President Trump on Wednesday told reporters that Jerome Powell’s handling of a $2.5 billion renovation of the Federal Reserve headquarters “sort of is” a fireable offense, raising new questions about whether he may seek to oust the central bank boss.
The president also appeared to narrow his choices to replace Powell. Treasury Secretary Scott Bessent is an “option” but not the top choice “because I like the job he is doing,” he said.
The Washington Post and Bloomberg have reported this week that National Economic Council Director Kevin Hassett is rising as an early frontrunner in the race to replace Powell, although former Fed governor Kevin Warsh is also under consideration. Fed governor Christopher Waller is another possibility.
Bessent, though, is “probably not that much of an option,” Trump said Tuesday, citing what he views as his good performance as Treasury secretary.
‘He’s a very soothing force.”
Trump has been hammering Powell for months over what Trump viewed as a refusal to ease monetary policy for political and personal reasons, referring to Powell publicly as “dumb,” a numbskull,” a “stubborn mule”, “stupid,” a “moron” and a “fool.”
Trump nominated Powell for the Fed chair seat during his first administration, and his current term is scheduled to run until May of 2026.
Trump’s allies in recent weeks have used another tactic to turn up the pressure on Powell: They have invoked a $2.5 billion renovation of the Fed’s headquarters as a way to question the chair’s management of the institution and whether he told Congress the truth about the project during testimony in June.
Trump said Tuesday that “the one thing I wouldn’t have guessed is he would be spending two and a half million dollars to build a little extension onto the Fed.”
He was asked if it was a fireable offense and Trump said: “I think it sort of is, because if you look at his testimony…he’s not talking about the problem. It’s a big problem.”
Top administration officials have sent mixed signals about how far Trump would go with Powell.
Hassett said Sunday on ABC News’s “This Week” that whether the president has the legal authority to fire Powell before his term is up next May “is being looked into” and that “certainly, if there’s cause, he does.”
But Treasury Secretary Scott Bessent told Bloomberg Tuesday that the president “said numerous times he’s not going to fire Jay Powell” and compared Trump’s public pressure to former college basketball coach Bobby Knight “working the refs.”
“President Trump seems to prefer the Bobby Knight school,” he said.
Bessent also said Tuesday “there’s a formal process that’s already starting” to find Powell’s replacement. He also hopes Powell decides to leave the Fed board when his term as chair is up. His seat on the Fed Board of Governors is not up until 2028.
Trump, too, has sent mixed signals in recent months about whether he would seek to remove Powell, musing about it publicly before assuring he wouldn’t do it.
Wall Street is paying close attention to the drama unfolding in Washington, D.C.
JPMorgan Chase (JPM) CEO Jamie Dimon said Tuesday that the independence of the Federal Reserve is “absolutely critical” and that warned that “playing around with the Fed can often have adverse consequences.”
A firing by Trump could potentially open a new legal war with Powell, who has argued that his removal is “not permitted by law.”
The only language in law pertaining specifically to the removal of Fed board members can be found in Section 10 of the Federal Reserve Act. The law states that each member of the board shall hold office for 14 years “unless sooner removed for cause by the President.”
The statute doesn’t have any language that specifically addresses the chair of the Board of Governors, nor does it detail what exactly constitutes “for cause.” The term has been interpreted in legal rulings to mean “inefficiency, neglect of duty, or malfeasance.”
But Powell and the Fed could still have the backing of the Supreme Court, which made it clear in a May decision it might protect the central bank even as it allowed Trump to fire the board members of two other independent agencies: the National Labor Relations Board and the Merit Systems Protection Board.
The central bank, the court said, “is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States.”
What Trump is trying to challenge is a 90-year-old Supreme Court precedent limiting the power of the president to dismiss independent agency board members except in cases of neglect or malfeasance.
If that precedent eventually falls, a Powell firing may be easier to legally justify at the Fed.
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