By estimate or by law: what threatens a new twist in the Trump-Powell standoff

When Donald Trump publicly reprimanded Jerome Powell for the rising cost of renovating the Fed buildings, it was like a Russian TV story about President Putin's visit to an Olympic construction site. Here, too, there were accusations of inflated costs, but no threats to fire him. Although there are more chances to send Jerome Powell to resign than it seems legally, says Igor Slabykh, a lawyer and author of the USlegalnews   

The complexity of the relationship between U.S. President Donald Trump and U.S. Federal Reserve Chairman Jerome Powell was concentrated in 51 seconds of the officials' joint speech on July 24 after inspecting the progress of the Fed's building renovations.

"We looked and [the cost of reconstruction] went up a little ... or a lot: it was $2.7 [billion] and now it's $3.1 [billion]," President Trump remarked.  Whereupon Chairman Powell stopped just shaking his head in disagreement, interrupted the President and said: "I'm not aware of anything about that. I haven't heard anything like that from anybody." The President explained that it had just come to his attention, pulled a sheet of notes from his inside jacket pocket, and showed it to Powell. After a few seconds of studying the document, the Fed chairman noticed that another building was included in that amount. The president replied that it had been built, too, after all. "Built five years ago," the Fed chairman again objected;

The U.S. Federal Reserve System is the local counterpart to central banks in other countries. The system is run by a seven-member Board of Governors, including the Fed chairman. He is appointed for a term of four years for a maximum of two terms. All of them are nominated by the president, but the nomination made by the head of state must be supported by the Senate. The term of office for a member of the Board of Governors is 14 years and cannot be renewed, and a member of the Board leaves and is replaced by a new nominee every two years. Such a complex structure is designed, on the one hand, to guarantee the independence and stability of the regulator, and on the other hand, allows the president to exert some influence on the Fed.

Jerome Powell was nominated as a member of the Fed Board of Governors by President Barack Obama in 2012. In 2018, it was President Trump who initiated Powell to become Fed Chairman, and in 2022 already President Biden nominated Powell for a second (and maximum possible) term. Thus, Powell's powers as chairman will end already in May 2026, but Powell will remain a member of the Board of Governors until 2028, as he received an incomplete mandate in 2012 by his predecessor, and his own 14-year term was received only in 2014.

President Trumpbegan expressing his displeasure with the Fed chairman almost immediately after taking office:  The president and the regulator's views did not agree on the need to change the key rate. The president believes that the absence of high inflation requires a lower key rate to stimulate economic development. Powell in absentia disagrees, stating that inflation is still higher than necessary, but most importantly, the Fed is preparing for a worsening economic situation, including because of the duties that Trump is imposing. According tothe words of the Fed chairman, the Fed's main objectives are to maintain price stability and maximize employment. However, the introduction of tariffs may hit both areas, so the key rate should remain unchanged until the situation is clarified. 

With such a conflict, it's not surprising that President Trump, who has fired a large number of executive branch leaders who displease him, has been promising to fire Powell for some time. Угрозу президент Трамп озвучил еще в апреле. At one point, President Trump even forgot that he himself nominated Powell for Fed Chairman and resented his appointment. However, President Trump has since changed his mind and is said to have rejected the firing after meeting with Republican members of Congress in mid-July. As Trump said in a meeting with reporters, he explicitly asked his fellow party members whether Powell should be fired and even showed a draft letter of resignation.  Allegedly, those were in favor of Powell's resignation, but  the president said that he "probably" would not fire the Fed chairman because he was "more conservative" than lawmakers. 

The next day, however, Republican Senators Thom Tillis and Mike Rounds warned the president against firing Powell. Tillis said:   "If anyone thinks that turning the Fed into another agency in the government reporting to the president is a good idea, they're making a huge mistake." 

Be that as it may, President Trump is known for his impulsiveness and frequent changes of opinion, so the decision to revisit the discussion of firing the Fed chairman doesn't look fantastic. 

The Fed chairman is protected by law and jurisprudence. Undersection 10 of the Federal Reserve Act, the President can only fire a member of the Board of Governors for cause, and that cause has traditionally been defined as malfeasance, negligence, or inefficiency. And just as traditionally, disagreement over policy (and the question of what to do about a bet is a classic case of such policy) is not an appropriate reason for dismissal. 

However, it is not so simple: while protecting members of the Board of Governors from summary dismissal (and the chairman is also a member of the Board of Governors), the law says nothing about firing the chairman himself. It is difficult to predict exactly how the courts would apply the law if the president fired Powell as chairman but not as a member of the Board of Governors: this has never happened in U.S. history. Accordingly, no court has ever tested the legality of such a presidential action.

