On Tuesday, the President signed a new Executive Order claiming that “independent” federal regulatory agencies, such as the SEC, shouldn’t really be so independent after all. Rather, the Order contends, they all should be operating under the President’s authority and supervision. According to the Administration’s fact sheet, these independent agencies need to be “reined in”: These “so-called independent agencies…have exercised enormous power over the American people without Presidential oversight.” They issue rules and regulations, the fact sheet contends, “that cost billions of dollars and implicate some of the most controversial policy matters, and they do so without the review of the democratically elected President. They also spend American tax dollars and set priorities without consulting the President, while setting their own performance standards. Now they will no longer impose rules on the American people without oversight or accountability.”
But, some might ask, isn’t agency independence an important concept to retain? “Independent regulatory agencies” (defined in U.S. Code Title 44, section 3502(5)) are actually creations of Congress, which has the power to direct them by statute or resolution to take certain actions. As described in this article in the National Law Review, “[i]ndependent agencies oversee certain functions of the federal government that require expertise and precision lawmaking that are generally beyond the ability of a Congress composed of—at best generalist lawmakers. These agencies have incredible power over areas of government function that require unique supervision to assure sound policy—like telecommunications, environmental protection, or how elections are conducted.” Historically, independent agencies, such as the Federal Election Commission, were established to be shielded from White House interference and the inherent pressures of electoral politics—to be, or at least attempt to be, relatively nonpartisan and to promote stability in rulemaking. While, in the last decade or so, that nonpartisan nature may have dissipated to some extent—consider how frequently we see dissenting votes at the SEC compared to past decades—most White Houses, the NLR author suggests, “have avoided even the appearance of interfering in the workings of these agencies for fear of being viewed as wielding inappropriate control over the affairs of agencies designed by Congress to be independent.” Typically, Axios observes, chairs of independent agencies “share the president’s philosophy. But once installed, they are generally left to lead as they see fit. They oversee the writing of regulations and the enforcement of rules while, in many cases, navigating the politics of multimember boards with appointees from both parties. The idea is that agencies act on the president’s big-picture agenda, but day-to-day agency decisions—how to regulate bank capital levels, for example, or which securities fraud cases to bring—are insulated from politics.” A senior fellow at the Brookings Institution told Axios that “Congress and presidents of both parties have created regulatory agencies structurally independent of the president because the bipartisan consensus for generations has held that this was in our economic interest….This executive order upends that multigenerational bipartisan consensus.”
The Fact Sheet highlights three key aspects of the Executive Order with which all agencies will be required to comply:
- “(1) submit draft regulations for White House review—with no carve-out for so-called independent agencies, except for the monetary policy functions of the Federal Reserve; and (2) consult with the White House on their priorities and strategic plans, and the White House will set their performance standards.
- The Office of Management and Budget will adjust so-called independent agencies’ apportionments to ensure tax dollars are spent wisely.
- The President and the Attorney General (subject to the President’s supervision and control) will interpret the law for the executive branch, instead of having separate agencies adopt conflicting interpretations.”
Notably, the Order provides that adjustments to apportionments by the OMB “may prohibit independent regulatory agencies from expending appropriations on particular activities, functions, projects, or objects, so long as such restrictions are consistent with law.” In addition, signaling the potential for more routine involvement by the White House, the Order states that agency chairs will need to “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 in their respective agencies,” and “submit agency strategic plans…to the Director of OMB for clearance prior to finalization.”
With respect to regulations, the Order provides that “all executive departments and agencies, including so-called independent agencies, shall submit for review all proposed and final significant regulatory actions to the Office of Information and Regulatory Affairs (OIRA) within the Executive Office of the President before publication in the Federal Register.” While there is no definition of “significant,” the Director of the OMB is required to “provide guidance on implementation of this order to the heads of executive departments and agencies newly submitting regulatory actions….”
With regard to legal interpretations, the Order states that the “President and the Attorney General’s opinions on questions of law are controlling on all employees in the conduct of their official duties. No employee of the executive branch acting in their official capacity may advance an interpretation of the law as the position of the United States that contravenes the President or the Attorney General’s opinion on a matter of law, including but not limited to the issuance of regulations, guidance, and positions advanced in litigation, unless authorized to do so by the President or in writing by the Attorney General.” That provision would effectively put an end to the SEC’s independent authority to determine what positions to take in Enforcement cases, or, in theory at least, even staff legal bulletins and CDIs.
Clearly, the Order has stirred substantial controversy; whether it will be determined to be Constitutional remains to be seen.
