President Donald Trump is implementing a new directive that places independent federal regulators such as the Securities and Exchange Commission, the Federal Trade Commission, and the Federal Communications Commission under closer presidential oversight.
The executive order signed on Tuesday enables the White House to exert greater influence over the regulation of the financial sector as well as criteria concerning transportation safety, consumer protections, and various forms of communication like wireless, broadcast, satellite, and broadband.
This action is part of a broader initiative by the Trump administration aimed at consolidating power within the federal government, which could complicate the use of congressionally allocated funds and potentially lead to legal disputes that may require judicial involvement.
Previous administrations have traditionally valued the independence of regulatory agencies, believing that these bodies should function with an eye on long-term interests rather than the immediate political climate.
In the past, although presidents could influence these agencies through appointments, they did not require them to submit detailed strategic plans to the White House, which could jeopardize their access to funding initiatives as outlined by the current directive.
The Trump administration argues that independent regulators could pose a hindrance to the president’s policy objectives and the wishes of the electorate.
The order stipulates that for the U.S. government to maintain accountability to its citizens, officials who wield substantial executive power must operate under the supervision of the elected president.
Critics of the move argue that it could foster an environment ripe for misuse of power.
Alexandra Reeve Givens, CEO of the Center for Democracy & Technology, remarked, “This action will only serve to politicize and corrupt independent agencies, turning them into instruments of those currently in power.”
She added that these agencies have maintained their independence for a century for good reason, as Congress requires their expertise to effectively interpret and enforce laws free from political influence.
The concept of independent agencies dates back to the creation of the Independent Commerce Commission in 1887, established to monitor railroad monopolies and their pricing structures. A variety of regulatory agencies followed this model, functioning under presidential appointments and Congressional oversight.
Roger Nober, a professor at George Washington University and director of the GW Regulator Studies Center, characterized this executive order as “very significant.” He noted that it extends beyond existing provisions requiring regulations with substantial economic impact to undergo review by the White House Office of Management and Budget.
Nober acknowledged the potential reasoning behind Trump wanting closer supervision of stock market regulators like the SEC but questioned whether this approach would effectively enhance the agencies’ political accountability in the long term.
While the executive order addresses the regulatory duties of the Federal Reserve, it maintains the central bank’s independence regarding short-term interest rates, which play a vital role in shaping inflation and employment figures.
A spokesperson for the Federal Reserve chose not to comment on the executive order for the time being.
In the short term, the order may have limited immediate consequences. The vice-chair for supervision, Michael Barr, who was appointed by Biden, is set to resign on February 28. The Fed has also indicated plans to pause major rulemaking activities until Barr’s successor is appointed.
Ian Katz, an analyst at a policy research firm, perceives potential court challenges as a desired outcome of the order. Katz mentioned that both the White House and its conservative allies “expect, and want, legal challenges to the executive order,” aiming for a Supreme Court ruling that could further authorize the executive branch’s control over regulatory agencies.
Under the new directive, the White House Office of Management and Budget will establish performance criteria and management goals for heads of independent agencies. Additionally, OMB would have the authority to adjust agency funding based on specific activities or functions that may conflict with the president’s policy agenda.
Leaders of independent agencies will now be required to have designated White House liaisons to facilitate communication with presidential aides and advisors.
