely pass constitutional muster.

(I should note that I did not discuss Texas v. United States, which deals with the Obama administration’s deferred action executive orders and implicates the Take Care clause, because the lower courts have yet to rule on the merits and a Scalia-less Supreme Court split 4-4, which kicks it back down without any binding precedent.)

It is also worth pointing out that the president is especially restrained from interfering with so-called independent agencies. While the Dodd-Frank Act is sprawling piece of legislation that calls for regulatory action from a number of different agencies, the agencies most responsible for executing Dodd-Frank’s provisions – the Consumer Financial Protection Bureau, the Securities and Exchange Commission, the Commodity Futures Trading Commission and the Federal Reserve – are all independent agencies. Additionally, independent agencies are exempted from some of the requirements of Executive Order 12866, which the executive branch can use to slow down unwanted regulatory actions.

Admittedly, the president can influence independent agency actions somewhat indirectly by the power to appoint the head or commissioners of these agencies. However, unlike with non-independent agencies, the president could not remove her/him for political reasons (i.e., refusing to abide by Trump’s desired moratorium on regulations).

So in summary, a blanket moratorium would likely be problematic, because surely some of the Dodd-Frank Act regulations currently being considered are mandated by the statutory language. However, as regards regulations whose authorizing statutory language is not so explicit, there is substantially greater wiggle room. That being said, Trump couldn’t merely dictate to the independent agency heads and certainly couldn’t threaten to remove them for failing to abide by his commands.

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