Scholars call Slaughter ruling ‘Brexit moment’ for U.S.

• Key insight: The Supreme Court’s Monday decision to end removal protections for independent agencies is expected to make bank regulation more political and less stable, according to several banking and legal scholars.

• Expert quote: “If I were a bank today I would be very worried about the staying power of any regulatory policy not specifically required by law beyond the end of a presidential term.” — Todd Baker, senior fellow at the Richman Center for Business, Law & Public Policy at Columbia University and managing principal of Broadmoor Consulting LLC

• Forward look: Experts say the ruling could lead to more policy swings between administrations and could ultimately force lawmakers to rethink how bank regulators are structured.

The Supreme Court’s decisions on Monday to overturn a longstanding precedent that insulated federal regulators from direct White House control over policy — while carving out an exception for the Federal Reserve — gives presidents greater influence over bank regulation and makes regulatory policy less durable, a shift scholars say could muddy banks’ policy expectations and intensify regulatory regime swings after each Presidential election.

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The high court’s ruling in Trump v. Slaughter held that the President may fire members of the Federal Trade Commission — and, by extension, members of similarly independent commissions — without cause, a development that will have sweeping ramifications for agencies like the Federal Deposit Insurance Corp., National Credit Union Administration, Securities and Exchange Commission and Commodity Futures Trading Commission. 

Todd Baker, senior fellow at the Richman Center for Business, Law & Public Policy at Columbia University and managing principal of Broadmoor Consulting LLC, said the ruling’s most immediate effect will likely be to accelerate an existing trend toward more top-down regulation, with agency priorities increasingly dictated by the White House. 

Baker pointed to Acting Comptroller Michael Hsu’s tenure as an example of how quickly regulatory priorities can change. Hsu reversed several fintech and payments charter initiatives launched by his predecessor, Acting Comptroller Brian Brooks, and halted the issuance of new crypto-related trust bank charters; just 18 months into the second Trump administration, those moves have largely been reversed again.

“If I were a bank today, I would be very worried about the staying power of any regulatory policy not specifically required by law beyond the end of a presidential term,” Baker said. “Many of the agency’s actions and interpretations could — and almost certainly will — be reversed or amended by a future Comptroller appointed by a Democratic President.”

The ruling will likely destabilize bank regulation by legitimating White House pressure on agency decisionmaking, says Jeffrey N. Gordon, the Richard Paul Richman Professor of Law at  Columbia Law School.

“I think the decision in Trump v. Slaughter is a Brexit moment for the U.S., meaning a structural break in an economic governance system that will have long-run negative effects,” Gordon wrote in an email. “The decision has sharply limited the governance structures available to Congress to address various modern complexities, since Congress is unlikely to grant unconstrained authority to a President on many important questions. The states will step into the regulatory vacuum and we will lose many of the advantages of a single market. Or maybe it will all be left ‘to the market,’ which is likely to result in substantial periods of financial instability and declining economic growth.  And all this assumes that the lifeboat of Fed ‘independence’ remains intact.”

Gordon argues the lack of agency independence could also harm recruitment at the agencies, as their professional judgement will be filtered through the lens of political priorities and as agency appointees will face removal if they do not satisfy the administration. 

Baker also argued that agencies pursuing more politically driven agendas face greater legal risk. With courts exercising closer scrutiny of agency actions after the Supreme Court’s decision in Loper Bright ended Chevron deference, regulators could be inviting more litigation than ever in a post-Slaughter, post-Chevron world. The uncertainty brought by that confluence of rulings could erode what had been a strength of U.S. markets: a stable and predictable regulatory system.

“One of America’s greatest economic advantages since the end of the second world war has been a transparent legal and regulatory system that did its best to deliver predictability for businesses and investors,” Baker said. “America’s competitive advantage as an investment and business destination was built on a foundation of predictability. When that foundation is undermined, the advantage disappears quickly.”

In a separate decision the same day as Slaughter, the Supreme Court appeared to carve out an exception that preserves the Fed’s independence. Although the Court justified that exception based on the Fed’s historical role in monetary policy, Baker argues it would be impractical to treat the Fed’s monetary and supervisory functions differently.

