Friday, October 12, 2018

Why Trump Can’t Fire Fed Chairman Powell Over Monetary Policy

President Trump and Fed Chairman Powell
With a two-day break in the stock market which saw the Dow Industrials fall by 5.3%, President Trump has been talking up a storm as to how unhappy he is with the Federal Reserve raising interest rates.

Can Trump fire Fed chairman Jay Powell because he doesn't like his interest rate or monetary policy?

Robert Hockett, a professor of law at Cornell Law School, told MarketWatch “The answer is basically, no, while technically, yes.”

Similar to other independent regulatory agencies, like the Securities and Exchange Commission, the Federal Reserve Act, section 10.2, stipulates that a president can remove a Federal Reserve governor “for cause” rather than “at will.”

This is commonly understood as a severe, egregious or criminal act, “not a disagreement with the monetary policy they are pursuing,” Hockett said.

MarketWatch explains that the law goes back to the 1940s when President Franklin Roosevelt removed a member of the Federal Trade Commission and cited as a reason their divergent views of public policy. The Supreme Court unanimously reversed the firing, saying executives of independent agencies cannot be removed in their term of office except for cause. These agencies “must be free from executive control,” the court ruled.

But there might be a loophole. According to Michael Feroli, chief U.S. economist at JPMorgan Chase, Trump might be able to remove Powell as chairman:


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