By Gloria Ogbonna
Federal Reserve Chair Jerome Powell’s decision to publicly accuse the Trump administration of undermining the Fed’s independence may ultimately give President Donald Trump a powerful opening: the ability to select the next leader of the central bank with or without Senate cooperation.
In an unprecedented move, Powell released a video late Sunday night alleging that the Trump administration was attempting to pressure the Federal Reserve into cutting interest rates.
He claimed that recent Justice Department inquiries into his Senate testimony and the costly renovations of the Fed’s headquarters were merely “pretexts” designed to intimidate the central bank for refusing to move rates aggressively enough to satisfy the president. Powell offered no concrete evidence to support the allegation.
The charge was swiftly rejected. President Trump denied any involvement in the subpoenas, while U.S. Attorney for the District of Columbia Jeanine Pirro whose office issued them explained that federal prosecutors acted only after repeated attempts to contact the Fed were ignored.
According to Pirro, the subpoenas were procedural, not punitive, and certainly not a threat of indictment.
“The word ‘indictment’ came from Mr. Powell, not from us,” Pirro said, emphasizing that the situation would never have escalated had the Fed responded to earlier outreach from prosecutors.
Powell’s timing raised eyebrows. His announcement appeared designed to catch the administration off guard and possibly rattle financial markets.
If that was the intention, it backfired. Markets remained calm, stocks closed higher, and bond traders showed no signs of panic—suggesting investors were unconvinced by Powell’s claims of political interference.
While markets stayed steady, Washington did not. Several senators reacted with alarm. Senators Tom Tillis of North Carolina and Lisa Murkowski of Alaska announced they would refuse to confirm any Trump nominee to the Federal Reserve until the Justice Department investigation is resolved.
With Republicans holding only a razor-thin Senate majority, their resistance could be enough to block confirmation of a permanent successor once Powell’s term expires.
But this strategy appears to rest on a misunderstanding of how the Federal Reserve Act actually works.
Contrary to popular assumption, a Fed chair does not automatically remain in power when his term ends. While Federal Reserve governors may hold over until a successor is confirmed, that provision does not apply to the chairmanship itself.
The chair serves a four-year term and, once it expires, ceases to hold that role unless renominated by the president and confirmed by the Senate. Even if Powell remains a governor under his 14-year term, he would no longer be chair.
Some senators may assume Powell could simply stay on, or that the vice chair—currently Philip Jefferson—would automatically step in. But legal precedent strongly suggests otherwise.
The Federal Reserve Act allows the vice chair to assume duties only in the “absence” of the chair, a term historically interpreted to mean temporary situations such as illness or travel—not a vacancy created by an expired term.
This exact issue was examined during the Carter administration in 1978, when Arthur Burns’ term as Fed chair expired. Burns, originally appointed by President Nixon, frequently clashed with President Jimmy Carter over monetary policy.
Despite widespread belief that Burns would remain in place, Carter unexpectedly chose to replace him with G. William Miller.
The problem was timing: the Senate could not confirm Miller before Burns’ term ended. Lawyers at the Office of Legal Counsel concluded that the law did not allow the vice chair to automatically take over during a vacancy. Instead, they determined that the president possessed inherent authority to appoint an acting chair to ensure continuity of government operations.
In a legal memo, Deputy Assistant Attorney General Larry Hammond advised that when no statutory mechanism exists to fill a vacancy, the president may designate one of the sitting governors to serve as acting chair until confirmation of a permanent nominee.
Acting on that advice, Carter issued a formal order appointing Burns himself as acting chair until Miller was confirmed a decision that underscored the president’s ultimate authority in such situations.
Burns served briefly in that role before stepping aside, later explaining that the continued presence of a former chair could undermine the authority of the new leader.
Similar gaps occurred in later years. When Alan Greenspan’s term expired in 1996 and when Powell himself awaited reconfirmation under President Biden, the Fed’s board voted to name each man chairman pro tempore.
In both cases, however, those actions followed presidential nominations and were effectively ratifications of the president’s choice—not independent decisions by the board.
The lesson is clear: if the Senate blocks Trump’s nominee, it does not prevent Trump from deciding who leads the Federal Reserve. It simply shifts the process from a confirmed chair to an acting one.
Trump’s options would be limited to sitting governors, either newly confirmed or already serving. That likely means one of his appointees such as Christopher Waller, Michelle Bowman, or Stephen Miran would be elevated.
While senators could block confirmation of new nominees, they cannot strip the president of the authority to designate an acting chair from among existing governors.
There are practical limits. Any acting chair would still need the confidence of the Federal Open Market Committee, since monetary policy decisions require majority support. But the power to choose who occupies the chair permanently or temporarily ultimately rests with the president.
When Jerome Powell’s term ends, the outcome is effectively settled. Whether through Senate confirmation or presidential designation, Donald Trump will decide who chairs the Federal Reserve next one way or another.
Source Breitbart
Original article
Comments