Can Donald Trump unseat Jay Powell as Federal Reserve chair?

{"text":[[{"start":9.59,"text":"Donald Trump and Jay Powell are set for a showdown on whether the Federal Reserve chair has the right to remain in position should the US president fail to get his successor, Kevin Warsh, confirmed in time. "}],[{"start":24.32,"text":"Warsh is set to appear before the Senate banking committee next Tuesday — but he could struggle to secure congressional approval ahead of the end of Powell’s term as chair on May 15. "}],[{"start":36.519999999999996,"text":"Republican Thom Tillis of North Carolina, who sits on the influential committee, has said he will block Warsh’s nomination from reaching the Senate floor until the Department of Justice drops its probe into Powell. "}],[{"start":50.419999999999995,"text":"Trump on Wednesday said he would fire Powell if he did not leave “on time”, but also ruled out dropping the probe into the Fed chair’s handling of a $2.5bn renovation of the central bank’s headquarters — raising the odds of a clash with Powell if Warsh is not confirmed soon. "}],[{"start":70.35,"text":"Even if the administration tries to bypass the committee, wider disquiet among Republicans over the DoJ probe, which many see as a threat to the Fed’s independence, means Warsh would struggle to reach the 51 Senate votes he needs to be confirmed."}],[{"start":87.03999999999999,"text":"The dispute comes as Trump has repeatedly lambasted Powell for not bowing to his demands to cut interest rates, calling the Fed chair a “moron” and “stubborn mule” for his decision not to lower borrowing costs. "}],[{"start":103.17999999999999,"text":"Does Powell have the right to remain Fed chair? "}],[{"start":106.86,"text":"He certainly thinks so. "}],[{"start":109.94,"text":"“If my successor is not confirmed by the end of my term as chair, I would serve as chair pro tem until he is confirmed,” Powell said last month. “That is what the law calls for, that’s what we’ve done on several occasions — including involving me — and that’s what we’re going to do in this situation.” "}],[{"start":130.89,"text":"But some Republicans believe otherwise. "}],[{"start":134.42,"text":"While it is not clear what strategy Trump plans to pursue in his attempt to fire Powell, some allies believe the president has the right to appoint one of the Fed governors he nominated, such as Stephen Miran, Michelle Bowman or Christopher Waller, to stand in for Warsh until he can be confirmed. "}],[{"start":null,"text":"

"}],[{"start":154.76999999999998,"text":"Conservative commentators have recently circulated a memo prepared during Jimmy Carter’s administration, which suggests the president could designate an acting chair should his nominee not be confirmed in time."}],[{"start":167.95999999999998,"text":"In 1983, John Roberts, currently chief justice of the Supreme Court, but then an associate White House counsel during Ronald Reagan’s administration, appeared to support that opinion. "}],[{"start":181.90999999999997,"text":"In a memo, Roberts said that, upon expiration of the Fed’s then chair Paul Volcker’s term, “the president may appoint any member of the board acting chairman (including Volcker) but only if a nomination for chairman is pending or soon to be submitted”. "}],[{"start":198.59999999999997,"text":"What is the Fed’s view on the legal ruling? "}],[{"start":202.12999999999997,"text":"The Fed has not commented on the Carter administration opinion. "}],[{"start":207.16999999999996,"text":"But the Federal Reserve Act, the legislation governing the central bank, is seen as providing a clear mandate for Powell to remain in place at the helm of the board of governors. The act states board members “shall continue to serve until their successors are appointed”. "}],[{"start":224.24999999999994,"text":"Recent precedents include Miran, who has stayed on beyond the end of his term as governor, which ended in January. Powell also served as chair pro tempore for about three months in 2022 pending his confirmation by the Senate for his second term in office. "}],[{"start":243.52999999999994,"text":"A case in the DC circuit court last year also went against the White House’s attempts to appoint board members at the Inter-American Foundation, ruling the president had no authority to appoint an “acting principal officer” without Senate confirmation. "}],[{"start":259.35999999999996,"text":"“The short answer is Powell has the authority to stay on,” said Lev Menand, a law professor at Columbia University. While he cautioned that the questions were yet to be litigated, he added that there was “no legal basis” for the president to appoint someone other than Powell. "}],[{"start":276.43999999999994,"text":"Menand said the Carter administration analysis was “very weakly reasoned”. "}],[{"start":null,"text":""}],[{"start":282.62999999999994,"text":"White House spokesperson Kush Desai said: “The White House remains focused on working with the Senate to swiftly confirm Kevin Warsh as the next Chairman of the Federal Reserve. Warsh’s academic credentials, private sector success, and prior experience on the Fed board of governors make him eminently qualified to restore confidence and competence in Fed decision-making.” "}],[{"start":306.00999999999993,"text":"Should Trump follow through on his threat to fire Powell, the Fed chair will almost certainly contest it. That would trigger a situation in which it would be unclear who is formally in charge of the world’s most important central bank."}],[{"start":321.3999999999999,"text":"Will Powell remain on the board even if Warsh joins? "}],[{"start":326.43999999999994,"text":"While Powell’s term as chair expires in May, his seat on the board of governors does not end until January 31 2028. "}],[{"start":336.23999999999995,"text":"Powell was keen to follow the precedent set by most other Fed chairs and cut his term as governor short once a new boss is appointed. "}],[{"start":345.16999999999996,"text":"However, unsealed legal documents suggest he believes doing so while the probe into him is active would place the Fed’s independence to set interest rates free from interference at risk."}],[{"start":null,"text":""}],[{"start":357.65999999999997,"text":"Powell, like Tillis, believes the probe over whether the Fed chair lied to Congress over a $2.5bn renovation of the central bank’s headquarters is motivated by Trump’s desire to press officials into cutting interest rates. "}],[{"start":375.71,"text":"As a result, he said last month he would not step down from the board until the investigation “is well and truly over, with transparency and finality”. "}],[{"start":387.59999999999997,"text":"The closure of the investigation is thought to be the bare minimum Powell wants to see before departing the central bank. "}],[{"start":395.03999999999996,"text":"He will also want to see evidence that Warsh is willing to safeguard the Fed’s independence, and that Trump will stop trying to fire officials such as himself and his fellow governor Lisa Cook — who the US president last summer tried to dismiss. "}],[{"start":413.09,"text":"With the chances of Powell staying on as governor climbing after Trump’s latest attack, analysts say the president’s strategy risks undermining Warsh’s attempts to reshape the central bank. "}],[{"start":426.33,"text":"“People will look at Powell not just for economic but for moral leadership,” said Derek Tang of Monetary Policy Analytics. "}],[{"start":436.22999999999996,"text":"Additional reporting by Lauren Fedor and Alex Rogers in Washington"}],[{"start":448.77,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1776335484_9003.mp3"}