The government’s attempt to defend the constitutionality of the accounting oversight board went very badly. The board is probably toast, at least in its current form.
The argument before the court turned on whether the president has sufficient control over the Public Company Accounting Oversight Board to make it constitutional. The government argued that the PCAOB was sufficiently controlled by the president because the president has the power to control the SEC by removing the chairman, and the SEC has “comprehensive control” over the PCAOB.
The government’s position is likely to be supported by the four most liberal justices on the court and opposed by the four most conservative justices. This will leave the swing vote with Justice Anthony Kennedy. And Kennedy seemed sceptical of the government’s case.
“The history and tradition of boards like this is that their investigative powers are independent,” Kennedy said.
And an independent board is likely to be found to be unconstitutional.
Indeed, there’s something very strange about the government’s argument. The entire structure of the PCAOB was intended to limit political control over its functions. Essentially, the government’s case turns on the assertion that Congress completely failed in this attempt and that the PCAOB remains under presidential control. It’s an exercise in attempting to get the majority of the Justices to believe arguments that melt away in the presence of political reality.
Of course, it’s always dangerous to read too much into oral arguments before the Supreme Court. It’s not clear at all what effect, if any, the arguments really have on the Court’s decisions. Many legal scholars suspect that the Justice’s own opinions, the opinions of law clerks and those in legal briefs have far more import than oral arguments.
It’s not clear that the Supreme Court will have to order the immediate end of the PCAOB immediately. The court could declare it unconstitutional but give the government a timeframe in which to remedy the problems.
But based on what happened today, it looks like the PCAOB is toast.
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