In a recent interview with Fox Business, former President Donald Trump renewed his threat to remove Federal Reserve Chair Jerome Powell from his position, which is set to expire next month. Trump stated, “I’ll have to fire him, OK?” illustrating his dissatisfaction with Powell’s leadership, particularly regarding interest rates during his presidency.
This threat reiterates ongoing tensions between the White House and the Federal Reserve, particularly as Trump prepares to advance his nomination of Kevin Warsh as Powell’s successor. However, Powell’s term as chair concludes on May 15, and it remains uncertain if Warsh will be confirmed by that date. He is scheduled to appear before the Senate Banking Committee next Tuesday, which is the first step before his nomination is voted on by the full Senate.
Complicating Warsh’s confirmation, Republican Senator Thom Tillis, a committee member, has pledged to block Warsh unless an ongoing criminal investigation into Powell by the Justice Department is withdrawn. Without Tillis’s support, Warsh lacks enough committee votes to proceed with his nomination.
In a press conference last month, Powell indicated that if a successor is not confirmed by the time his term ends, he will serve temporarily as chair until the position is filled. He noted, “That is what the law calls for, that’s what we’ve done on several occasions… and that’s what we’re going to do in this situation.” While Powell’s position as chair terminates soon, his tenure on the Board of Governors continues until 2028.
Powell has also stated he intends to remain on the Board during the ongoing criminal inquiry, which was initiated by the U.S. Department of Justice to investigate allegations that he misled Congress regarding significant cost overruns at the Federal Reserve’s headquarters. Powell publicly defended himself, claiming that the investigation was politically motivated due to the previous administration’s disagreement with the Fed’s monetary policies.
Recently, a federal judge dismissed two subpoenas issued by the Justice Department, effectively invalidating the investigation. However, DOJ prosecutor Jeanine Pirro is set to appeal this ruling, and Trump has expressed a desire to see the investigation carried through, questioning the inflated costs of renovations at the Fed’s headquarters.
Under the Federal Reserve Act, Federal Reserve Board members serve 14-year terms but can be removed by the president only for “cause,” a term that lacks a precise legal definition and has been interpreted in prior rulings as pertaining to ineffectiveness, neglect, or misconduct.
As the situation develops, Powell remains resolute in maintaining his role amidst the ongoing investigation and reflects on a tumultuous relationship between the Federal Reserve and the Trump administration over economic management and policy.
