In May, the Supreme Court temporarily upheld President Donald Trump’s decision to remove Democratic appointees to the National Labor Relations Board and Merit Systems Protection Board. The order in Trump v. Wilcox, issued on the Court’s emergency docket, suggests the precedent established in Humphrey’s Executor v. U.S. that appointees to multimember commissions are protected from removal by the President absent just cause is not long for this world. Looming over this seeming inevitability is the Federal Reserve System, which the Court in Wilcox went out of its way to distinguish as a “uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States.” A year earlier, in dissenting from the Court’s decision upholding the constitutionality of the Consumer Financial Protection Bureau’s funding structure, Justice Alito similarly sought to distinguish the Fed as a “special arrangement sanctioned by history.”

In originalist terms, the Fed’s insulation from political control ties back to the purported similarities between the First and Second Banks and the monetary policy set by the Federal Open Market Committee. But as former Fed Governor Daniel Tarullo observes, this reasoning is likely driven by underlying policy preferences, namely the consensus in favor of preserving the independence of monetary policy-setting by central banks and the risk that political control over monetary policy leads to inflation, instability, and other undesirable outcomes.

But the Fed does more than monetary policy. Its Board of Governors, unlike the private regional reserve banks, is a public agency that supervises and regulates banks, their holding companies, and other financial institutions. Under the unitary executive theory motivating the overturning of Humphrey’s Executor, agencies’ vast regulatory powers—in the words of Chief Justice Roberts, “creating substantive rules for a wide swath of industries, prosecuting violations, and levying knee-buckling penalties against private citizens”—necessitate presidential control.

The fights over the Banks of the United States sounded in this register, but they instead focused on ensuring democratic control over private financial capital. There were concerns that government would be too deferential—not too antagonistic—to banks. That is because bank supervision and regulation is ultimately about the allocation of financial resources, the balance between public and private economic and political power, and the shape of our economy. As such, these policies are inherently political.

So, how should the Court, scholars, and policymakers think about situating the Fed’s supervisory and regulatory functions in a world after Humphrey’s Executor?

As a preliminary matter, there is a problem of line drawing, namely, the connections between supervision and monetary policy and the difficulty of dividing up functions. The approach taken by the President’s Executive Order on Ensuring Accountability for All Agencies sought to subject only the Fed’s “conduct and authorities directly related to its supervision and regulation of financial institutions” to White House and Justice Department oversight and specifically carved out “its conduct of monetary policy.” Even the leading article presenting an originalist rationale for preserving the Fed’s institutional independence by Aditya Bamzai and Aaron Nielson concedes that only the Fed’s monetary policy can be independent from the President. Thus, Congress would have to amend the Federal Reserve Act and other banking laws to remove the Fed’s supervisory and regulatory functions. But this is easier said than done.

The Fed’s regulatory functions matter because banks are the principal instruments—the “transmission belt”—through which the Fed conducts monetary policy. Banks’ government-granted charters allow them to create money, in the form of deposits, and channel credit throughout the economy. The Fed’s regulatory authorities—everything from their supervision of banks to their ability to regulate borrowing for securities transactions—are connected to their monetary policy and financial stability responsibilities.

This is consistent with the proper understanding that the Fed’s creation served multiple functions. As Tarullo observed, the creation of the Fed was “intended at least as much as a financial stability measure as an instrument of monetary policy.” Indeed, in describing the Fed as a “historical anomaly,” then-Judge Brett Kavanaugh once cited the Fed’s “special functions in setting monetary policy and stabilizing the financial markets.” (My emphasis.)

If those functions are delegated to another agency, that agency’s actions will affect the Fed’s monetary and financial stability functions. If they stay at the Fed, however, it would not be clear why the supervisory and regulatory functions that further these purposes should be independent when conducted by the Fed, but not one of the other banking agencies. These distinctions may not hold as a practical matter: even if the Fed’s rules are not subject to White House review, for example, the other banking agencies are submitting joint agency rulemakings for review.

More fundamentally, the debates over Wilcox and Humphrey’s Executor raise deeper questions for scholars and practitioners about the role and nature of independence in financial regulation in theory and practice and the potential implications of the loss of regulatory independence—including what we mean by “regulatory independence,” whether and to what extent it exists in practice, and its ultimate desirability.

The Fed has ostensibly been politically independent from the Executive Branch at least since the 1951 Treasury-Fed Accord, if not as far back as 1935 (when Congress removed the Treasury Secretary and Comptroller of the Currency as ex officio board members). The 1935 reforms were intended to “increase the ability of the banking system to promote stability of employment and business” and concentrate authority in a “body representing the general public interest.” Scholarship by researchers at the Bank of England has reinforced the theory that greater regulatory independence correlates with greater financial stability.

Yet, in reality, the history of the Fed’s independence on regulatory matters is more complicated. The Fed aligns with the White House at times, but claims independence at others. As is the case with many other norms, in practice, the regulatory independence of the Fed and other financial regulatory agencies is often in the eye of the beholder.

