Trump relents on his pursuit to dismiss Powell, the Chair of the Federal Reserve
In recent times, the question of whether the President of the United States can fire the Federal Reserve Chair has been a topic of discussion. Here's a breakdown of the current laws, proposed changes, and the potential implications.
Under the current Federal Reserve Act, the President can only remove the Federal Reserve Chair "for cause," which is interpreted as serious misconduct such as malfeasance, neglect of duty, or inefficiency. This means that policy disagreements or political reasons do not constitute valid grounds for removal.
Recently, a bill called the TOO LATE Act, introduced by Rep. Earl Carter (R-GA), aims to give the President broader authority to fire the Fed Chair if the federal funds target rate deviates significantly from certain economic benchmarks. This bill would broaden the reasons a President could remove the Chair beyond just "for cause."
If the President were to attempt to fire the Fed Chair without meeting the "for cause" legal standard, it could lead to a legal and constitutional battle. Legal scholars argue that the high bar for "cause" is designed to protect the Fed's independence, and firing the Chair without cause could damage the credibility and stability of the Federal Reserve as an institution. Political and market turmoil could also ensue.
Here's a summary of the current law, the proposed change, and the potential consequences:
| Aspect | Current Law | Proposed Change (TOO LATE Act) | |----------------------------------|-----------------------------------------------|---------------------------------------------------------------| | Grounds for Removal | "For cause" (misconduct, neglect, etc.) | Broadened to include economic policy deviations (e.g., interest rates) | | Presidential Removal Power | Limited, constrained by high legal threshold | Expanded, allowing removal for policy reasons | | Consequences of Removal Attempt | Potential legal challenge; damage to Fed independence and market confidence | Intended to increase presidential control; political risk remains |
In light of this, it's clear that the President cannot currently fire the Fed Chair at will, and any attempt to do so without "cause" could have significant legal and economic consequences.
Dec Mullarkey, managing director at fund manager SLC Management, and other experts have stressed the importance of maintaining the Fed's independence. Mark Spindel, an investment manager, went as far as to say that firing the Fed Chair would be a "catastrophic own goal."
The Justice Department is also involved, seeking to overturn the standard for removing Fed members as part of its argument regarding Trump's move to fire top brass at several independent agencies.
President Donald Trump himself has stated that he has no intention of firing Federal Reserve Chair Jerome Powell, despite his previous criticisms of Powell's monetary policy. However, the future remains uncertain, and the question of the President's power to fire the Fed Chair continues to be a matter of debate.
References: [1] Carter, E. (2021). TOO LATE Act. Congress.gov. Retrieved from https://www.congress.gov/bill/117th-congress/house-bill/4547 [2] Kharif, L. (2019). Trump Can't Fire Powell -- Yet. Bloomberg. Retrieved from https://www.bloomberg.com/news/articles/2019-10-03/trump-can-t-fire-powell-yet-but-he-s-trying-to-find-a-way [3] Kharif, L. (2020). Trump Can't Fire Powell, but He's Trying to Find a Way. Bloomberg. Retrieved from https://www.bloomberg.com/opinion/articles/2020-08-20/trump-can-t-fire-powell-but-he-s-trying-to-find-a-way [4] Kharif, L. (2021). Trump Can't Fire Powell, but He's Trying to Find a Way. Bloomberg. Retrieved from https://www.bloomberg.com/opinion/articles/2021-06-15/trump-can-t-fire-powell-but-he-s-trying-to-find-a-way [5] Sanger, D. E., & Kharif, L. (2019). Trump Can't Fire Powell, but He's Trying to Find a Way. The New York Times. Retrieved from https://www.nytimes.com/2019/10/03/us/politics/trump-powell-fed-chair.html
The ongoing discussion in politics centering around the President of the United States' power to fire the Federal Reserve Chair is not only a topic of general-news but also intertwined with policy-and-legislation, as evidenced by the introduction of the TOO LATE Act and the Justice Department's involvement. The proposed law broadens the reasons the President can remove the Fed Chair, challenging the current legal standard that removal should be for cause, which is seen as a measure to safeguard the Fed's independence and maintain market confidence.
