Trump’s food problem is bigger than Powell
President Donald Trump has never been shy when calling Jerome Powell. Now speculation is an increase that Trump could go even further by Delete the fed chair completely. But here is the turn: only that bold and controversial movement may not offer interest rates cuts that Trump wants.
The financial press has worked in a frenzy about the possibility of Powell’s expulsion, warning that it would destroy the standards, scared markets and compromise the independence of the Fed. But the true reason why such movement could fail is not for legality or optics, But because it would simply work.
Unlike federal agencies with individual directors, such as the Office of Financial Protection of the Consumer or the Federal Housing Finance Agency, the monetary policy of the Federal Reserve is established by a large board called Federal Open Market Committee (FOMC). The Committee has 19 members, seven members of the Board of Governors of the FED and 12 presidents of the Regional Banks of the Federal Reserve. At any given meeting, there are typically 12 voting members: the seven governors (including the president and the two vice presidents), the president of the Fed of New York and four voters of the regional banks.
Fed is not a dictatorship
It is assumed that the fed chair says the shots; But in truth, the power of the position is mainly derived from the precedent and consensus. Typically, the governors and presidents vote with the president of the FED, partly because the presidents of the Fed, historical seek to build a consensus on the committee. While sometimes there are dissidents of FOMC decisions, the chair opinion almost always takes the day. Regional presidents are more likely to disagree, historical, than the governors, although sometimes they are also deserted since the president’s opinion.
However, if Trump eliminated Powell, members of the committee revia could not feel forced by the precedent of voting with the president. On the contrary, they can Decides to resist the position of the new president to demonstrate the independence of the Fed. Of the president. This would be even more likely if the new president tried to quickly change the position of monetary policy to be more accommodative or the political agenda of President Trump.
The Board of Governors of the Federal Reserve from left to right: Lisa D. Cook, Adriana D. Kugler, Michael S. Barr, Jerome H. Powell, Philip N. Jefferson, Michelle W. Bowman and Christopher J. Waller. (Photo: Federal Reserve through Flickr)
Currently, only three Fed governors were appointed by Trump. There’s chairman powerll, who was initially appointed to the board of governors by President Barack Obama in 2012, elevated to the chairmanship by Trump in 2019, and reappointed as chair by president biden in 2022. Christopher Waller was Into 2030. Michelle Bowman was appointed by Trump in 2018, and Trump has recently indicated to name to name her to be the vice chair for supervision, The best bank regulator in the Fed. It is likely to need to need them Feel forced to vote for a policy Just because a freshly named Trump chair wants to reduce rates.
The other four governors were Designated by President Biden. None of them should be considered to support a change in policy under what they would like to see as a “usurper” president.
If Trump would like a fed to fulfill, he would like not only to have to eliminate Powell, but would like They probably have to eliminate most or all governors. This would be “packing” the Fed with its own followers, something that even Republican legislators could resist when the time for their confirmation of the Senate arrived.
In other words, even if the court agreed that Trump can eliminate Powell already his fellow governors, Trump could still Not being able to win a compatible fed. Hello, not only would I have to win the judicial battles to establish their authority to eliminate the governors of the Fed, but also have to win the Senate to vote for their nominees.
A great fight for a little victory
That is a lot of political and economic risk to expel Jerome Powell, especially when Powell’s term expires next year. He The juice would probably not worth the tailAs the saying goes.
Trump’s instincts about Fed are too well may not be wrong. But even if the economy is softening and the monetary asing is justified, the reality is that Political interference It can be the least effective way to make that happen. Instead of reducing rates, the Fed could dig.
It is still an open question if Trump can legally say goodbye to Powell. But if the objective is a more loose monetary policy, it could be the initial of the fight – Memorando the end.
