Trump Tests Fed’s Independence With Order Expanding Authority Over Agencies

The Federal Reserve’s independence from the White House has long been enshrined in the law. But an executive order that President Trump signed this week seeking to extend his administration’s reach over independent agencies is prompting concerns about how much further he will go to challenge that separation.

Mr. Trump’s directive took aim at regulatory agencies that had typically operated with limited political interference as authorized by Congress.

The order partially shielded the Fed by exempting the central bank’s decisions on interest rates. Those are voted on at every meeting by seven presidentially-appointed members of the Board of Governors, who typically serve 14-year terms, as well as a rotating set of five presidents from the regional Reserve Banks.

But the order sought to exert authority over how the Fed oversees Wall Street, decisions that are ratified with majority support by the board.

The order was the president’s latest attempt to centralize the executive branch’s power over the government. It requires independent organizations to submit proposed rule changes to the White House for review and gives the Office of Management and Budget oversight of how these institutions spend funds and set priorities. It also asserts that the president’s and the Justice Department’s interpretations of the law are binding and that alternative interpretations require authorization.

The expansive nature of the order has raised questions about whether Mr. Trump’s decree is legally applicable to an institution like the Fed. It has also fueled speculation that the president — who has a history of trying to influence the central bank’s decision on interest rates — may eventually turn his scrutiny to monetary policy decisions.