The White House makes its control over how the Federal Reserve regulates large banks as part of a new executive order that gives the initiative of President Donald Trump more power about independent agencies.
But the new administration made it clear that the monetary policy – the direction of the interest rates – will remain under the full control of the FED.
Rates are set by the Federal Open Market Committee of the Fed, which consists of seven Fed Governors based in Washington, DC and presidents of regional fed banks throughout the country.
“This order does not apply to the board of directors of the Federal Reserve System or to the Federal Open Market Committee in its behavior of monetary policy,” said the order released on Tuesday.
That language can help to alleviate the concern that the White House could penetrate the long -term independence of the FED when it comes to whether rates should be increased or lowered.
But it makes it clear that another important FED function – supervision of the largest banks in the country – will now have a closer relationship with the policy and priorities of the White House.
“This order applies to the Board of Directors of the Federal Reserve System only in connection with its behavior and authorities that are directly related to its supervision and regulation of financial institutions,” said the order.
Read more: How the decision of the FED rate influences 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 important rules to the White House Office of Management and Budget, which has been interpreted by Russell Vought.
Vought will determine “performance standards and management objectives” for the heads of these agencies. He can also assess and adjust budgets that “can prohibit” independent regulatory authorities to spend loans on certain activities, functions, projects or objects. “
The stricter control over the regulation of the Fed van Banken coincides with attempts by the Trump administration to insert a large bank -regulating authority, the Consumer Financial Protection Bureau and to reconsider how other large supervisors to supervise the Largest lenders in the country.
Earlier this month, the Trump administration effectively ordered all work at the CFPB to stop. It is said that it also discusses plans to consolidate other banking regulations without the input of the congress, according to a report in the Wall Street Journal. The discussions may include folding the FDIC in the Ministry of Finance and combining it with the office of the competent of the currency.
