It’s safe to say that Donald Trump and Jerome Powell have a contentious relationship. Despite appointing Powell as the Federal Reserve Chairman in 2017, President Trump has constantly criticized Powell since he assumed office in 2018. In a July 2018 CNBC interview, Trump stated that he was “not thrilled” with increases in interest rates and later in 2018, he stated that appointing Powell was “one of the worst choices” he ever made.
These economic problems have only been exacerbated in Trump’s second term and Trump has continued to slam Powell’s high interest rates, even threatening to fire Powell throughout 2025.
Powell’s term is set to end on May 15, but he is expected to remain on the Federal Reserve Board of Governors until Jan. 31, 2028. However, in a recent Fox News interview, Trump stated that if Powell does not resign from the Board of Governors after his term ends, he’ll “have to fire him.”
But Trump cannot remove Powell over policy disagreements. Members of the Board of Governors can only be removed for actions such as misconduct or neglect of duty.
Additionally, Trump’s claims are dangerously politicizing the Federal Reserve, an institution that is meant to act independently from Congress or the President. To accompany these threats, the Department of Justice is leading investigations into a renovation project for multiple Federal Reserve buildings, which has raised concerns because costs are projected to reach up to $2.5 billion.
Despite issuing multiple subpoenas, these investigations have produced minimal results, with Judge James Boasberg stating that prosecutors have “offered no evidence whatsoever that Powell committed any crime other than displeasing the president.” Although Trump is not directly leading these investigations, his remarks suggest that his inability to fire Powell based on policy disagreements has influenced the inspections. Along with undermining the Federal Reserve’s autonomy, Trump’s hostility toward Powell has also drawn backlash within the GOP, disrupting the confirmation process for Trump’s chair nominee, Kevin Warsh.
Sen. Thom Tillis, who currently sits on the Senate Banking Committee, has stated that he would block the nomination of Warsh until the investigations are dropped, arguing that they infringe on the bank’s independence.
Tillis has shown support for Warsh and said he thinks Warsh would be a strong chairman. Since the panel consists of 13 Republicans and 11 Democrats, Tillis’s opposition would likely result in a 12-12 tie. Other Republican Senators, like Lisa Murkowski and Kevin Cramer, have spoken out against the Department of Justice’s probe of Jerome Powell, making Warsh’s approval from a full Senate vote seem even more unlikely.
The conflict between Trump and Powell is pointless. It only hurts Trump and the GOP, in addition to harming the independence of the Federal Reserve.
If Tillis does not change his mind and the Senate Banking Committee fails to approve Warsh, Powell would stay as the pro tempore chair. Powell has emphasized that he would not leave the board until the criminal probe is over. Most of these problems could be avoided if the Department of Justice dropped the probe, which would likely allow Warsh to move past the Senate Banking Committee and Powell to leave after his term ends. Although prosecutors have the right to investigate fraud or corruption in billion-dollar projects like these, the evidence of criminal activity related to cost overruns appears weak.
Moreover, Trump’s rhetoric sets a dangerous precedent that concerns how the Federal Reserve operates for the rest of his term. Trump has targeted numerous political enemies, such as Powell, throughout his second term and Powell isn’t the only one in the Federal Reserve who has been targeted. Lisa Cook, a member of the Federal Reserve Board of Governors, was a part of an attempted firing by Trump due to mortgage fraud. If Trump tries to fire Powell outright, it could lead to a legal battle that would likely be more contentious than the attempt to fire Cook.
This begs the question: will Warsh face this kind of opposition during his chairmanship if he is eventually approved?
After the Senate Banking Committee’s confirmation hearing of Warsh, the possibility of the institution’s autonomy under a Warsh chairmanship is still questionable. Trump has stated that he would be disappointed if Warsh does not cut interest rates right away and during the hearing, Warsh said that he would not be a “sock puppet” that would obey Trump’s demands.
Another dispute that arose during the hearing was when Senator Elizabeth Warren asked Warsh if he believed that Trump lost the 2020 presidential election and Warsh refused to say so. This suggests that Warsh may not act independently of Trump’s requests and if he does act on his own, he would likely face similar issues to those faced by Powell.
Aside from the Department of Justice investigations, most of Trump’s attacks have just been threats and action may not be taken to remove Powell if Warsh passes the Senate. However, Trump’s conflict with Powell has done him more harm than good and threatens his hopes of replacing Powell, leaving the future of the Federal Reserve unclear.
This conflict sets a risky precedent that threatens the Federal Reserve’s independence and prosecutorial power. After the Senate Banking Committee’s confirmation hearing on April 21, Warsh’s fate seems unclear.
Henry Brandler is a freshman double-majoring in cinema and economics.
Views expressed in the opinions pages represent the opinions of the columnists. The only piece that represents the view of the Pipe Dream Editorial Board is the staff editorial.