President Donald Trump has signed an executive order that expands his authority over independent agencies, including the Federal Reserve, Securities and Exchange Commission, the Commodity Futures Trading Commission, the Federal Trade Commission and even the Federal Election Commission.

Under the order, independent agencies must submit for review “significant” regulations to a unit within the Office of Management and Budget, led by Russ Vought.

The order gives Vought power over independent agencies’ budgets and enables him to draft “performance standards and management objectives” for independent agency heads. It also prohibits agencies from taking legal positions that differ from those of Trump or Attorney General Pam Bondi. 

In addition to leading OMB, Vought also is acting director of the Consumer Financial Protection Bureau.

Application of the order

The order applies to the Fed as it relates to “conduct and authorities directly related to its supervision and regulation of financial institutions,” but the Fed board and the Federal Open Market Committee would maintain independence over monetary policy. 

Each of the agencies also have to employ a White House liaison, and they must consult regularly on policy and priorities with the OMB, the White House Domestic Policy Council and the White House National Economic Council, according to the order.  

The OMB will “adjust so-called independent agencies’ apportionments to ensure tax dollars are spent wisely,” according to a fact sheet that accompanied the executive order. 

“These regulatory agencies currently exercise substantial executive authority without sufficient accountability to the President, and through him, to the American people,” the order said. “Moreover, these regulatory agencies have been permitted to promulgate significant regulations without review by the President.”

The order says that for the federal government to be truly accountable to the American people, “officials who wield vast executive power must be supervised and controlled by the people’s elected President.”

Trouble ahead

Legal challenges are expected, as is the case with many of the president’s other executive orders to date.

Legal arguments are likely to revolve around the point that this order reduces the independence of agencies, which were set up to operate free from political influence, and that this potentially affects their ability to make impartial decisions on issues such as consumer protection, elections, or financial regulation.

Will this lead to reduced regulatory headaches for businesses? Maybe.

But not in this interim period of litigation, and not if the agencies continue to mandate strong policies, procedures and controls over all types of fraud while also appearing to reduce regulatory and enforcement activity. (Meaning: It’s easier for The White House to say “we’re lightening the regulatory burden,” than for these regulatory agencies to actually look away when instances of fraud or corruption occur for lack of corporate supervisory controls.)

And even if US courts appear to be more in favor of a strong executive branch than ever, putting quite this much discretion over individual agency interpretations of law is unprecedented.

The executive order reads: “No employee of the executive branch acting in their official capacity may advance an interpretation of the law as the position of the United States that contravenes the President or the Attorney General’s opinion on a matter of law, including but not limited to the issuance of regulations, guidance, and positions advanced in litigation, unless authorized to do so by the President or in writing by the Attorney General.”

That language makes the agencies appear far more answerable to the president than to the taxpaying public they are designed to protect.

We’ll be following these developments.