the issue
President Donald Trump’s attacks on Federal Reserve Chair Jerome Powell have raised an uncomfortable prospect for Washington lawmakers: a potential attempt to fire the central bank chief.
Trying to dislodge Powell before his term is up is an unpopular idea, even among Republicans who share Trump’s hopes for interest rate cuts in the near term, and some are floating a solution — a bill that could also let them make their own changes to the Fed.
the bond
Rep. Frank Lucas, R-Okla., told Semafor last week that he wants Congress to pass a bipartisan bill that would protect the Fed against administration attempts to encroach on its independence, even after Trump walked back earlier comments targeting Powell.
“I would suggest — if my Democrat colleagues agree with me that reinforcing the Fed’s independence is a critically important issue — then I think we can achieve an understanding there legislatively,” Lucas, who chairs the House Financial Services Committee’s monetary policy task force, said at Semafor’s World Economy Summit.
No specifics have been decided, Lucas said, but “there are provisions of Dodd-Frank we’re looking at,” a reference to the 2010 banking legislation passed in the aftermath of the financial crisis that began in 2008. Lucas added that the prospective bill would also give Republicans the opportunity to “make corrections” that would block the Fed from acting as a “a social policy and environmental policy enforcer.”
Democratic members of the Financial Services panel are expressing at least mild interest in the idea — though there’s some hesitation about embracing it right away. That’s because there’s a worry that speaking too positively could feed the impression Trump already has the legal ability to fire Powell, said one person familiar with their talks who was granted anonymity to discuss private conversations.
“I have a lot of respect for Congressman Lucas, and I’m always willing to look at opportunities to work together,” Rep. Juan Vargas, D-Calif., told Semafor.
Vargas, the top Democrat on the monetary policy task force, added: “We agree that the independence of the Federal Reserve is critical, and in my view, our current regulations to preserve it are strong. I’ll be watching closely to ensure the Trump administration respects those laws and will continue my work to defend the central bank’s independence.”
Rep. Jim Himes, D-Conn., offered a blunter quip when asked about Lucas’ idea at the World Economy Summit: “I’m glad to know that Frank Lucas is opposing the destruction of the American capitalist economy.”
Later, he said he was open to bipartisan work on issues like the Fed and cryptocurrency regulation, though he made clear the independence of the central bank shouldn’t be up for debate.
“As a Democrat, I’m supposed to say the president is lawless, the Constitution is in flames, all we’re going to do is resist,” Himes said in an interview Wednesday. “But my job is to try to try to advance the interests of my constituents and the country. So, yes, I’ll work on a bipartisan crypto bill.
“And damn right I’ll work on — again, it sort of makes me laugh, are we really going to litigate whether we should have an independent Federal Reserve?” Himes added. “Because if so, we’ve got a long way to go in terms of real bipartisanship.”
The View From the white house
At the outset of his second term, Trump mostly steered clear of attacking Powell in public. In private, his administration has sought to establish more control over independent agencies — including with an executive order that directed the central bank to run its supervisory rules by the White House.
But after one of his top economic advisers told reporters last week that the White House was exploring whether it could legally fire Powell, the president penned a series of attacks against the central banker on social media platform Truth Social.
“[T]here can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW,” Trump posted.
The comments sparked enough uncertainty to cause markets to dip — and Trump quickly walked them back, saying the next day that he had “no intention” of firing Powell. Stocks immediately ticked up.
The View From the supreme court
The Supreme Court is currently weighing whether to overturn a decades-old legal precedent, targeted by the White House, that prevents the president from firing heads of certain independent agencies without cause. Lucas said last week that he was “not so certain” their ruling would affect the Fed, but that he expected lawmakers to “discuss these issues” in upcoming hearings held by his task force.
Some experts say it would be highly difficult to carve out the central bank.
“There is no meaningful way to distinguish the Fed from other administrative agencies, not least because central banking in the 21st century has become so much a function of regulation and supervision,” Peter Conti-Brown, a professor who studies the Fed at the Wharton School of the University of Pennsylvania, told Semafor. “The idea that the Fed is different is a comforting thought, and the Court may well indeed attempt to make it, but that argument lacks credibility.”
“I fear that even if the Court insists the Fed is different, a decision that will give the President untrammeled authority over independent agencies will become too tempting to let lie,” Conti-Brown added.