President Donald Trump has sent a mixed message about whether to fire Federal Reserve Chairman Jerome Powell.
When asked on July 16 if he was going to fire Powell, he said he “is not going to do anything.” However, he also said he “was not ruled out anything” and mentioned the bulging costs renovation project.
“I think that’s very unlikely as long as he has to leave because of fraud,” Trump said. “And there could be fraud involved in the $2.5, $2.7 billion renovation. This is a renovation. How do you spend $2.7 billion?
The Federal Reserve has been renovating the building since 2021 on a project that administers the first approved committee in 2017, which the Fed controls the first approved committee, according to the Associated Press.
Costs are increasing due to design changes, increased labor and material costs, and “unexpected conditions” such as “more asbestos than expected,” the Fed said in its FAQ.
However, it appears that Trump’s administration is using renovations as a possible reason to kick Powell out. Russ Vert, director of the Office of Management and Budget, sent a letter from Powell on July 10, stating that the project was “not violated from compliance with the approved plans.”
Trump’s feud with Powell is nothing new. For months, the president has been criticizing Powell, who appointed him in 2017 for refusing to fall interest rates. The Fed raised interest rates in 2022 and 2023 during the administration of former President Joe Biden in response to inflation.
Since joining the White House in January, he has threatened to fire Powell by telling him to step down.
“If I wanted him, he’d come out of there really quickly, trust me,” Trump said in April. “I’m not happy with him.”
In November, after the 2024 election, reporters asked Powell if he thought he would resign or if he thought Trump had the authority to fire him.
“It’s not permitted under the law,” Powell said.
Trump spoke to a group of Republican lawmakers on July 15 about firing the chair, several news outlets reported. Trump showed lawmakers a draft letter to fire Powell, the New York Times reported.
Trump denied writing the letter.
“No, I talked about the concept of firing him. I said, ‘What do you think?’ Almost all of them said I should,” Trump said. “But I’m more conservative than them.”
Trump attributed his meditation to his “conservatism” over Fire Powell, but the bigger obstacle is legality. This is why.
What is the role of the Federal Reserve? Who will appoint that chair?
The Federal Reserve is the central bank of the country. That responsibility includes setting interest rates and bank supervision and regulation. It was created in 1913 as part of the Federal Reserve Act and is run by an independent committee of governors. The seven governors who make up the board will be appointed president and confirmed by the Senate. According to Congress’s Research Services, the president will choose a chair and two secondary chairs from among seven.
While talking to reporters, it appears Trump has overlooked the person who nominated Powell as chairman in 2017. “I was surprised he was appointed,” Trump said. “Frankly, I was surprised that Biden put him in and spread him out.”
In 2021, Biden nominated him for a four-year term, due to end in May 2026. Powell will then be able to remain on the Governor’s Committee until January 2028.
Can the President fire the Federal Reserve Chairman?
Unlike other government agencies, the Fed has a lot of independence from Congress and the White House, Congressional Research Services said in a January report.
The report said economists justify independence and that decisions on monetary policy should not be influenced by political pressure. To ensure the Fed’s accountability, the chairman, like any other government agency, will testify before Congress.
According to the law, the Fed chair can be removed “for the president’s president.” This refers to “inefficient, neglect of obligation, or misconduct,” according to the Supreme Court’s decision on the Federal Trade Commission.
In May, the Supreme Court ruled Trump’s authority to fire members of two different independent institutions. In the 6-3 ruling, the court granted an emergency request to fire the head of the agency at the Trump administration’s request for emergency, while a lawsuit filed in court was filed.
In that opinion, the Supreme Court addressed the Fed, saying that the ruling would not affect the agency.
“The Federal Reserve is a unique, structured, semi-private entity following the clear historical traditions of the first and second banks of the United States,” the Supreme Court said.
Some legal experts have questioned the legality of Trump firing Powell. The move to expel him will likely end up in court.
Peter Conti Brown, a professor of financial regulations at the University of Pennsylvania, said the cost of renovating the Fed’s building was not a “cause” of Powell’s firing.
“There is no de facto basis to support the conclusion that the cost of a renovation project will be rejected is like fraud or gross negligence,” Conti-Brown said. “If Powell commits fraud, there could be a case of his removal in this context.”
Conti-Brown said he’s been talking for a long time about Trump wanting to remove Powell. The court may think Trump would call the renovation budget a “pretty” for his firing. This is a legal term used to explain the false reasons an employer gives to fire an employee to cover actual reasons, Conti-Brown said.
“The courts that attempted to remove it after the fact give a very strong impression of both the animus and the pretext against President Trump,” Conti-Brown said.
But it’s unclear how the courts will respond, former Fed bank regulator Jeremy Cress, a faculty member at the University of Michigan’s Center for Finance, Law and Policy. “This is an unknown legal sphere.”
Lev Menand, a law scholar at Columbia University, agreed to Kress.
“In normal times, I think Powell won 10 out of 10,” Menand told the New York Times. “But these are not ordinary times, because this court wants the president to look the other way when he is engaged in illegal activities and is willing to interpret his powers so broadly that he allows the president to underestimate the law.”
