Federal Reserve Chairman Statement on Investigation

Federal Reserve Chairman Jerome Powell has stated that he plans to remain on the Fed’s board until the ongoing Justice Department investigation concludes. “I will not leave the Board until the investigation is successfully concluded with transparency and finality,” he mentioned, referring to a statement in the Fed’s preparedness document and choosing not to elaborate further.

Although Powell’s term as chair ends in May, he will continue as a Fed director until January 31, 2028. Typically, the Fed chair resigns once a new president is appointed. There was only one exception in 1946, when Marriner Eccles stayed on the board for three years after being replaced as chairman, largely due to a request from President Harry Truman.

Powell also indicated that he hasn’t made a decision about whether he would appear in court if the investigation wraps up. “I haven’t made that decision,” he stated.

Additionally, Powell claimed, without providing evidence, that he would serve as chairman until a successor is confirmed. President Trump has nominated Kevin Warsh, a former Federal Reserve Director, for this role. However, Senator Thom Tillis (R-North Carolina), who is part of the Senate Banking Committee, has said he won’t support Warsh’s nomination while the investigation is ongoing.

“That’s what the law requires,” Powell asserted, referencing past practices. But it seems there’s some confusion, as the Federal Reserve Act doesn’t clearly address what happens if the chairman’s term expires before a new successor is confirmed. A memo from 1978 indicated that the president has the inherent authority to make temporary appointments to ensure the executive branch’s operation.

This memo was relevant when President Jimmy Carter appointed G. William Miller to succeed Chairman Arthur Burns. Since the nomination came post the confirmation deadline, Burns was designated as the acting chair until Miller was confirmed a few weeks later. It appears that strong presidential action was essential for this transition.

Other instances have varied quite a bit from the current legal and political scenarios. In March 1996, when Alan Greenspan’s second term expired, the Board of Governors appointed him Chairman pro tempore. The situation wasn’t clarified through an executive order, leading legal analysts to view this as a nod to President Clinton’s intention to nominate Greenspan rather than an independent board decision.

The same pattern followed when Powell’s first term ended before his reconfirmation under President Biden. The board again named him interim chairman, understood generally as aligning with the president’s nomination rather than acting on its own.

In these cases, the president had already put forth the current chair to continue. According to the 1978 analysis, if a different individual is appointed to fill a vacancy, the board lacks the authority to counter the president’s choice. Thus, if Powell’s term ends before Warsh’s confirmation, the president could appoint an acting chair, not the Fed’s board or Powell himself.

Interestingly, Powell could have a more substantial argument for remaining in charge of the Federal Open Market Committee instead of the Fed’s board. This committee, which determines the federal funds rate, elects its own chair. Traditionally, the Fed Board of Governors has elected a chairman, but it’s not mandatory. In theory, the board might elect Powell as its chairman, even if the president selects another governor as the interim chairman.