Can Trump Fire Jerome Powell?
Not under current law, but will the Supreme Court overturn precedent, allow the firing, and send the economy into chaos?
Donald Trump is criticizing Federal Reserve Board Chair Jerome Powell and threatening to fire him. But the President can’t do that, at least under current law. That’s because Congress deliberately set up the Federal Reserve as an independent agency headed by a Board with a Chair that is explicitly protected from being fired at the whim of the President.
However, the Trump administration is trying to claim that that sort of protection, which has existed both for the Federal Reserve and many other federal agencies since the 1930s, is actually unconstitutional because it means that these agencies, which are within the executive branch, are not sufficiently subject to presidential control. This is known as the unitary executive theory. The idea is that Article II grants all executive power to the president, and so if someone is in the executive branch that person must be able to be fired at will by the president.
The counter-arguments are:
(a) the framers of the constitution had just won a war to get rid of a king and surely would not have wanted to give that much power over the whole federal government to the new president, and
(b) Congress deliberately passed a statute to provide this sort of independence to the Federal Reserve Board Chair and did so for very good reasons which courts should not second-guess.
Since 1935, the US Supreme Court has permitted Congress to create these independent agencies, but in the coming months we will see if the current Supreme Court is willing to overturn that precedent and if so whether they will also gut the independence of the Federal Reserve or somehow create an exception. The stakes are very high because if Trump fires Powell, it is likely to send the economy into chaos as investors flee the dollar. And I don’t know that the Supreme Court justices really want to be responsible for that kind of catastrophic consequence. Stay tuned.