New Administration Outlook: Trump's Executive Order on Independent Agencies—and Asserting the Unitary Executive (Part 1)

The White House attempts to exert full control over all parts of the Executive Branch—including the federal banking agencies

Despite the tone and tint of recent headlines, President Trump's February 18, 2025, "Ensuring Accountability for All Agencies" Executive Order (the "Accountability EO") appears to be the latest in a long line of efforts to make the Executive Branch more responsive to political officeholders.[1] The broad scope of presidential power asserted in the Accountability EO is grounded in earlier research, analysis, and Executive Branch actions spanning presidencies from both political parties. It also likely presages a review by the U.S. Supreme Court regarding the extent of presidential power under Article II of the Constitution.

Nevertheless, it appears that this EO will directly affect federal banking agencies—especially the FDIC and the Federal Reserve—which have long been considered "independent," however questionable that characterization has been in practice in recent years.

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Independent Agencies and Context

In the past, agencies that considered themselves independent acted as if they were free from Executive Branch and Congressional oversight.[2] There have been a number of efforts to make those agencies more responsive, and the Accountability EO is the latest one. Whether the Accountability EO will be more effective than President Carter's efforts that resulted in the reduction of the federal workforce by 100,000 or President Clinton's efforts to reinvent government that resulted in federal workforce reductions of between 250,000 and 350,000 remains to be seen. But this particular controversy is not new.

Recent legal scholarship confirms that this debate, centered on presidential removal power, goes back to the Founding. As explained by Professors Aditya Bamzai and Saikrishna Bangalore Prakash, this issue "implicates one of the oldest constitutional disputes. From debates in the First Congress, to President Andrew Jackson's Bank War, to President Andrew Johnson's impeachment, to the firing of FBI director James Comey and the criminal investigation of President Donald Trump, removal has played an outsized role in the separation of powers and in the political disputes of the day."[3]

Setting a Direction of Political Accountability

The "Policy and Purpose" section of the Accountability EO states what legal scholarship and the Supreme Court[4] have said for years: "The Constitution vests all executive power in the President and charges him with faithfully executing the laws." The rest of the section discusses presidential accountability to the electorate and the need for subordinate officers to assist him in carrying out his executive duties.

The Accountability EO is also rooted in two previous memoranda of the Office of Legal Counsel (OLC) of the U.S. Department of Justice.

• On October 8, 2019, the OLC issued a Memorandum[5] that concluded that "the President may direct independent regulatory agencies to comply with the centralized review process prescribed an Executive Order 12866." That 2019 Memorandum itself can trace its roots to a February 13, 1981, Memorandum[6] regarding Reagan-era Executive Order 12291 ("Federal Regulation"). Executive Order 12291 was one of the first efforts to establish the Office of Management and Budget as the central coordinator for federal regulation.[7]
• The 1981 OLC Memorandum recognized the distinct constitutional role of the President based on the "Take Care" Clause of the Constitution. The Memorandum noted, "It would be anomalous to attribute to Congress an intention to immunize from presidential supervision those who are, by force of Art. II, subject to removal when their performance and exercising their statutory duties displeases the President."[8] The 1981 Memorandum later reenforced that concept, stating: "Of course, the President has the authority to inform an appointee that he will be discharged if he fails to base his decisions on policies the President seeks to implement."[9]

Definitions Make a Difference

Section 2 of the Accountability EO, the "Definitions" section, extends the definition of "agency" to ensure that independent agencies, including the Board of Governors of the Federal Reserve System (but only in connection with its supervision and regulation of financial institutions), are covered under the Executive Order.[10] This is a significant change. But it isn't revolutionary for at least three reasons:

1. In adopting Executive Order 12291, the Reagan Administration considered applying the Office of Information and Regulatory Affairs' (OIRA) regulatory review process to independent regulatory agencies (as defined in 44 U.S.C. § 3502), and the OLC approved the legality of such a direction.[11] This was also the case when the Clinton Administration promulgated Executive Order 12866 ("Regulatory Planning and Review").[12] Further, independent agencies have often voluntarily submitted themselves to the requirements of OIRA review and cost-benefit analyses.
2. There are recent instances of a President exercising removal power notwithstanding agency independence. For instance, in 2021, President Biden fired the general counsel of the National Labor Relations Board, an independent agency.[13]
3. While there is no clear definition of agency independence, many of the features of independence remain in place regardless of the Accountability EO. For example, Congress has established agencies with multi-member boards composed of members of each party, who serve staggered terms. Members often serve terms in excess of four years. In some instances, certain agencies may have special authority to transmit a budget or legislative proposals to Congress without OMB approval or litigate in federal court independent of the U.S. Department of Justice. In addition, the President's removal power continues to be limited by certain statutory and implied limitations,[14] though these limitations are hotly debated, given that "under the Constitution, the meaning of 'independence' remains highly uncertain."[15]

OMB and OIRA as the Central Hubs of Regulatory Control

Section 3 of the Accountability EO, "OIRA Review of Agency Regulations," applies Executive Order 12866 to all independent agencies and directs the OMB Director to provide guidance to the agencies newly required to submit regulatory actions for review on the implementation of the Executive Order. Notably, Executive Order 12866 requires agencies to conduct a cost-benefit analysis for any new regulation that is "economically significant."[16] These standards should not be new, as many independent agencies already voluntarily comply with EO 12866, even though they are not by its terms technically required to do so.

Judging Performance, Management, and Reporting

Section 4 of the Accountability EO, "Performance Standards and Management Objectives," provides that the OMB Director will establish performance standards and management objectives for independent agency heads and periodically report to the President on their performance and efficiency with respect to those objectives. If independent agencies are to be more responsive to the President, it is difficult to imagine how presidential oversight of those agencies could function effectively without such standards and objectives. This section is consistent with Executive Order 13979, promulgated January 18, 2020, and recently revived, which requires that only a senior appointee may initiate a rulemaking process and that a senior appointee must sign each agency rule.

