In a recent move, President Donald Trump has taken steps to bring independent federal regulatory entities, including the Securities and Exchange Commission (SEC), the Federal Trade Commission (FTC), and the Federal Communications Commission (FCC), under increased White House control.
The executive order, signed on Tuesday, enhances the president’s capabilities to influence how the financial sector is overseen and outlines standards for transportation safety, consumer protection, and communications, including wireless and broadband services.
This action is part of a broader effort by the Trump administration to assert more authority over the federal government. It raises concerns that it may limit the spending of funds already approved by Congress, potentially resulting in lawsuits that could lead to judicial intervention.
Historically, past administrations believed in the value of having regulatory bodies that functioned with a long-term perspective, free from the immediate pressures of political influence.
Presidents traditionally wielded informal influence via their appointments of agency leaders without mandating that these agencies present their strategic plans to the White House or risk the loss of funding opportunities, which the new order specifies.
The current administration argues that independent regulators could hinder the president’s policy objectives and the collective desires of the electorate.
Trump’s signed order emphasizes the belief that for the government to be held accountable, those in positions of significant executive power must be operated under the oversight of the president elected by the populace.
This directive has been met with criticism, with experts warning it could lead to potential abuses of power by the Trump administration.
Alexandra Reeve Givens, CEO of the Center for Democracy & Technology, stated, “This action will serve only to politicize and corrupt independent agencies, which will now be subject to the political whims of those in power.”
She added that for over a century, these agencies have remained independent for important reasons, as they require experts to interpret laws passed by Congress and to enforce them free of political bias.
The foundation of independent agencies dates back to 1887 with the formation of the Interstate Commerce Commission, originally established to manage railroad monopolies. Over time, multiple regulators have been created under this model, functioning through a combination of presidential appointments and congressional oversight.
Roger Nober, a professor at George Washington University and head of the GW Regulatory Studies Center, described the order as “very significant.” He noted that it extends beyond existing regulations requiring that any rule with an economic impact exceeding $100 million undergo a review from the White House Office of Management and Budget (OMB).
Nober explained that the intention behind the executive order appears to be significantly diminishing the autonomy of independent regulatory bodies. He acknowledged that there might be justification for bringing an agency like the SEC closer under White House control, but expressed uncertainty about whether this approach would effectively enhance the political accountability of these agencies in the long term.
The executive order addresses the Federal Reserve’s regulatory duties, assuring its independence in determining short-term interest rates that impact inflation and employment.
A representative from the Fed opted not to comment on the executive order.
In the short term, the practical implications of this order may be limited. The Fed’s vice chair for supervision, Michael Barr, appointed under President Biden, announced plans to resign effective February 28, and the Fed disclosed intentions to halt any substantial rule-making until Barr’s successor is appointed.
Ian Katz, an analyst at Capital Alpha, suggested that one anticipated outcome of the order may indeed involve judicial review. He noted in an email that the administration seems prepared for legal challenges to the executive order and may seek a Supreme Court verdict that further reinforces executive authority over regulatory agencies.
Under the new directive, the OMB will establish performance metrics and management targets for heads of independent agencies. The OMB also has the power to alter agency funding based on various factors, which could conflict with presidential initiatives.
Moreover, agency leaders will be required to have designated White House liaisons to facilitate coordination with presidential aides and advisors.
