The White House Tightens Control over Federal Reserve's Bank Supervision

The Biden administration has signed an executive order strengthening its oversight of the Federal Reserve's (Fed) bank regulatory functions. However, the order emphasizes that monetary policy, including interest rate decisions, remains solely under the Fed's control.

Limited Scope of Executive Order

The executive order explicitly excludes the Federal Open Market Committee (FOMC) from its purview, ensuring the independence of the Fed's monetary policy decision-making process.

Greater Oversight of Bank Regulation

The order grants the White House Office of Management and Budget (OMB), led by Russell Vought, increased oversight over major regulations issued by independent agencies, including the Fed's bank supervision activities.

Trump Administration's Regulatory Ambitions

The executive order aligns with the Trump administration's broader efforts to reshape financial regulation. The administration has previously proposed restructuring the Consumer Financial Protection Bureau (CFPB) and consolidating other banking regulators, such as the FDIC and OCC.

Industry Reaction and Fed Leadership

JPMorgan Chase CEO Jamie Dimon has voiced support for a review of bank regulatory frameworks. Meanwhile, Fed Chair Jerome Powell has reaffirmed his commitment to serving his full term through 2026, emphasizing that the law prohibits the president from dismissing him.

Departure of Fed Banking Regulator

Michael Barr, the Fed's vice chair for supervision, has announced his resignation effective month-end. Barr, appointed by Joe Biden, had previously indicated he would not resign even if Trump attempted to dismiss him. However, he has now stepped back from that position, stating the desire to avoid potential distractions.

Conclusion

The White House's executive order tightens its grip on the Fed's bank regulatory functions while maintaining its autonomy in monetary policy decisions. The order reflects the Trump administration's ongoing efforts to reshape the regulatory landscape for financial institutions.