It is no surprise that President Donald Trump is exploring options to reshape the U.S. Federal Reserve by purchasing Bitcoin with government funds to position the U.S. as a leading cryptocurrency hub. This is the most discussed topic in his campaign.
Trump appointed Powell as Chairman of the Board of Governors of the Federal Reserve in February 2018 during his first term as President. But the two have always been at odds over interest rate issues. In 2022, President Joe Biden re-nominated Powell for a second four-year term.
"We are not allowed to own Bitcoin. That is an issue Congress needs to consider, but we do not want the Fed to change the law," Powell said.
Now, there are talks that Trump could fire Powell when he returns to office. But could he? Unfortunately, Trump cannot fire Powell, but he may try to remove other board members.
The Fed primarily compares the seven members who are presidential appointees confirmed by the Senate. With some Biden appointees currently in office, Trump may seek to "clean house" if re-elected.
Michael Barr, Vice Chair for Supervision and Biden appointee, is reportedly Trump's primary target. Barr's overseas banking regulations, a role not directly related to monetary policy, could provide Trump with a potential reason to challenge his position.
Barr's term lasts until 2026, but Trump's advisors are considering arguments to remove him. Knowing that this could happen, Barr sought legal advice from Arnold & Porter, a prominent law firm.
Other Biden appointees, such as Adriana Kugler, Philip Jefferson, and Lisa Cook, are also being considered. Kugler, whose term ends in January 2026, is rumored to have a bad reputation, which might make her an easier target.
On the other hand, the members appointed by Trump, Christopher Waller and Michelle Bowman, are likely to keep their jobs. Waller works on monetary policy, while Bowman focuses on community banking.
The legal protections for Federal Reserve governors require a "reasonable" standard for removal. This means that misconduct, not policy disagreement, must justify their removal.
"Trump might try, and he might try," said Alan Blinder, former Vice Chairman of the Fed. If opposed, the issue could escalate to the Supreme Court. However, Blinder believes the court would side with Powell.
Trump could also try other ways, such as demoting Powell to a lower position on the board. Although this has never happened before, many experts consider it a legal gray area. Additionally, Trump could push a Republican-controlled Congress to amend the Federal Reserve Act to reduce the agency's autonomy.
The independence of the Federal Reserve has been the cornerstone of U.S. economic policy since the 1950s. Critics argue that attempts to undermine it could destabilize financial markets.
However, Trump has previously commented on this issue in a recent interview on NBC News' "Meet the Press". When asked if he intended to fire Powell, he replied, "No, I don't think so," Trump said. "I don't see that. But I don't see – I think if I told him to do it, he would. But if I told him to do it, he might not. But if I told him to do it, he would do it."
In another interview with Bloomberg in June, he said, "I would let him throw the ball, especially if I think he is doing the right thing."
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