The White House is tightening its control over how the Federal Reserve regulates big banks as part of a new executive order that gives President Donald Trump’s appointees more power over independent agencies.
But in doing so the new administration made it clear that monetary policy — the direction of interest rates — will remain under the Fed’s full control.
Rates are set by the Fed’s Federal Open Market Committee, which is composed of seven Fed governors based in Washington, D.C., and presidents of regional Fed banks spread across the country.
“This order shall not apply to the Board of Governors of the Federal Reserve System or to the Federal Open Market Committee in its conduct of monetary policy,” according to the order released Tuesday.
That language may help alleviate concerns that the White House could encroach on the long-held independence of the Fed when it comes to the question of whether rates should be raised or lowered.
But it does make it clear that another key Fed function — oversight of the country’s biggest banks — will now have a closer connection to the policies and priorities of the White House.
“This order shall apply to the Board of Governors of the Federal Reserve System only in connection with its conduct and authorities directly related to its supervision and regulation of financial institutions,” the order said.
Read more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments
Independent agencies — which would also include the Federal Communications Commission, the Securities and Exchange Commission, and the Federal Trade Commission — will now submit major regulations to the White House Office of Management and Budget, which is overseen by Russell Vought.
Vought will establish “performance standards and management objectives” for the heads of these agencies. He can also review and adjust budgets, which “may prohibit independent regulatory agencies from expending appropriations on particular activities, functions, projects, or objects.”
The tighter control over the Fed’s regulation of banks coincides with attempts by the Trump administration to rein in one big bank regulatory agency, the Consumer Financial Protection Bureau, and rethink how to restructure other big regulators that oversee the nation’s largest lenders.
Earlier this month, the Trump administration ordered effectively all work at the CFPB to halt. It is also reportedly discussing plans to consolidate other bank regulators without Congress’ input, according to a report in the Wall Street Journal. The discussions include possibly folding the FDIC into the Treasury Department and combining it with the Office of the Comptroller of the Currency.
The boss of the biggest US bank, JPMorgan Chase (JPM) CEO Jamie Dimon, said last week that he is in favor of restructuring the financial regulatory agencies that oversee his bank and his industry.
“I think it’s time, in my view, to take a step back and look at all the rules and regulations put in place,” he told reporters after a closed-door meeting with Republican lawmakers and other top bank CEOs on the issue of whether big lenders are “debanking” certain customers.
“You have got to take a step back and look at the whole thing.”
The White House’s move to gain greater control of Fed bank regulation also comes as the central bank’s top banking regulator, Michael Barr, plans to step down from his position by the end of this month.
Fed watchers expected Trump to demote Barr, who was a Joe Biden appointee and a Treasury official during the Barack Obama era, although it was not clear that Trump would have had the legal power to make such a move once he took office.
Barr himself said in November he wouldn’t leave as the Fed’s vice chair of supervision before his term was up even if Trump tried to fire him, saying, “I intend to serve my fixed term of office.” Barr’s term as vice chair for supervision was scheduled to end in July 2026.
But Barr backed off from that potential fight last month, in a surprise move, saying that “the risk of a dispute over the position could be a distraction from our mission.”
However, he said that he would remain on the Fed board of governors, a separate term that doesn’t end until 2032.
Since Trump’s election win, Fed Chair Jerome Powell has repeatedly reinforced his intention to serve out his term as chair through May 2026, telling reporters he didn’t intend to go anywhere even if Trump tried to fire or demote him.
“Not permitted under the law,” the central bank chair said in November when reporters asked about it.
Trump has made it clear he doesn’t intend to fire Powell and has softened his criticisms of the Fed’s monetary policy decisions.
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