Fed Scholar Expects Immediate ‘Market Chaos’ If Trump Ousts Powell
Fed Scholar Expects Immediate ‘Market Chaos’ If Trump Ousts Powell
(Bloomberg) -- President Donald Trump would create chaos in financial markets if he ousted Federal Reserve Chairman Jerome Powell, according to Peter Conti-Brown, a professor at the University of Pennsylvania’s Wharton School and author of the 2016 book “The Power and Independence of the Federal Reserve.”
Trump has discussed firing Powell as his frustration with the central bank chief intensified following this week’s interest-rate increase and months of stock-market losses, Bloomberg News reported late Friday, citing four people familiar with the matter.
In a series of Twitter posts early Saturday, here’s how Conti-Brown explained what’s involved legally if the president wants to remove a sitting Fed chairman:
- “The law isn’t clear. Trump can probably de-designate a Fed Governor as Board Chair, but not fire the Governor. That would violate a deeply held norm in Fed governance, but then, norms and Trump aren’t fast friends.”
- “What immediate effect? Market chaos and Jay Powell still the Fed Chair. Because the even curiouser fact of Fed governance is that there are two Fed Chairs, not one. The Board Chair (controlled by President) and FOMC Chair, controlled by the FOMC.”
- “And the FOMC can elect any of their members to lead them. Rich Clarida (current Vice Chair) would lead on regulation and testify before Congress. The FOMC could elect Jay Powell to lead monetary policy, the only thing Trump cares about.”
- “The next chapter would depend on the Senate. Would they confirm a Mulvaney or a Kushner or a Warsh to succeed Powell? I hope not. I hope they would say ‘We will wait until Powell’s term at the FOMC is up according to our expectation of a four-year chairmanship.’ But who knows?”
- “The fact would be that, confirmed or not, the two chairmanships that each Fed chair has held since 1935 would be separated for the first time. It would feed theories (already rampant) of unaccountability and deep state manipulation.”
- “And it would represent a governance crisis that would damage the Fed, damage the presidency, and damage the nation.”
- In an email, Conti-Brown adds: “It is now all up to the Senate. Will they show resolve to stop this before it starts? I hope so.”
To contact the reporter on this story: Brendan Murray in Washington at brmurray@bloomberg.net
To contact the editors responsible for this story: Brendan Murray at brmurray@bloomberg.net, Scott Lanman
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