President Trump has asked both internal and external advisers to shoot Federal Reserve Chairman Jerome H. Powell, two people familiar with the exchange said, as a sign of his growing frustration with the head of the central bank.
News of Trump's discussions on Powell led to legislative protests and alerts to economists and Wall Street executives on Saturday. In the evening, Finance Minister Steven Mnuchin tweeted a statement from the president: "I totally disagree with the Fed's policy. , , However, I have never suggested dismissing Chairman Jay Powell and I do not believe that I have the right to do so.
The two, who were familiar with Trump's questions about his authority to remove Powell, spoke about the condition of anonymity in order to freely discuss private discussions. One of them characterized Trump's investigation as expressing his anger at the stock market's recent fall and his desire to blame someone.
Many experts said that the president most likely did not have the authority to remove Powell, the Trump head of the central bank a year ago, largely on the recommendation of Mnuchin.
Ever since he became president, Trump has shattered many norms, but investors and economists have been unprepared for publicly opposing central bank policies.
In the Clinton administration White House officials had largely avoided public criticism of the Fed, fearing that any political pressure on the central bank could undermine their reputation and cause investors and finance ministers to question their actions put. 1
Tru mp throws this tradition aside. He has been publicly talking for weeks about how Powell leads the Fed, and forging a course of slow but steady rate hikes to curb inflation.
The fact that Trump has talked with advisors about whether he could dismiss Powell first reported by the Bloomberg News on Friday night.
The stock market is on its way to its worst year in a decade, with many sectors falling more than 20 percent – technically a bear market. The sell-off continued last week – the worst for the stock market since 2008 – after Powell signaled that the Fed had not intended to change course significantly.
Trump's question about his authority to dismiss Powell highlights how scared he is that the stock market slump and worries about economic growth are threatening his chances for reelection and weakening him politically.
The Fed declined to comment.
Wall Street executives have asked Trump to step down from his attacks If the Fed chairman were dismissed, it would lead to a massive sell-off of markets and blabber on the global financial system. The independence of the Fed and the freedom to make decisions independently of politics have long been key factors in supporting the US economy.
"If Trump attempts to dismiss Powell, this would lead to a catastrophic reaction to markets," said Greg Valliere, chief strategist at Horizon Investments. "This is so ruthless that Kudlow and probably Mnuchin [Defense Secretary Jim] would resign, as would Mattis (19459047)."
The Federal Reserve Act states that a Fed governor may be removed "for good reason", something the courts have interpreted as criminal activity or misconduct, as in other cases involving independent leaders.
Powell is both one of the governors of the Fed and its chairman. The law is silent as to whether someone at the Fed can be deprived of chairmanship.
"The law is not clear," wrote Fed historian Peter Conti-Brown, a professor at the University of Pennsylvania, in a series of tweets. "Trump may be able to veto a Fed governor as chairman, but not dismiss the governor."
If the president even tried to depose Powell as chairman, he would probably go to court, and "we have no idea what the court would do," Conti-Brown said, which is why he predicts "chaos."  If Trump managed to get Powell out of the chair, it is not clear what would follow, the Senate would have to confirm a replacement, and many legislators have stated that they believe in Fed independence and support Powell That said, one of the other Fed governors would steer the Fed in a different direction.
Regardless, Fed decisions are the result of a vote by a board of 12 members, including Powell and six other Fed governors Washington and five regional Fed Presidents At present, only five governors have been appointed, meaning that decisions are made between the Washington-based operators and the regional F ed presidents, who are not appointed by Trump.
Trump's main complaint is that Powell is raising interest rates too fast, which concerns the president's concerns will affect the economy and its re-election opportunities by 2020. The President told the Washington Post last month that he was "not even a bit happy with my election of Jay [Powell]."
Trump's critique of Powell is not without irony. Republicans have been criticizing the Fed for years for keeping interest rates too low for too long and warning against catastrophic inflation that never happened. They have calmed down since Trump became president. Trump himself fluctuated, sometimes criticizing and sometimes accepting the Fed's policy of low interest rates.
For the most part, left-leaning economists believe that the Fed should stop raising interest rates, although they believe that this should be the case left to the Fed alone.
The Fed raised interest rates on lending rates across the country and around the world to 2.25-2.50 percent last week. That's still low by historical standards. This reflects the long recovery from the depths of the financial crisis and the great recession that occurred a decade ago. However, many economists agree that rising interest rates are playing a role in the sharp decline in stock markets. The confrontational trade policy of Trump is often cited.
"It is legally questionable if President Powell can fire. It is not politically advisable. And most of all, it would be financially reckless, "added Richard Fisher, former president of the Federal Reserve Bank of Dallas. "I think you have a dramatic sell-off in the market."
In the past, authoritarian leaders in Argentina and Turkey had removed their central bank chairmen, and there were downturns, Fischer said. Former US presidents, including Ronald Reagan, have allegedly tried to get the Fed to keep interest rates low, but no one's known to be trying to fire a sitting Fed chairman.
Some say Trump had tweeted that he intends to fire Powell, but the credibility of the Fed and global markets would likely be damaged, even if Powell would ultimately retain his job following a court order.
"Even believing that President Powell fires is frightening," said former US President Douglas Holtz-Eakin Economic Advisor to George W. Bush and John McCain. "In one fell swoop, this would destroy the independence of the Fed."
Other officials agree.
"What the president does not understand is that monetary policy should be separate from politics," said Sen. Mark R Warner (D-Va.), Member of the banking committee. "Any action taken to relieve the independence of the Fed would not only be inappropriate, it would also threaten the institutions that protect our rule of law."
Kudlow said at a live Washington Post event in November that this was "impossible" task "to remove Powell.
"Jay Powell is a friend of mine. I do not even want to continue on this path, "Kudlow said when asked if President would replace the Fed chairman . "A Fed chairman can only be removed for good cause."
Robert Costa contributed to this report.