MNI INTERVIEW: Powell Firing Would Set Off Legal Battle-Menand

Federal Reserve Chair Jerome Powell could fight a potential firing by President Donald Trump in court by arguing that he is being pushed out unfairly, setting off a tough and public legal battle that would quickly make its way to the Supreme Court, Columbia University's Lev Menand told MNI.

“We’d be in pretty uncharted territory but I think it’s quite possible that’s where we’re headed at this point,” said Menand, a former New York Fed staffer and current Columbia University Law School professor who is an expert on legal issues around central banking. 

“If it were for-cause removal, Jay Powell should be provided notice and an opportunity to be heard before being removed from office. Powell could go to court and challenge either the process as being inadequate or the findings as they're lacking substantial evidence to support the removal.”

He added: “It’s possible the courts will prevent this from happening.”

UPHILL BATTLE

In the interim, Fed Vice Chair Phillip Jefferson would be come the acting board chair, while the FOMC would vote on its own chair – and also likely select Jefferson. 

Menand said a preliminary injunction to halt the firing could come as quickly as 24 hours, but the case would be an uphill battle for Powell in a Supreme Court that has taken sweeping interpretations of presidential powers. 

“One would think it would rapidly reach the Supreme Court, where the Supreme Court would have to determine whether to grant a preliminary injunction, which is what presumably Powell would ask for to remain in office, and decide whether Powell is likely to prevail on the merits of his challenge,” he said.

Trump indicated to Republican lawmakers Tuesday that he will "likely" fire Federal Reserve Chair Jerome Powell soon, after receiving approval from them to make the move, a senior White House official told MNI. The president then on Wednesday denied he was planning to remove the Fed chair, adding however that he could not rule it out. (See: MNI INTERVIEW: Fed Independence Facing Imminent Risk - Menand)

“The White House has clearly been trying to develop a case for removing Powell for cause. And it's a contrived case, but if they move forward in that direction with the first presidential for-cause removal in over a century, they're going to really test the Supreme Court and the lower courts’ willingness to second-guess a presidential cause determination," Menand said. 

This would be "a different sort of legal question than what the courts have been grappling with in the other litigations where the president asserted an inherent authority to fire at will, at pleasure, without cause. This would be a question about: is the cause sufficient? Is the process afforded Jay Powell to defend himself sufficient?”