Title: White House Examines Federal Reserve Renovation Costs and Legal Boundaries of Firing Fed Chair Powell
Source: Adapted and expanded from an article by MarketScreener
The Trump administration’s economic team has turned its attention toward the costs associated with renovating the Federal Reserve’s headquarters and is also exploring the legal feasibility of removing Federal Reserve Chair Jerome Powell from office, according to White House economic adviser Kevin Hassett.
This development occurred amid heightened tensions between the Trump administration and the Federal Reserve, as disagreements over monetary policy have surged into public view. President Donald Trump has repeatedly voiced his dissatisfaction with the Fed’s interest rate hikes, blaming Powell for what he believes are unnecessary increases that threaten to derail economic growth.
In this context, the White House appears to be not only criticizing Fed policy direction but also investigating the institution’s functioning and leadership, including its budget decisions and the extent of executive authority over the central bank’s leadership structure.
Key Developments
Kevin Hassett, then chairman of the Council of Economic Advisers, commented publicly that:
– The White House was actively reviewing the costs related to the renovation of the Federal Reserve building in Washington, D.C.
– Officials were seeking to understand whether the renovation was being conducted in a cost-effective and transparent manner.
– Discussions were taking place internally about the President’s authority to potentially remove Chair Jerome Powell from his position at the Federal Reserve.
Renovation Scrutiny
According to Hassett, President Trump had expressed interest in understanding how much was being spent on the Federal Reserve’s headquarters renovation. While this initiative may appear bureaucratic in nature, many analysts see it as a further indication of the administration’s growing readiness to apply pressure on the Fed from multiple fronts.
Federal Reserve modernization projects are typically managed internally, funded independently of the Congressional budgeting process. This financial independence is a cornerstone of central bank autonomy, but critics argue it makes projects less subject to rigorous public oversight. The scope and cost of the ongoing renovation have not been widely reported, but Hassett’s statements imply that White House officials found the figures high enough to raise questions.
Constitutional Debate Over Firing Powell
Perhaps more significantly, Hassett confirmed during his interview that the administration’s legal advisers were investigating whether President Trump possessed the constitutional and legal authority to fire Jerome Powell or demote him from his position as Chair of the Federal Reserve Board.
Key considerations that were being evaluated, according to officials familiar with internal discussions, include:
– The Federal Reserve Act of 1913, which defines the roles and terms of the Board of Governors and the Chair.
– Any applicable legal precedent regarding the dismissal of independent agency heads.
– The distinction between Powell’s role as a member of the Board of Governors, where he serves a 14-year term, and his role as Chair, which carries a renewable four-year term, and which the President can choose not to renew.
– Potential implications for investor confidence and U.S. financial market stability if the independence of the Fed were seen as threatened.
Historical Context
Presidents have clashed with Federal Reserve Chairs in the past, but none have taken steps as overt as those being considered by the Trump administration in 2019. Trump’s public frustration with Powell had intensified after several Fed rate hikes in 2018, which he felt were undermining economic expansion and stock market performance.
Previous examples of presidential pressure include:
– President Lyndon B. Johnson confronting Fed Chair William McChesney Martin in 1965 over rate increases.
– President Richard Nixon influencing Fed Chair Arthur Burns to focus on growth objectives ahead of the 1972 election.
However, subsequent reforms and growing awareness of the importance of central bank independence largely discouraged future political interventions. Today, direct attempts by the President to remove or demote the Chair of the Federal Reserve remain untested in modern legal and political theory.
Market Reactions and Public Response
Wall Street reacted with concern to reports of the administration potentially dismissing Powell, fearing that such a move could significantly damage investor confidence
Read more on EUR/USD trading.