The Trump administration has not limited its pressure on the Federal Reserve to calls for lower interest rates. According to interviews with current and former Fed and Treasury officials and a review of public statements, the administration is also working to steer the central bank's role as a regulator of large banks, seeking greater influence over both rulewriting and day-to-day supervision.
Officials interviewed by Reuters said the effort aims to roll back post-2008 regulations the administration contends are holding back economic growth. Those steps include pushing the Fed to submit rules into a White House review process and nudging the central bank to change how bank examiners cite problems. Several former Fed officials interviewed warned that such efforts, reported here with some details for the first time, could make the Fed's supervisory and rulemaking work more susceptible to ideological pressures and to influence from Wall Street, potentially undermining the institution's capacity to safeguard the financial system.
One consequential personnel development has the potential to accelerate the shift. If former Fed Governor Kevin Warsh is confirmed to replace Jerome Powell when Powell's term ends in May, his public statements suggest he would advance the view that Fed regulatory and supervision policy should not be insulated from outside influence and that the central bank should shrink its footprint in the economy - positions that imply a larger role for private banks and for other policy levers. Warsh did not respond to a request for comment.
Over the last year, Fed officials have debated whether to comply with a Trump executive order that would require the Fed and other independent regulators to submit proposed rules for review by the White House Budget Office. Two people with knowledge of the discussions said Fed staff wrestled with the decision. Officials at the Treasury have also pressed the Fed to move faster on certain supervisory changes, including narrowing the grounds on which bank examiners can assign criticisms to lenders, three other sources said.
At stake in these debates are major components of bank oversight: the amount of capital banks must hold to absorb losses and the mechanisms by which examiners monitor the safety of lenders on a routine basis. Scott Alvarez, who worked at the Fed for nearly 36 years and served more than a decade as general counsel, said the independence of banking supervision matters for system safety. "Banking supervision is better if its done by an independent agency," he said. "When theres a political element to it, then banks that are influential with the administration get their way. Thats dangerous for the financial system."
A Fed spokesperson declined to comment, and the White House did not respond to a request for comment.
White House order dilemma
During her April confirmation hearing, Fed governor and the administration's regulatory chief Michelle Bowman did not rule out complying with the executive order that would bring Fed rule proposals into a White House review process. That order breaks with decades of practice that kept Fed rulemaking largely shielded from the White House, and it alarmed some senior officials, two people familiar with the internal conversations said.
Facing uncertainty, Fed staff reached out to counterparts at other independent federal agencies to gauge whether they would collectively refuse to participate in the order, according to the two people. To date, the Fed has not delivered any rule for that White House review.
Still, the central bank has aligned with other administration priorities by dropping initiatives on climate change risk and abandoning efforts to police banks for reputational risks - a supervisory lens the president says has led lenders to discriminate against him and other conservatives. Fed Chair Jerome Powell has said the Fed aligns with executive orders when they are consistent with law, following the practice of past administrations. The Fed's spokesperson pointed Reuters to Bowman's congressional testimony in February in which she called Fed independence "of utmost importance, but along with that independence comes the responsibility for accountability and transparency."
An assault on Fed independence?
President Trump has run a campaign of pressure on top Fed leaders, including Powell, seeking lower interest rates. That campaign has produced political pushback and court challenges. Regulatory authority at the Fed sits with a bipartisan board in Washington, where Republicans currently hold a 4-3 majority. The board has often prized consensus, which allows Democrats to retain influence even when outnumbered.
Scholars agree that Congress designed the Feds monetary policy functions to be insulated from political whim, but they disagree on whether that insulation should extend to regulatory and supervisory activities. Todd Baker, senior fellow at the Richman Center for Business, Law and Public Policy at Columbia University, argued that rulemaking related to monetary policy should be treated the same as other board activities. "Rulemaking activities that facilitate monetary policy should be treated no differently than other activities of the Board," he said.
Others point to an insular, bureaucratic Fed culture and say it has produced missteps, including the collapse of Silicon Valley Bank in 2023. They contend the administration has a role in keeping financial regulators coordinated. According to two people familiar with her thinking, Bowman has privately framed the presidents campaign to shrink the federal workforce and rein in independent regulators as a mandate for transformation at the Fed. Jeremy Kress, a University of Michigan law professor and former Fed attorney who generally favors tougher rules, said Bowman has "strategically given up a little bit of autonomy, ceded some power to Treasury for the greater good of coordination." He added: "A lot of people would agree that we need Fed reform both from the outside and inside."
Growing role of Treasury
Treasury involvement in shaping regulatory direction has increased, former regulatory officials say. Treasury Secretary Scott Bessent has publicly said the department will set policy direction and push bank regulators to prioritize economic growth. In remarks at a Fed conference in July, Bessent said Treasury would "break through policy inertia, settle turf battles, drive consensus, and motivate action to ensure no single regulator holds up reform." A Treasury spokesperson referred Reuters to those remarks.
That heightened engagement has produced tensions. Fed officials have at times questioned and pushed back on Treasury efforts, two sources said. For example, when Treasury urged the Fed, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency to publish a proposal defining "unsafe and unsound" bank practices in advance of a Bessent speech last October, Fed officials declined. They said they needed more time to evaluate potential legal issues. The Fed has not issued that proposal.
An FDIC spokesperson declined to comment, and the OCC did not respond to a request for comment.
Personnel and structural changes
Bowman has overseen significant staffing shifts that are reshaping the Feds supervision and regulation division. Internal memos documenting headcount reductions coincided with departures of long-serving staff who had long acted as a bulwark against outside influence on rulemaking, three sources said.
Last year Bowman also recruited three executives from the banking industry, including Randall Guynn, a longtime partner at Davis Polk who has represented large Wall Street banks. In March, Guynn was named director of supervision and regulation, a role filled by Fed career staff since at least 1977, Reuters reported. Traditionally, governors have relied on career staff rather than outsiders to preserve continuity in policy.
Under Bowman's Republican predecessor Randal Quarles, industry lobbyists often complained that entrenched career staff put up barriers to regulatory change. Many of those career staff have since left. "Shes making big changes and making them very quickly...Its having a massive effect on the direction of the institution," said Phillip Basil, a former Fed staffer now with Better Markets, a group advocating for tougher rules.
What is at stake
The debates and personnel moves center on how strictly banks are required to prepare for losses, and how examiners monitor and grade institutions on an ongoing basis. Those determinations shape capital requirements, supervision practices and the broader contours of financial regulation. Changes that reduce the Feds independence in these areas could tilt outcomes toward preferences held by the administration or by influential industry actors, critics say, while supporters argue that increased coordination with Treasury can break gridlock and align regulators on growth priorities.
For now, many of the proposed shifts remain contested and unresolved. The Fed has not submitted rules to the White House review process and has yet to publish the proposal on "unsafe and unsound" practices. Personnel turnover continues to alter internal dynamics. How those forces ultimately change bank oversight depends on policy decisions, legal constraints and potential personnel confirmations, including for the Fed chair vacancy in May.
Bottom line
The administration's push to exert influence over the Federal Reserve's supervisory and rulemaking work is unfolding across several fronts: executive orders and White House review, Treasury direction on regulatory priorities, changes to the Feds staff and leadership, and pressure on specific supervisory rules. Former officials warn that reducing the independence of bank supervision could expose oversight to political and industry sway, while supporters counter that stronger coordination can address policy inertia. The outcome will affect capital rules, supervisory standards and the contours of U.S. bank regulation.