Since nominating Jerome Powell to be chairman of the Federal Reserve more than a year ago, President Trump has lobbed, with increased frequency, criticisms at the head of the U.S. central bank – even opening the door this week to possibly stripping Powell of his chairmanship.
“Well, let’s see what he does,” he said on Tuesday, when a reporter asked him whether he wanted to demote Powell. Trump wants the Fed to keep borrowing costs low – which they’ll decide during their meeting on Wednesday.
Earlier in the day, Bloomberg News reported that the White House, in February, had explored the legality of stripping Powell of his chairmanship and leaving him as a Fed governor, just two months after Trump reportedly discussed firing him for hiking interest rates in December.
But the attacks on Powell, and the Fed, are mostly unprecedented and have left legal experts scrambling to determine whether the president is legally capable of firing (or demoting) Powell before his term expires in 2022.
Under the Federal Reserve Act, which was signed into law in 1913, the president has the power to appoint seven members to the Fed’s board of governors, with the approval of the Senate. It doesn’t explicitly give the president the power to remove Fed members, but indicates it could be possible.
“The President shall fix the term of the successor to such member at not to exceed fourteen years, as designated by the President at the time of nomination,” Section 10 of the act reads, adding: “Thereafter each member shall hold office for a term of fourteen years from the expiration of the term of his predecessor, unless sooner removed for cause by the President.’
Still, we’re mostly in uncharted waters: It’s unclear exactly what the “cause” entails, as it hasn’t been tested on the firing of a chair.
Some legal scholars believe Trump couldn’t remove Powell as chairman simply because he doesn’t agree with his monetary policy. It’s also important to note that Powell alone hasn’t been setting the country’s monetary policy: The 10 voting members of the Federal Open Markets Committee all agreed unanimously to raise interest rates four times last year.
Powell also waded into the debate in March during an interview on “60 Minutes.” Although he avoided commenting directly on Trump’s criticisms of the Fed, Powell said that he did not believe the president could fire him.
“The law is clear that I have a four-year term, and I fully intend to serve it,” Powell said in March, citing the Fed’s independence from the White House.
When asked directly whether Trump could fire him, he said, “No.”