However, jurisprudence also stands in the defense of the Fed chairman. For nearly 100 years, the U.S. Supreme Court's decision in Humphrey's Executor v. United States, which was decided in 1935 after President F.D. Roosevelt attempted to fire William Humphrey without proper cause. United States, which was decided in 1935 after President F.D. Roosevelt attempted to fire William Humphrey, commissioner of the Federal Trade Commission, without proper cause. The Court sided with Humphrey and agreed that the law's restrictions on firing certain members of the executive branch were consistent with the Constitution. That is, a precedent was set that is commonly interpreted as an opportunity for some federal agency heads to retain their independence. But if a modern court decides that the old case is not the same as the new one on factual grounds, it cannot be applied. 

Moreover, the Trump administration is now trying to get rid of this precedent that limits the president's power. In theory and in practice, there are debates about the scope of power of the head of state. Some believe that the president should manage the executive branch without any interference from other branches of government, because this is the kind of management that will enable the president to implement the policies that he or she deems necessary and that the voters voted for. Some believe that checks and balances should permeate the president's job and limit the president's ability to act. It is the second viewpoint that is set forth in Humphrey's Executor v. United States.

However, the current Supreme Court has already begun to move away from this approach: in a case challenging the firing of members of the National Labor Relations Board and members of the Merit System Protection Board, the Supreme Courtsupported President Trump despite the statutorily prohibited unmotivated firing and the Humphrey precedent. However, in that new decision, the Supreme Court, albeit without detail or motivation, stipulated that firing a member of the Fed's Board of Governors is "different" because the Fed is a uniquely independent body within the executive branch. However, the Supreme Court said nothing about firing the Chairman (not just a member of the Board of Governors) of the Fed.

Regardless of the president's ability or inability to fire the Fed chairman without cause, the president still has another option: fire the official for misconduct. Calling Powell's firing not very likely, President Trump left himself a fallback option, adding "unless fraud is uncovered at the Fed." And here it is necessary to return to the story of the renovation of the Fed buildings.

The overhaul itself has already become a parable, as it has been underway since 2017, and each time Powell has been questioned about the progress of the overhaul during congressional hearings. But by early July, tensions had escalated over 2025, and on July 10, the White House Office of Management and Budget sent a formalrequest to the Fed chairman. In that request, the head of the Office questioned whether the reconstruction project complied with the law and asked for comments on changes to the project beginning in 2021.

A week later, the Fed chairmanresponded, detailing the circumstances of the project change. In particular, Powell referred to the fact that the buildings are historical, which makes it difficult to reconstruct them due to special requirements.  At the same time, since the construction of the buildings have been carried out only current repairs, and capital repairs - never. In the end, the original plans were supplemented, for example, by actions to clear the building and the area of building materials made of asbestos, as well as a large amount of underground work related to drainage. 

The head of the Fed put the responsibility for the bulk of the project's changes on the National Capital Planning Commission. As Powell insists, once the Commission approved the project, the Board of Governors itself made minimal changes, which were aimed only at reducing the cost and simplifying the reconstruction. Among the various reasons for the high cost of the project were also cited, such as the need to preserve the original marble with which the building was covered and the purchase of marble only from a special deposit where the marble was purchased during construction. By the way, the cost of the reconstruction was affected by the position of another approving state body: the Commission of Fine Arts just requested to use marble instead of cheaper materials.

Powell also refuted some of the arguments from the White House letter: for example, contrary to the statements in the letter, no VIP elevators were provided for the reconstruction. At least twice the Fed chairman reminded that all the information is contained on the regulator's website.

The Fed chairman drew attention to the fact that the inspector general (an independent employee who is responsible for compliance with the law by a government agency) has access to all documentation on the reconstruction, and in 2021 even audited the project. Moreover, Powell showed confidence in his work and showed that he had nothing to hide: in mid-July, after a wave of media outrage over the cost of the reconstruction and its timing, the Fed chairman asked the regulator's inspector general to check for violations;

Finally, among the reasons for the rise in construction costs are inflation over the past few years and ... taxes imposed by Trump himself. Under these circumstances, it would be difficult for the White House to prove abuse by the Fed chairman even though the fees did go from $1.9 billion to $2.5 billion. Given that it would be difficult to prove abuse during the reconstruction, a situation in which Powell would be fired for malfeasance seems unrealistic. To initiate a criminal trial in a felony court, prosecutors must obtain grand jury approval, but with the aforementioned non-obviousness of wrongdoing, there is no guarantee that a jury would see Powell's actions as grounds for criminal prosecution.

That said, even if one agrees with President Trump's claims, the regulator is spending its own revenues, not budget money, on the renovation.

This article was AI-translated and verified by a human editor