Washington
CNN
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President Donald Trump has blasted Federal Reserve Chair Jerome Powell for months for not lowering interest rates, even threatening to fire the central banker.
Now, the White House is seizing on a $2.5 billion renovation of the Fed’s headquarters in Washington, DC, as a potential legal opening to fire Powell as Trump calls for supersized rate cuts. The president said last week that it’s “highly unlikely” he will try to fire Powell, but he left the door open “for fraud.”
Firing Powell would be an unprecedented move in the central bank’s 111-year history, potentially sparking a landmark legal battle, turmoil in financial markets and economic uncertainty. The move also won’t assure Trump gets lower interest rates, since Powell is only one out of 12 people at the Fed who vote on policy moves.
Here are some key facts on the removal process of a Fed official.
Top administration officials have said the Fed’s renovation project is mismanaged, citing cost overruns. Some Republicans have claimed Powell lied to Congress when he told a panel of lawmakers last month that some upgrades won’t be included in the renovation.
Earlier this month, the Fed posted an FAQ page on its website detailing the project and why costs have ballooned.
Yes, but only in one instance. According to Section 10 of the Federal Reserve Act, the president can remove any member of the Fed’s Board of Governors “for cause,” which is broadly interpreted to mean malfeasance, neglect of duty or inefficiency. But they cannot be removed for policy differences, such as Trump’s disagreement with the Fed’s wait-and-see approach on interest rates. Trump has to prove there is sufficient cause to successfully remove Powell.
Powell technically has three jobs: member of the Fed’s Board, chair of the Board of Governors and chair of the Federal Open Market Committee (FOMC). The FOMC is the Fed group that sets interest rates, and the chair is voted into their position by committee members. It’s unclear if the for-cause rule also applies to Powell’s leadership roles.
According to an analysis by Peter Conti-Brown, a monetary policy scholar at the University of Pennsylvania, the law “says nothing, however, about whether the president can ‘fire’ the Board chair, effectively demoting him to being just one of the other governors.”
“Other presidents have concluded that they lacked that authority, and there is good reason to think they were right. But we just don’t know: it’s legally uncertain,” he wrote for the Brookings Institution.
No. Under a for-cause removal, Powell would have the chance to respond. It’s unclear how much time Powell would have to respond.
“There hasn’t been a presidential for-cause removal proceeding in a century, so exactly how much time Powell has to be heard is really hard to say,” said Lev Menand, an associate professor at Columbia Law School who researches financial institutions.
A removal order would mean Powell is effectively fired — but he could still sue. He would have to argue that his firing was unjustified and show why it’s crucial for him to remain as chair.
It could take months for the case to be resolved, from when Trump issues a removal order to when a final ruling, likely from the Supreme Court, is handed down.
The case could even stretch until Powell’s term as chair expires in May 2026.
If the courts issue an injunction, then Powell remains at the Fed as chair during the litigation. However, if the courts don’t issue a preliminary injunction, then Fed Vice Chair Philip Jefferson would be responsible for Powell’s duties in the meantime.
That means Jefferson, appointed to the Fed’s board in 2022 by former President Joe Biden, would preside over the Fed’s policy meetings, regulate banks and oversee the central bank’s other day-to-day activities.
Powell because he himself is the plaintiff, not the Fed as an institution.
