President Trump is considering a significant federal overhaul at the Federal Reserve, possibly as a strategy to remove the politically independent chair, Jerome Powell.
For months, Trump has critiqued Powell for the Fed’s decision not to lower interest rates, a choice influenced in part by uncertainty related to Trump’s tariffs. Despite having appointed Powell during his first term, Trump has expressed a desire to oust him, but questions about the legality of such an action linger.
It seems Trump is looking for justification, as he has blocked measures that would allow central bankers to move forward, even though he has shown willingness to challenge other independent institutions.
Now, with a $2.5 billion renovation planned for the Federal Reserve’s headquarters, Powell’s position appears more precarious than ever. When asked if the costly renovation could provide grounds for dismissal, Trump remarked, “I think it’s kind of a thing.”
Legal experts suggest that attempting to remove Powell under the pretense of the renovations would be a complicated undertaking. Powell could argue that Trump lacks the requisite legal “cause” for dismissal, as specified by federal law.
“If Trump were to fire Powell, and Powell contested it, he could claim it was a blatant misuse of presidential authority,” noted Todd Phillips, a law professor at Georgia State University.
Unlike other independent agencies where specific grounds for dismissal are outlined—like inefficiency or misconduct—the Federal Reserve Act merely states that the president needs a “cause.”
“It’s not just about whether Trump dislikes Powell’s ties,” Phillips emphasized.
Interestingly, Trump would be the first president in contemporary history to dismiss a Fed chair, and no legal framework has been tested in this context.
“Can the president fire Jerome Powell? Honestly, I’m uncertain,” said former constitutional lawyer and Speaker Mike Johnson (R-La.) while speaking to reporters.
While Trump could cite the renovation as a reason, he may struggle to demonstrate that board oversight infringed on the law. The Federal Reserve Act allows the board to “maintain, expand or modify” its buildings.
As Trump remains tight-lipped on the potential dismissal, administrative investigations into the renovations are intensifying, potentially laying the groundwork for a more effective justification.
Russell Vought, the Director of the Office of Management and Budget, indicated last week that Trump is “very troubled” by the Fed’s leadership, implying that the drastic changes under consideration conflict with testimonies given to Congress. Vought also pointed out that Powell may not have adequately consulted the National Capital Planning Commission regarding the renovation plans.
Recently, three White House officials were appointed to a committee overseeing this project, with Will Scharf taking the lead as chairman. He’s known for ensuring the president’s executive orders are delivered smoothly.
At a committee meeting, Deputy Chief of Staff Michael Blair expressed skepticism about the renovation, demanding more transparency from Fed leaders.
In response, Powell defended the project in a recent letter, asserting that the Fed is “very careful” in its operations.
“We are committed to being responsible stewards of public resources, fulfilling our duties to Congress and the American people,” Powell stated.
Phillips believes that using the renovation as a pretext to fire Powell seems disingenuous, especially since the project’s costs have been known for some time and Trump is only now raising concerns.
Paul Schiff Berman, a law professor at George Washington University, also noted that renovations don’t directly impact Powell’s primary role in managing monetary policy and suggested that Trump’s actions might appear as a mere excuse.
Trump’s management of other independent agencies also raises questions; he previously dismissed staff without hesitation, despite their protections. Legal action is currently pending regarding Trump’s dismissals from various commissions.
Many of those dismissed have found success in lower courts, including a recent case where a judge reinstated an FTC Commissioner.
However, the Trump administration appears to believe that the ultimate resolution will come from the Supreme Court, which has the ability to revoke a long-standing precedent regarding removal protections for certain agencies. Some conservative justices may be inclined to reshape or even eliminate these precedents.
That said, even those justices have indicated that the Federal Reserve might be an unusual case where the president cannot simply dismiss the chair at will.
“The Federal Reserve is a unique, structured semi-private entity with historical foundations tied to the US’s early banking systems,” the court remarked in an unsigned ruling, while allowing Trump to exert power over other independent agencies.
Berman believes that Powell could succeed in a legal challenge if Trump fails to establish proper cause for dismissal.
“Even if the Supreme Court alters the independence of various agency heads, I think it sends a clear message that they are unlikely to remove the protections surrounding the Fed Chair,” Berman added.
While many Republican lawmakers are urging Powell to resign or for Trump to take decisive action against him, some, like Sen. Tom Tillis (R-N.C.), caution against such moves, arguing they could destabilize financial markets and undermine long-term economic stability.
“Dramatic fluctuations don’t just keep wealthy individuals up at night; they can significantly harm working-class Americans,” Tillis expressed. “I wasn’t entirely satisfied with the leadership, but I’m uncertain if that’s enough for action. We need to carefully consider the situation.”
