Washington
CNN
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President Donald Trump exploded Fed Chairman Jerome Powell for not lowering interest rates and even threatening to fire central bankers.
Now, the White House is occupying the $2.5 billion renovation of the Federal Reserve headquarters in Washington, D.C., a potential legal opening for Powell who calls for a cut in tax rates. The president said last week that he was “very unlikely” that he would try to fire Powell, but he opened the door “for fraud.”
The firing of Powell would be an unprecedented move in the central bank's 111-year history, potentially triggering landmark legal struggles, turmoil in financial markets and economic uncertainty. The move also won't ensure Trump gets lower interest rates, as Powell only 12 of the Fed's vote on policy actions.
Here are some key facts about the process of dismissal of Fed officials.
Senior administration officials said the Fed's renovation project was inappropriate, citing cost overruns. When some Republicans told the panel last month he claimed Powell lied to Congress that his renovations would not include some upgrades.
Earlier this month, the Fed posted a FAQ page on its website detailing the project and why the costs surged.
Yes, but only in one instance. Under Section 10 of the Federal Reserve Act, the president can delete any member of the Federal Reserve Committee “for reasons”, which is often interpreted as implying a drawback, neglect of duty or inefficiency. However, it cannot be removed due to policy differences, such as Trump's disagreement with the Fed on how interest rates are waiting. Trump must prove that there is enough reason to successfully remove Powell.
Technically, Powell has three jobs: the Fed’s board member, the board chairman and the Federal Open Market Committee (FOMC). FOMC is the Fed that sets interest rates, and committee members vote for the chairperson for their posts. It is not clear whether Powell's leadership role also applies.
According to analysis by the University of Pennsylvania monetary policy scholar Peter Conti-Brown, the law “says nothing, but whether the president can’t’s expelling the board of directors, effectively relegating him to one of the other governors.”
“The other presidents concluded that they lacked this authority and had good reason to think they were right. But we don't know: This is legally uncertain,” he wrote for the Brookings agency.
no. Powell will have a chance to respond after deletion for reasons. It is not clear how long Powell will need to respond.
“For a century, there hasn't been a president's evacuation process for reasons, so it's really hard to hear Powell's time,” said Lev Menand, associate professor at Columbia Law School who studies financial institutions.
The demolition order will effectively fire Powell – but he can still sue. He will have to say his sack was unreasonable and show why he continued to serve as chairman is crucial.
It may take several months to resolve the matter from when Trump issues the removal order to when the final decision of the Supreme Court will be revoked.
The case could even be extended to Powell’s term as the chair expires in May 2026.
If the court issues an injunction, Powell remains with the Federal Reserve as chairman during the lawsuit. But if the court does not issue a preliminary injunction, then Federal Reserve Vice Chairman Philip Jefferson will take charge of Powell's duties.
This means that Jefferson will be appointed to the Fed's board of directors by former President Joe Biden in 2022 and will chair the Fed's policy meetings, regulate banks and oversee other daily activities of the central bank.
no. Federal Housing Finance Director Bill Pulte has visited social media several times to call on the Fed’s chairman to resign, and even prompted Democratic Senator Elizabeth Warren, who is often critical of Powell’s policy stance.
But Scott Bessent, Trump's closest economic adviser, did not call on Powell to resign or be fired. “I know Chairman Powell. Nothing can tell me that he should step down now,” Becent told Fox Enterprise on Tuesday. “His term ends in May. If he wants to pass that, I think he should do that. If he wants to leave early, I think he should.”
However, Bessent called for a comprehensive review of “the entire Fed agency and whether they were successful.”
Powell is because he is the plaintiff himself, not the Fed as an institution.