President Franklin D. Roosevelt had a great deal of influence over the creation and early leadership of the ostensibly independent Securities and Exchange Commission and advocated for vigorous oversight of the securities markets. Then-Fed Chair Marriner Eccles was also close with FDR and saw himself as working in the interests of the President’s administration—Congress’s 1935 reforms notwithstanding.

By contrast, take the era of Fed Chair Paul Volcker. Volcker’s actions taken to stem inflation are often cited as evidence of the need for central bank independence. Volcker also sought to exercise the Fed’s securities law authorities to rein in the leveraged buyout boom in 1985. Instead, he found himself politically out-flanked by the White House and was forced to weaken his proposal. After several run-ins with the Reagan Administration, Volcker was ultimately not re-appointed as chair.

Under the leadership of Volcker’s successor, Alan Greenspan, the Fed worked closely with Congress and the Treasury Department to champion deregulation of financial institutions and markets. The most innocuous critique of the Fed was that the 2008 crisis was the result of its focus on monetary policy to the exclusion of supervision and financial stability; in the uncharitable formulation, the Fed’s deregulatory ethos actively contributed to the crisis. Such failures of financial regulation have political implications, as financial crises increase political polarization and the appeal of right-wing populism.

Following the crisis, through several provisions of the Dodd-Frank Act, Congress gave the Fed “an expanded role in maintaining financial stability” because of its “expertise and its other unique functions.” Congress created a Board position responsible for regulation and supervision, known as the Vice Chair for Supervision (VCS), to raise the profile of the Fed’s supervisory and regulatory functions and concentrate accountability in a single individual. But the Obama Administration never filled the position; instead, Governor Tarullo functionally carried it out.

Even when the VCS role was filled in the first Trump Administration, the Fed returned to its pre-crisis ways, working with the Treasury Department and Congress to roll back aspects of the Dodd-Frank Act reforms—an approach known as “regulatory tailoring.” The lone dissenter during that period was Governor Lael Brainard, who cast 23 dissenting votes to the Fed’s proposed and final rules and merger approvals from 2018-2020. Those tailoring changes contributed to the eventual failures of Silicon Valley Bank (SVB) and two other large banks in 2023. Brainard would have to respond to the banking stress from her new position as the director of the White House’s National Economic Council, President Joe Biden’s chief economic policymaker.

During the Biden Administration, it was the Republican appointees’ turn to dissent, with Trump-appointed Governor Michelle Bowman dissenting nine times from 2022-2024. Prior to President Biden assuming office the Fed joined the Network for the Greening of the Financial System (NGFS), the global coalition of central banks dedicated to addressing the financial risks of climate change. But it otherwise took a narrowly circumscribed view of its climate-related responsibilities, deferring to the “elected branches of government.” Following SVB’s failure, President Biden urged banking regulators to adopt a variety of measures to modify the Trump-era tailoring, but the Fed adopted very few of these recommendations. It made a particular show of its opposition to implementing a Dodd-Frank provision mandating reforms to banks’ incentive-based compensation practices.

The second Trump Administration has already further complicated the picture of Fed independence. Despite being subject to the same ostensible statutory removal protections as the Fed Chair, former VCS Michael Barr voluntarily announced his intent to step down but remain on the Fed Board in the face of rumors President Trump was planning to remove him from the VCS position. Barr rationalized his decision as “not about the legal merits,” but rather “what it would mean for the Fed,” which prompted him to take himself “out of the equation.” So, in an effort to preserve the political independence of the Fed, the VCS was functionally removed (despite Congress’ intention to make the role independent of the executive branch) and the President replaced him with Governor Bowman, who reportedly keeps a MAGA-style hat in her office at the Board.

In what looks by all appearances to be an attempt to placate the Trump Administration’s anti-climate views, the Fed withdrew from the NGFS. Fed Chair Jerome Powell has said the Fed is “working to align [its] policies with the [Trump Administration’s] executive orders as appropriate and consistent with applicable law.” The Fed has, in large part, disbanded its work relating to diversity, equity, and inclusion following President Trump’s executive order requiring agencies to do the same. It is reportedly planning to reduce its workforce in the coming years, consistent with the administration’s broader goal to downsize the federal government. On regulation specifically, during her confirmation hearing to serve as VCS, Bowman was cagey about whether the Fed would submit its rules for White House review consistent with the agency accountability executive order.

Even President Biden’s appointees to the Board seem to be conforming their views to those of the Trump Administration. Perhaps seeking to avoid a prospective legal fight if the President should attempt to remove them in a fit of pique, Biden’s appointees have supported or abstained from decisions to depart NGFS, approve a merger by credit card giants Capital One and Discover banks, and release Wells Fargo from an enforcement action imposing a cap on the bank’s assets.

These examples illustrate that Fed independence from the White House has tended to mean whatever the Fed says it means. In other words, independence is a means to an end and not an end in itself.

More importantly, it is unclear whether banking and bank regulation have ever been—or can be—fully de-politicized or separated from questions of democratic governance. That is a question banking and administrative law scholars should continue to grapple with, whether the Supreme Court does or not.

The author is an academic fellow at the Rock Center for Corporate Governance at Stanford Law School. From 2021-24 he served as the Assistant Secretary for Financial Institutions at the U.S. Treasury Department.