Trump said he won’t fire Fed chair­man — and he prob­a­bly can’t

Lodi News-Sentinel - - BUSINESS - By Jim Puz­zanghera

WASH­ING­TON — Pres­i­dent Don­ald Trump on Thurs­day blamed the Fed­eral Re­serve for the re­cent stock mar­ket down­turn but said he would not dis­miss his hand-picked chair­man, Jerome H. Pow­ell.

“No, I’m not go­ing to fire him.” Trump said in the Oval Of­fice af­ter a re­porter asked him if Pow­ell’s job was in jeop­ardy due to re­cent in­creases in the Fed’s bench­mark short-term in­ter­est rate that Trump said “dis­ap­pointed” him.

But it would be very dif­fi­cult for Trump to fire the Fed chair­man even if he wanted to.

The Fed is in­de­pen­dent of the White House. Un­like Cab­i­net of­fi­cials and most other ex­ec­u­tive branch em­ploy­ees, the cen­tral bank’s chair­man and mem­bers of its board of gov­er­nors do not serve at the will of the pres­i­dent.

No Fed chair has ever been re­moved by a pres­i­dent, though Chair­man Thomas B. McCabe was forced to re­sign in 1951 un­der White House pres­sure af­ter clash­ing with Pres­i­dent Harry S. Tru­man’s ad­min­is­tra­tion.

The Fed­eral Re­serve Act, which cre­ated the cen­tral bank in 1913, states that Fed board mem­bers can only be “re­moved for cause” by the pres­i­dent be­fore their term ex­pires. Pow­ell’s term as chair­man ends in 2022 and his term as a gover­nor ends in 2028.

The law does not spec­ify the def­i­ni­tion of “for cause,” a term that ap­plies to of­fi­cials in other in­de­pen­dent agen­cies, such as the Fed­eral Trade Com­mis­sion. In a 1935 case in­volv­ing Pres­i­dent Franklin D. Roo­sevelt’s re­moval of an FTC com­mis­sioner, the Supreme Court ruled that such of­fi­cials could not be fired for po­lit­i­cal rea­sons.

More re­cently, some lead­ing Repub­li­cans pub­licly pushed Trump to fire Demo­crat Richard Cor­dray as di­rec­tor of the Con­sumer Fi­nan­cial Pro­tec­tion Bureau. But the law that cre­ated the agency also lim­ited the re­moval of the CFPB’s chief “for cause.” Trump did not fire him amid con­cerns of a court fight. Cor­dray re­signed late last year on his own ac­cord to run for Ohio gover­nor this fall.

Pow­ell’s lead­er­ship of the Fed since tak­ing over in Fe­bru­ary has drawn praise from economists and fi­nan­cial an­a­lysts for clearly sig­nal­ing the di­rec­tion of mone­tary pol­icy and slowly rais­ing the still his­tor­i­cally low fed­eral funds rate.

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