“As the chief justice argued in the Cook case, the Fed’s lineage traces back to the First and Second Banks of the United States, establishing a longstanding understanding that monetary policy should be insulated from political interference,” Baker said. “That history, however, seems less helpful once the discussion moves away from monetary policy [since the] Fed does many things … like regulating banks and holding companies and running the national payments system.”

“Those things look at first glance to be much more like the kind of executive power that the Court held in Slaughter must remain subject to presidential control,” Baker continued. 

The President also does not seem to have given up his effort to remove Fed Governor Lisa Cook, despite the ruling allowing her to stay for now and the Supreme Court’s determination that the administration is unlikely to prevail on the merits of its case. The question of removals, according to Baker, is “definitely still on a table, just subject to a new procedural framework and the time delays that go along with it.”

“In doing so he would be following the roadmap that Chief Justice Roberts’s opinion laid out for him in the Cook opinion,” Baker says. “He also may try the same thing with Jerome Powell over the Fed headquarters construction, and Michael Barr, based on the recently announced investigation of the handling of Silicon Valley Bank by the Fed while Barr was the Vice Chair of Supervision.”

Jane Manners, associate professor of law at Fordham University, says that while independent agencies were never fully insulated from politics — Presidents can influence appointments, budget decisions and leadership — the ruling calcifies the partisan nature of multimember agencies. Manners says recruiting bipartisan members going forward will be even more difficult than it already was.

“Would members of the opposing party be willing to serve on a commission where they could be fired at will, regardless of what the statute says about the duration of their term?” she posited.  “Even if a bipartisan commission is in place, what is there to stop the president from firing all of the members of the opposite party?”

The FDIC board under Trump has already been operating without minority party board members, with no apparent plans to tap Democrats for the roles. Even if a future administration is willing to nominate opposite party appointees, the partisan nature of regulation would be unlikely to change, Baker said.

“The decision … was widely expected, and in light of earlier court decisions on ‘independent” agencies, the President has been effectively in direct control of the the CFPB, FDIC, SEC and CFTC through leadership appointments along with his unwillingness to fill statutorily-mandated commission and board openings with Democrats,” Baker said. 

But not all observers think the demise of the independent agency necessarily augurs doom. Jeremy Kress, law professor at the University of Michigan Ross School of Business and former lawyer at the Federal Reserve, argues that the expert, apolitical oversight that independent regulators were supposed to offer has not been especially evident in practice. Rather than resisting the Supreme Court’s embrace of the unitary executive, policymakers should accept the new constitutional framework and use presidential control to advance regulatory priorities when they hold power, says.

“There was a compelling rationale for independent agencies at the start: neutral expertise, technocratic expertise, some insulation from executive whims. But there were also downsides that I think were not really well appreciated. Most notably, agency independence, I think, helped perpetuate industry capture,” Kress said. “If you look back at the Biden administration, for example, President Biden issued an executive order on competition in 2021 that encouraged the banking agencies to work with the DOJ to modernize their bank merger guidelines. The Federal Reserve not only refused to do that, but actively impeded the DOJ and the other banking agencies from accomplishing that objective.”

Kress also criticizes Chair Jerome Powell’s response to the second Trump administration, arguing Powell resisted President Biden’s monetary policy priorities but became far more willing to accommodate President Trump’s directives on regulation.

“When Trump was inaugurated in early 2025 and started directing the Fed and other government agencies to do all of these crazy things with respect to [diversity, equity and inclusion] and climate and all the MAGA priorities, Powell gets up at his press conference and says, ‘The Fed — we do our best as the Fed to try to implement White House executive orders where possible,'” Kress said. “That was [untrue], because the Fed had just spent four years throwing sand in the gears of the Biden administration’s financial regulatory priorities, and Powell himself was complicit in that, insisting that he wouldn’t bring matters to the Board unless they had unanimous support or near-unanimous support.”

Kress argues more pronounced policy swings between administrations are preferable to regulators consistently frustrating elected presidents’ agendas.

“The choice that we have is between pendulum swinging on the one hand versus gradual slides toward industry-favorable deregulation on the other hand,” Kress said. “Because that’s what we get in the absence of congressional legislation: just an inexorable slide toward deregulation.”