Accountability by agency heads for regulations propagated by the organization they lead is fully consistent with practices in the private sector, particularly the demands made of CEOs and CFOs under the Sarbanes-Oxley Act ("SOX") that they certify that the financial statements and disclosures for their company and present in all material respects its operations and financial conditions.[17]

In the government, besides removal, there is no penalty for a senior official's failure to comply with these EOs. In contrast, CEOs and CFOs of publicly held companies face fines up to $1 million and 10 years' imprisonment for a "knowing" SOX violation, or $5 million in fines and 20 years' imprisonment for a willful violation. The burden imposed by the Accountability EO (and related EOs) on senior agency management seems rather mild by comparison.

Mandates for Consistency, Consultation, and Coordination

Sections 5 and 6 of the Accountability EO appear to be directed at controlling so-called "mission creep," or the expansion of the mission of an organization beyond the original goals that were set, a practice that has vexed Presidents since at least the New Deal. Section 5 ensures consistency between independent agencies and the policies and priorities of the President by requiring that the OMB Director conduct an ongoing review of independent regulatory agencies' obligations for consistency with the President's policies and priorities and adjust agencies' apportionments as necessary and appropriate to advance them. In a similar vein, Section 6 requires agency heads to regularly consult with and coordinate policies and priorities with the directors of OMB, the White House Domestic Policy Council, and the White House National Economic Council, establish a position of White House Liaison, and submit their agency's strategic plans to the OMB Director for clearance prior to finalization.

These new requirements should be considered alongside other Executive Orders issued by President Trump that have recently been revived, as discussed in our previous post, notably:

• Executive Order 13777, requiring that each agency appoint a Regulatory Reform Officer and Regulatory Reform Task Force to develop standards to fulfill the regulatory goals of the Administration, and
• Executive Order 13957, creating Schedule F to eliminate appeals when dismissing federal employees in senior policy-influencing decisions.

In short, the Accountability EO appears to echo promises made by President Trump on the campaign trail to reduce the size of government and make it more responsive to the policy goals and objectives of the President.[18]

Consistently Interpreting the Law Within the Executive Branch

Section 7 of the Accountability EO, "Rules of Conduct Guiding Federal Employees' Interpretation of the Law," requires consistency of legal interpretation within the Executive Branch and restrains agency personnel from adopting contrary positions. Section 7 plainly states that the "President and the Attorney General, subject to the President's supervision and control, shall provide authoritative interpretations of law for the executive branch. The President and the Attorney General's opinions on questions of law are controlling on all employees in the conduct of their official duties."

While Section 7 ensures that the Executive Branch speaks with one voice and provides additional clarity in challenging Executive Branch actions,[19] it is worth noting that Section 7 only covers the interpretation of the law in the Executive Branch. The ruling in Marbury v. Madison, that "[i]t is emphatically the duty of the Judicial Department to say what the law is," remains.[20] Merely because the Executive Branch makes an interpretation of the law does not mean that it is correct. Nor does it mean that that interpretation might not be subject to negotiation as circumstances change. But, once it is final and applied, that interpretation is subject to challenge in federal court, and the ability of the judiciary to "say what the law is" remains unimpeded.

But it does likely mean that general counsels and legal departments of the federal banking agencies will align more closely with the Administration's policies and interpretations. It is hard to see how they have not done so in recent years—under administrations of either political party.

The Bigger Picture

It is important to view this newest Executive Order as one part of a more complex whole intended to tightly control federal regulation and provide important rights to those who are regulated, as discussed in a previous post.

Within the context of the last ten administrations, it is part of a noticeable trend. As discussed in a recent post, each prior administration has planned, advocated for, and at least partially executed on efforts to better and more effectively control the administrative state so that it more fully supports the policies of the sitting President. This has not been an easy task, and readers should view the efforts of this White House as the latest, though perhaps the most thorough and aggressive, in an extensive body of presidential work toward that end.

Today, the second Trump Administration appears to be on a path towards seeking the overturning of Humphrey's Executor v. United States,[21] which cabins the power of the President to fire an executive branch employee over a policy difference. Notably, the U.S. Supreme Court's decision in Humphrey's Executor had been preceded by Chief Justice Taft's opinion in Myers v. United States,[22] which explored the limits of executive power going back to the Founding and concluded that the President had nearly unlimited power to remove members of the Executive Branch who did not fulfill his political will.[23] Chief Justice Taft first examined the notes of the Constitutional Convention and found its silence on the subject to be intentional. The Convention had discussed the dismissal of Executive Branch staff and believed it was implicit in the Constitution that the President held the exclusive power to remove his staff, whose existence was an extension of the President's own authority. He then discussed the Decision of 1789[24] and said that it indicated that a "considerable majority" of Congress were "in favor of declaring the power of removal to be in the president." Taft also analyzed subsequent congressional debates over the issue and found that the statute at issue was unconstitutional because it violated the separation of powers between the executive and legislative branches.

While we do not fully analyze those cases in this post, it appears that the issue of which interpretation is correct will soon be placed before the U.S. Supreme Court for decision. Indeed, Myers is at the very center of that debate. Until then, we can expect the robust use of Executive Orders to restrain the administrative state and ensure that all elements of the Executive Branch are coordinated to fulfill the President's policy goals and objectives. Whether as a public policy that approach will be either successful or good is a chapter that has not yet been written.

We also note that while a unitary executive may serve the current administration's goals today, federal banking agencies that are fully aligned with a White House policy agenda under the last administration or a future administration may not. The effect on the federal banking agencies and their supervised institutions as policies and priorities shift between administrations may be more acutely felt.

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