Trump ponders instituting legal action against Fed Chair Powell.
In a recent public encounter, former U.S. President Donald Trump accused Federal Reserve Chair Jerome Powell of mismanaging renovation costs at the central bank, alleging expenses totaling $3.1 billion. However, the legality of such a lawsuit is questionable.
The U.S. President does not have the power to directly sue the Federal Reserve Chair due to the chair’s independent status and legal protections. While Trump has threatened legal action over the Federal Reserve headquarters’ costly renovation, legal experts widely agree that such a lawsuit has little basis.
The Federal Reserve Chair is protected by law from removal except "for cause," typically interpreted as malfeasance, neglect of duty, or inefficiency. This standard is ambiguous and restrictive. A GOP member of Congress recently introduced legislation that would amend the Federal Reserve Act to grant the President clear authority to remove the Fed Chair if certain monetary policy benchmarks are not met.
Trump's main concern is a reduction in the interest rate, which the U.S. central bank has been maintaining at a high level for months. Economists argue that a reduction in the interest rate could fuel inflation. However, it's important to note that the Federal Open Market Committee, not solely Fed Chair Powell, decides on the interest rate.
In their last public encounter, Trump confronted Powell about the alleged renovation costs, to which Powell responded in a letter, stating that the building in question was already completed. Despite Trump's accusations, Powell did not confirm or deny the $3.1 billion renovation costs.
The hurdles for removing a Federal Reserve Chair are high, and a "valid reason" is needed. The legal framework reflects the intent to balance Fed independence with accountability, meaning presidential removal or legal action is not straightforward and requires specific grounds or legislative changes.
This confrontation between Trump and Powell is the latest in a series of public disagreements between the two. Despite the ongoing debate, the Federal Reserve Chair’s position is protected by law and institutional norms to maintain monetary policy independence.
In light of the ongoing disputes, it's clear that the political sphere, policy-and-legislation, and general-news are closely intertwined, as evidenced by the contentious exchange between former U.S. President Trump and Federal Reserve Chair Jerome Powell. However, the President's legal recourse against the Fed Chair's decisions, such as the questionable cost of renovations at the central bank, remains uncertain due to the chair's independent status and the complex legal protections in place.
