President Donald Trump has asked both internal and external advisers to shoot Federal Reserve Chairman Jerome Powell, two exchange-experienced members said in a note of growing concern with the central bank chief.
News of Trump Discussions over Powell on Saturday led to protests from lawmakers and alerting economists and Wall Street executives. In the evening, Treasury Secretary Steven Mnuchin tweeted a statement from the President: "I totally disagree with the Fed's policy … but I never suggested dismissing Chairman Jay Powell and I do not think I have the right. "
The two persons familiar with Trump's questions about his authority to remove Powell spoke under 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 hold someone responsible.
Many experts said the president most likely had no authority to remove Powell, whom Trump called the central bank a year ago, largely on the recommendation of Mnuchin.
Trump has shattered many norms since taking office, but investors and economists have proven unprepared for his willingness to publicly oppose central bank policies.
The White House Clinton administration has largely avoided public criticism of the Fed, fearing that any political pressure on the central bank could undermine its reputation and cause investors and finance ministers to question its actions ,
Trump rejected this tradition. 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 advisers about whether he could dismiss Powell for the first time reported by Bloomberg News on Friday night.
The stock market is on track for its worst year in a decade, with many sectors down more than 20 percent – technically a bear market since 2008 – after Powell signaled that the Fed had no plans for a drastic course change.
Trump's questions about his power to dismiss Powell underscore how much he fears the stock market is slipping and worries about economic growth threaten re-election opportunities and weaken him politically.
The Fed declined to comment.
Wall Street executives have asked Trump to step down from his attacks and they say every step of dismissing the Fed's chairmanship would lead to a massive sell-off of the markets and rattle 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 tries to fire Powell, this would be a catastrophic reaction to markets," said Greg Valliere, chief strategist at Horizon Investments. "This is so reckless that Kudlow and probably Mnuchin would resign, as would Mattis [Defense Secretary Jim]."
The Federal Reserve Act states that a Fed governor may be removed "for good reason", which the courts have interpreted as criminal activities or misconduct, as in other cases involving independent corporate officers.
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 the position of chairman.
"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 elect a Fed Governor as chairman of the board, 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 that, "said Conti-Brown, which is why he predicts" chaos. "
If Trump managed to remove Powell from chair position, it is uncertain what would follow Many legislators have stated that they believe in Fed independence and support Powell, which is not clear, however. Each of the other Fed governors would take the Fed in a different direction.
Voted on by a board of 12 members, including Powell and six other Washington Fed governors and five regional Fed presidents, there are only five governors currently appointed, meaning that decisions are made between Washington-based operators and the regional Fed -Pridents who are not appointed by Trump will be split.
Trump's main complaint is that Powell's u will quickly rise, as far as the president is concerned, will affect the economy and its re-election opportunities until 2020. The President told the Washington Post last month that he was "not even a bit happy with my choice 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 wavered, sometimes criticizing the Fed's policy of low interest rates and sometimes even accepting them.
For the most part, left-leaning economists believe that the Fed should stop raising interest rates to the Fed alone.
The Fed raised interest rates, which affect lending rates across the country and in 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 above all, it would be financially reckless," added Richard Fisher, former President of the Federal Reserve Bank of Dallas, "I believe They would have a dramatic market sale. "
Authoritarian leaders in Argentina and Turkey in the past In the past, the governors of the central bank have removed their central bank chairmen, and downturns followed, Fischer said. Former US presidents, including Ronald Reagan, have allegedly tried to get the Fed to keep interest rates low, but no one has known about trying to fire a sitting Fed chairman.  Some say that if Trump tweeted that he intended to fire Powell, it would probably damage the credibility of the Fed and world markets, even if Powell would ultimately retain his job after a legal dispute.
"Even thinking of the president Shooting down Powell is frightening," said Douglas Holtz-Eakin, a former economic adviser to George W. Bush and John McCain, "in one fell swoop, this would destroy the Fed's independence."  Others agree. 1965900 2] "What the President does not understand is that monetary policy should be separate from politics," said Sen. Mark Warner, D-Va., Member of the Banking Committee. "Any measure taken to dismantle the independence of the Fed would not only be inappropriate, it would also threaten the institutions that protect our rule of law."
Larry Kudlow said at an Washington Post Live event in November that this was an "impossible task" to remove Powell.
"Jay Powell is a friend of mine, I do not even want to go down this street," Kudlow said when asked if the president wants to replace the president of the Fed. "A Fed chairman can only be removed for cause."
Robert Costa of the Washington Post contributed to this report.
First published by the Washington Post.