• Allon Advocacy

All About President Biden's Executive Order

President Biden's July 9, 2021 Executive Order could usher in a new era of financial services in the U.S.

What do financial technology startups, audiologists and anesthesiologists have in common? They are all intensely interested in the “Executive Order on Promoting Competition in the American Economy” that President Joe Biden issued last Friday, July 9. In a fact sheet, the White House promised the proposals contained in this order will “lower prices for families, increase wages for workers, and promote innovation and even faster economic growth.”

While some stakeholders agree with that statement, others say the order would put government in greater control of the economy to the detriment of employers and employees alike, and consumers. What has everyone so animated? This week, we will examine the order itself and reaction to it.

But first, some history.

What Is An Executive Order?

As the American Bar Association (ABA) has pointed out, Americans often hear a lot about executive orders, but the press rarely explains what they are. Perhaps that is because executive orders are not mentioned anywhere in the U.S. Constitution. Their murky origins make them hard to define.

As the History Channel has reminded readers, the Constitution “does not directly define or give the president authority to issue presidential actions, which include executive orders, presidential memoranda and proclamations.” The power to issue these edicts, therefore, “derives from Article II of the Constitution, which states that as head of the executive branch and commander in chief of the armed forces, the president ‘shall take Care that the Laws be faithfully executed.’”

The ABA has defined an executive order as a “directive from the President of the United States” that aims to manage the “operations of the federal government.” The Emancipation Proclamation — even though it was called a proclamation — was an executive order. So was President Harry S. Truman’s 1948 effort to expand citizenship and civil rights for Black Americans by ordering the desegregation of the U.S. military. Tragically, it was also an executive order that President Franklin D. Roosevelt used to inter more than 120,000 Japanese Americans during World War II.

Executive orders are not proclamations. (Those documents are for communicating information on holidays, commemorations, federal observances, and trade.) They also are not administrative orders, or memos that give advice about the practical functions of government.

Executive orders also certainly are not pieces of legislation. Congress cannot undo an executive order even though it can “pass legislation that might make it difficult, or even impossible, to carry out the order.” (The legislative branch, for example, can limit federal funding to an agency to carry out a directive that a president has called for in an executive order.) But only “a sitting U.S. President may overturn an existing executive order by issuing another executive order to that effect.” Indeed, after the president issues an executive order, it is considered binding and, according to the History Channel, is “enforced in the same way as if Congress had enacted it as law.”

That is, unless the courts step in. “Just like laws, executive orders are subject to legal review, and the Supreme Court or lower federal courts can nullify, or cancel, an executive order if they determine it is unconstitutional,” the History Channel explained.

According to the ABA, every president since President George Washington has issued at least one executive order. As of January 25, 2021 (four days into the Biden administration), American presidents had collectively issued a total of 13,731 orders.

How does President Biden’s tally look in comparison to his predecessors? Let’s examine.

President Biden’s Executive Orders

According to the American President Project, President Biden has issued a total of 53 executive orders (EOs), including the competition order issued on July 9. With six months of his presidency under his belt, the president is on track to match the 220 orders that former President Donald Trump issued during his term in office. At his current pace, President Biden certainly will exceed the total number of Obama administration EOs (276) and Bush administration EOs (291) if he wins two terms in office. (It took Presidents Barack Obama and George W. Bush each eight years to rack up their totals.)

Most presidents never top the 400 or 500 mark for EOs, but some have shot well past it. President Franklin Roosevelt holds the record for number of executive orders. He issued 3,721 EOs over his four terms in office. President Woodrow Wilson is second with 1,803; President Calvin Coolidge is third with 1,203; and President Theodore Roosevelt is fourth with 1,081.

It is unlikely President Biden will come anywhere close to those high water marks, particularly since in an increasingly partisan environment, executive orders are increasingly controversial.

What the President’s Executive Order on Competition Will Do

Friday’s order certainly raised the ire of some groups.

The White House said its competition order was necessary because “corporate consolidation has been accelerating” over the past several decades. The White House’s fact sheet noted that, in more than 75 percent of U.S. industries, “a smaller number of large companies now control more of the business than they did twenty years ago” and that “this is true across healthcare, financial services, agriculture and more.”

That’s why everyone from the fintech founder to the audiologist to the anesthesiologist is intensely interested in this piece of policy. To make it easier for small firms to compete against big ones (no matter the industry), the order directs federal agencies to do things like:

  • Ban or limit non-compete agreements and occupational licensing requirements that keep employees from moving from job to job or starting their own small business;

  • Make it easier for consumers to comparison shop between rival companies;

  • Increase the number of contracts and spending directed toward startups; and

  • Vigorously enforce antitrust laws.

Reaction to the executive order fell somewhat along ideological lines. The Center for American Progress said, “Anti-competitive behavior by large corporations has made it more difficult to change jobs, start a business, get the care you need to stay healthy, or even fix a product that you already own. … With today’s executive order, President Biden is leveling the playing field for consumers, workers, farmers, patients, and small-business owners.” The U.S. Chamber of Commerce, meanwhile, said the order “is built on the flawed belief that our economy is over concentrated, stagnant, and fails to generate private investment needed to spur innovation. Such broadsided claims are out of touch with reality …”

One industry is celebrating the order, however — or at least a single provision in it.

Fintech Firms Are Celebrating the Competition Executive Order

The order calls on the Consumer Financial Protection Bureau (CFPB) to write regulations that would make it easier and more affordable for individuals and small businesses to switch banks and use innovative, technology-based financial tools. It will achieve this goal by requiring that banks allow customers to take their financial transaction data with them to a competitor.

As Reuters explained, this regulation would usher in an era of open banking (sometimes called consumer- or customer-directed banking) in the United States. Open banking “describes the process of banks and other traditional financial institutions giving customers and third parties easy digital access to their financial data. This includes being able to download and share information about account balances, payments, transactions and investments.” Australia already has implemented an open banking regime, as has the United Kingdom and countries across Europe. Consumers is several Latin American and Asian countries also will soon benefit from open banking.

Why is open banking important for customers? As Reuters explains, “Consumers may want to share their banking data with other providers to get better and cheaper services than what they already have. For example, an online wealth management startup might be able to offer better financial advice with a full picture of a consumer's assets and liabilities. To do so smoothly, it would need access to all the information in digital form, and in real time.”

The order should make it easier for financial technology companies to compete against established banks, and to bring more Americans into the financial system. According to the Federal Deposit Insurance Corporation, more than 14 million Americans don’t have a checking or savings account. Open banking would give them more options to set up accounts, get loans, and start creating retirement nest eggs.

These regulations, and the other changes outlined in the July 9 executive order, will not take effect overnight. In fact, they could take years to implement. Will they be in place by the time President Biden is up for reelection (and faces the prospect of having all of his EOs coming undone)? We’ll have to wait and see.

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