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June 19, 2019, 9:34 a.m. EDT

Trump on Federal Reserve chief Powell: ‘Let’s see what he does’

White House reviewed legality of demoting Fed Chairman, report

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By Greg Robb, MarketWatch

Bloomberg Enlarge Image
Fed Chairman Jerome Powell with Treasury Secretary Steven Mnuchin last fall.

The White House explored the legality of demoting Fed Chairman Jerome Powell in February, according to a report by Bloomberg News.

Citing people familiar with the matter, the report said the White House general counsel’s office weighed the legality of stripping Powell of his chairmanship of the central bank, and leaving him as just a Fed governor.

President Donald Trump had spoken of firing Powell late last year.

Asked by reporters late Tuesday if he still wanted to demote Powell, Trump replied: “Let’s see what he does.”

The president went on to complain he was not getting a “level playing field” with other countries, noting that the European Central Bank has a “much different stance” than the Fed.

The Bloomberg report said it didn’t know the result of the administration’s review.

Asked about the report, Larry Kudlow, the director of the National Economic Council, said Trump is not planning to demote Powell.

“It’s a six-month-old story,” Kudlow told reporters, according to Reuters. “It allegedly happened six months ago, and it’s not happening today, and therefore I have nothing to say about it. It is what it is.”

The report came ahead Federal Open Market Committee decision, to be made public later Wednesday and pressure from the White House to reduce interest rates. Economists expect the Fed to wait until July, at the earliest, to reduce rates.

Read: Five things to watch in the pivotal Fed meeting

Robert Hockett, a professor of law at Cornell Law School, told MarketWatch last fall that Trump could not fire Powell outright.

Read: Why Trump can’t fire Powell for disagreement over monetary policy

Similar to other independent regulatory agencies, like the Securities and Exchange Commission, the Federal Reserve Act, section 10.2, stipulates that a president can remove a Federal Reserve governor “for cause” rather than “at will.”

This is commonly understood as a severe, egregious or criminal act, “not a disagreement with the monetary policy they are pursuing,” Hockett said.

The law goes back to the 1940s, when President Franklin Roosevelt removed a member of the Federal Trade Commission and cited as a reason their divergent views of public policy. The Supreme Court unanimously reversed the firing, saying executives of independent agencies cannot be removed in their term of office except for cause. These agencies “must be free from executive control,” the court ruled.

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