By Andrew Ackerman · The Washington Post (c) 2025
The Trump administration took another swing at the Federal Reserve’s independence late Tuesday with a new executive order that seeks more control over federal agencies that have traditionally operated with day-to-day autonomy.
Even as the White House executive order said it would protect the Fed’s monetary policy – including its powers to set interest rates – it sought to scoop up all of Wall Street’s biggest regulators and make their budgets subject to the authority of the White House budget office.
It’s just the latest political attack on the Fed, a 111-year institution responsible for setting short-term borrowing costs that trickle through the financial sector and influence what millions of consumers and businesses pay to borrow money. It also plays a key role supervising and regulating Wall Street.
It’s possible little of Tuesday’s order will ultimately apply to the Fed because Congress established the central bank to operate with significant independence in determining how to use its resources. The order notes it does not seek to “impair” any authorities Congress has given to independent agencies.
“Time, the courts and Congress will ultimately determine whether and how much of this sticks,” said Scott Alvarez, a former general counsel at the Fed. “What’s important at this point is the President has announced he wants to dismantle a system of independent agencies that Congress has established and the courts have upheld and wants to shift funding decisions from Congress and the appropriations process to himself.”
Laws and norms have traditionally protected the Fed from the executive branch, with the aim of demonstrating to global markets that U.S. monetary policy isn’t at the mercy of the political whims of the White House. But President Donald Trump has made clear he thinks he should get more of a say.
The Fed declined to comment. A White House spokesman had no immediate comment.
For their part, Fed officials of their own volition have already made a series of decisions in the first weeks of the Trump administration to align internal policies with lawful directives from the White House, with the aim of avoiding a dispute with the administration, Fed watchers say.
Almost immediately after Trump was sworn into office, Fed officials announced a suspension of “diversity, equity and inclusion” programs, as well as a systemwide hiring freeze, according to emails reviewed by The Washington Post. The Fed is also trying to align to Trump’s return-to-office policies, with officials considering reductions to remote work.
“As has been our practice over many administrations, we are working to align our policies with the executive orders as appropriate and consistent with applicable law,” Federal Reserve Board Chair Jerome H. Powell told reporters earlier this month.
The difference in the move on Tuesday is that the White House appears to be trying to force the changes on the Fed when it comes to its oversight and regulation of Wall Street. The order requires that independent agencies submit major regulations to the White House Office of Management and Budget for review.
The new order also states that only the president and the attorney general – “subject to the President’s supervision and control” – will interpret law on behalf of the executive branch, blocking independent federal agencies from adopting legal interpretations that are at odds with the Trump White House.
OMB is run by Russell Vought, a fiscal hawk who helped to craft Project 2025, a controversial policy blueprint that has informed Trump’s return to the White House. Specifically, Project 2025 suggests the Fed’s role should be narrowed to only keeping the money supply stable, not regulating Wall Street banks or acting as a lender of last resort when big banks fail, because “political pressure has led the Federal Reserve to use its power to regulate banks as a way to promote politically favorable initiatives,” the paper said.
Fed watchers say the central bank’s actions to date suggest it wants to choose its battles carefully, avoiding conflicts with Trump that don’t directly threaten its control over monetary policy. The Fed has fiercely protected its independence since the high-inflation era of the 1970s. That period was partly driven by the central bank’s own missteps under pressure from President Richard M. Nixon to keep rates low, despite signs that the economy was overheating, to help his reelection campaign.
“The Fed is willing to go all 15 rounds with the sitting president to preserve its ability to make interest-rate policy separate from the Oval Office,” said Peter Conti-Brown, a Fed historian at the University of Pennsylvania. “It is not willing to separate itself from the Oval Office on nearly anything else.”
“The White House – for now, at least – appears to insist on precisely this balance of power,” he added. “The question only remains whether President Trump and those closest to him will continue to regard even monetary policy as outside of his immediate control.”
For months, Trump officials have privately discussed ways to streamline the alphabet soup of agencies responsible for overseeing Wall Street. One approach envisions consolidating agencies such as the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency into a single entity, according to people familiar with the discussions granted anonymity to convey internal plans.
Lacking sufficient votes in the Senate to overhaul the financial regulatory system, the White House’s order could provide a backup approach to trying to consolidate at least some control of financial regulation, even if it remains unlikely the Fed’s regulatory functions wind up under the direct purview of the president. The Fed, the FDIC and the comptroller are the three primary federal banking regulators.
It’s not the first time the Fed has moved quickly to align its policies with those of a new administration. At the start of Trump’s first term, the central bank similarly adopted a hiring freeze ordered across the government by the president.
This time, the political environment is more hostile to the Fed. During Trump’s first term, some Republican senators backed Powell against repeated efforts by Trump to undermine the independence of the Fed. Most of those lawmakers are no longer in office.
The push for more say over the Fed comes after Michael Barr, the Fed’s vice chairman for banking supervision, last month said he would step down from the role at the end of this month, avoiding a potential legal fight over whether Trump had the authority to demote him.
The Fed’s move to comply with earlier orders from the White House has been evident in the way it immediately removed public-facing webpages highlighting the board’s diversity, equity and inclusion efforts following a directive from Trump that agencies cease such work.
The shift is notable at some regional Fed banks. At the New York Fed, officials canceled a reception scheduled for Thursday and also withdrew from a summer fellowship program that aimed to support women and underrepresented groups in economics, according to a social media post from Yana van der Meulen Rodgers, an economist at Rutgers University. A bank official attributed the cancellations to the suspension of DEI work, according to an email reviewed by The Post.
The New York Fed declined to comment.
At the Kansas City Fed, top officials told staff members on Halloween – less than a week before the presidential election – that the bank’s commitment to DEI “remains steadfast,” according to a message to the bank’s roughly 2,000 employees reviewed by The Post.
That contrasted sharply with a Jan. 28 message from the top two officials at each Fed bank announcing the system was “temporarily pausing” diversity initiatives through at least February.
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Jeff Stein contributed to this report.