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President Trump's recent criticism of Jay Powell, chairman of the Federal Reserve, has prompted questions about whether the president might try to fire Powell. But does he have the legal authority to do so? New York Times correspondent Binyamin Appelbaum joins Nick Schifrin to discuss the need for an independent Federal Reserve and how these "uncharted waters" have unsettled financial markets.
Ever since reports this weekend suggested President Trump was considering firing Federal Reserve Chair Jay Powell over interest rate hikes, there have been many questions about the president heading into what would be uncharted territory.
Could he? Would he? And what kind of impact could firing the Fed chair have financially, legally, and politically?
Top members of his team have said Mr. Trump will not attempt it. But the president has been given opportunities to rule out such a move and declined to take them, including today in the Oval Office, when he was asked about Powell.
Well, we will see. They're raising interest rates too fast. That's my opinion. But I certainly have confidence. But I think it'll straighten. They are raising rates too fast because they think the economy is so good. But I think that they will get it pretty soon.
The president has repeatedly targeted Powell and the Fed rhetorically over whether interest rate hikes are causing stock markets to dive.
Yesterday, he tweeted: "The only problem our economy has is the Fed. They don't have a feel for the market. The Fed is like a powerful golfer who can't score because he has no touch. He can't putt."
And President Trump told The Washington Post a few weeks ago, "So far, I'm not even a little bit happy with my selection of Jay."
Let's look at the legal questions of whether the president could remove Powell, either as Fed chairman or a member of the Federal Reserve Board of Governors, and what all of this means, with Binyamin Appelbaum, who covers the Fed for The New York Times.
Thank you very much for joining us on the "NewsHour."
I guess the first question is, could the president fire Fed Chairman Powell legally?
This is a big question, and there is some disagreement about it.
The law says that the president can remove a member of the Federal Reserve's Board of Governors, which includes Jay Powell — quote — "for cause." And most legal scholars thinks that means the president can't do it just because he doesn't agree with the Fed chairman about policy. He needs to have some grounds beyond that.
But there is a separate question, importantly, about whether the president could remove Mr. Powell as chairman of the Fed while leaving him on the Board of Governors.
So, some kind of demotion, almost. That separate question, does that have a separate answer?
So the law doesn't say anything about it, and opinion is more divided. There are some people who think the president has considerable latitude to do that, basically, for any reason that he would like.
There are some people who think that there is a similar amount of protection, that the president would need to find some cause beyond a policy disagreement even to remove Mr. Powell as chairman. That is a much more open question.
So let's keep going with this hypothetical.
Even if he were to fire Powell or somehow demote Powell, could the other governors intervene somehow? Could they resist?
So, it is a really important point that you are raising, because the purpose of getting rid of Chairman Powell presumably would be to install someone who would lead the Fed in the direction that the president desires.
He has said repeatedly that he thinks interest rates are rising too quickly and that the Fed should stop raising interest rates. But it is not at all clear that removing Chairman Powell would accomplish that purpose.
In the first place, the other members of the Fed's policy-making committee have been voting unanimously to raise rates along with Chairman Powell. Even if he were removed, there is no particular reason to think that they would change their minds.
Indeed, they could even choose to resist the president by retaining Mr. Powell as the chairman of the policy-making committee, even if the he were removed as the chairman of the whole Fed.
We should just make a point of that. I mean, none of this has ever happened before, right? We really have no idea how these governors would respond?
We're in completely uncharted waters. No president has ever tried to remove a member of the Federal Reserve's board, let alone a chairman, for any reason at any time. So this is an incredibly theoretical discussion about what the law says.
We are in uncharted waters. No one has tried it before.
Because of how uncharted these waters are, there is already political resistance to some of this talk. How extensive is that resistance so far?
It is considerable.
And the reason is that the Fed's independence is extremely important to many people. Investors value the idea of an independent Central Bank. They want technocrats to be determining the level of interest rates. They don't want politicians to be making those decisions.
The reason that we have an independent Central Bank is to insulate its decision-making from the vagaries of politics, so that politicians like the president can't urge lower interest rates in the short-term to goose economic growth, at the expense of overheating the economy in the longer term.
So that structure is very important. And we have heard a number of senators from both parties on Capitol Hill saying very clearly in recent days, actually in unusually blunt and public terms, keep your hands off the Fed, Mr. President. Do not fire Mr. Powell. Leave the Fed alone.
And I wonder, just in the time we have left, all of this talk, even if it is theoretical, is having a big impact on the markets, isn't it?
It really is. Just the idea that the president is meddling in this, is thinking about it, might do it has really unnerved financial markets.
The president has said that he thinks the Fed is the only thing that is causing consternation in financial markets. I have spoken with a lot of investors in recent days who turn that on its head and say, you know who is causing problems in financial markets is President Trump.
The uncertainty that he is creating is rapidly becoming the biggest challenge for the economy.
Binyamin Appelbaum of The New York Times, thank you so much.
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