This much is clear: President Trump is unhappy with Federal Reserve chief Jerome Powell. Whether he can do anything about it, however, is another question entirely. A slew of reports, including in the Wall Street Journal, say Trump has been asking about whether he has the authority to fire the Fed chief, but nobody seems clear about the answer. "Legally ambiguous" is the phrase used by Bloomberg. That's mainly because no president has ever tried. The background of what's going on:
- The anger: Powell's Fed raised interest rates again last week, a move that Trump is worried will keep the stock market in a funk. After the Fed move, Bloomberg reported that Trump talked with his advisers about firing Powell "many times" in the subsequent days.
- Hoover worries: The New York Times similarly reports that Trump asked advisers whether he could fire Powell and expressed his worry that Powell would "turn me into Hoover," a reference to the Depression-era president. Trump also called his decision to appoint Powell the worst of his presidency.
- The rules: The Federal Reserve Act says Fed governors (and Powell is one) may be "removed for cause by the President." But legal scholars quoted by Bloomberg and the Times suggest that a disagreement over policy doesn't qualify. Presidents have traditionally respected the Fed's independence and not commented on policy decisions.
- Trump's analogy: The president continued his criticism of the Fed on Twitter Monday, writing that it was "the only problem our economy has." The Fed has no "feel for the Market" and lacks a basic understanding of issues such as trade wars, said Trump. Which led to his closing line: "The Fed is like a powerful golfer who can’t score because he has no touch - he can’t putt!"
- Damage control: Fearing that mere talk of Trump firing Powell could roil the markets, Treasury chief Steven Mnuchin tweeted over the weekend that Trump has no intention of making such a move. He quoted Trump as telling him: “I totally disagree with Fed policy. I think the increasing of interest rates and the shrinking of the Fed portfolio is an absolute terrible thing to do at this time, especially in light of my major trade negotiations which are ongoing, but I never suggested firing Chairman Jay Powell, nor do I believe I have the right to do so.”
- Damage control II: Trump "now realizes" he does not have the power to fire Powell, acting chief of staff Mick Mulvaney said Sunday on ABC News, per USA Today. Mulvaney initially said that Trump had tweeted something to that effect, but he later corrected himself to say it had been Mnuchin's tweet he was referencing.
- Another possibility: Instead of firing Powell, Trump could theoretically try to demote him from chairman to being a regular Fed governor. But any such move against the Fed could backfire, both the Times and USA Today point out. The Fed might lift rates even more rapidly as a way to assert its independence, and assure investors that it's not under the sway of a president.
- Backfiring, II: The president's public and private carping about Powell has aides worried for another reason, reports the Journal. Even if Powell planned to slow down the Fed on raising rates in the near future, he might be less likely to now in order to prove his independence.
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