MNI INTERVIEW: Powell Would Win In Court If Trump Fires Him

Federal Reserve Chair Jerome Powell would likely prevail in court and get to serve out his term even if President Donald Trump goes through with threats of firing him, former Fed lawyer Cornelius Hurley told MNI.

“Powell has said he’s not going. He would go immediately to court and ask for an injunction or restraining order or stay on the executive order, or however Trump articulated that action, and I think it's a high probability that the court would grant that stay,” said Hurley, former assistant general counsel to the Fed Board and now a professor at Boston University’s School of Law. 

“So Powell stays in office. It immediately goes to the appeals court, and the administration would probably ask for expedited relief at the Supreme Court, and because of the enormity of the issue, the Supreme Court would probably give it, so it would probably be resolved in a matter of days or a week.” (See MNI INTERVIEW: Powell Firing Would Set Off Legal Battle-Menand)

Hurley said judges would have a hard time siding against Powell given the weak pretext of building costs offered thus far – not to mention that the Supreme Court’s own carve out for the Fed in the recent Humphreys Executor decision overturned precedent by allowing the president to fire the heads of independent agencies. 

“They've already signaled that central banking is a different animal than all the other executive agencies like the SEC and the FCC. So they would have a hard time explaining why that was different,” he said. 

“And the excuse that Trump would be using is so pretextual that any man or woman on the street could understand it. Sure, the cost was overrun, USD2.5 billion for a building - it’s crazy. But that’s not the core of his job.”

DAMAGE DONE

Hurley worries that no matter who replaces Powell when his term ends in May of 2026, the damage to U.S. central bank independence has already been done, with hard to predict consequences that could include higher inflation and bond yields. 

The unprecedented public nature of Trump’s attacks on the Fed chair and explicit calls to lower interest rates in order to finance the government’s large deficit will put the next chair in an untenable position, he added.  

“That person, whoever it is, is going to be damaged goods, because he couldn't get the appointment without pledging his fealty to Trump. So institutionally, the damage has already been done,” said Hurley.

At the same time, the FOMC has enough institutional diversity that it could resist an overly political appointment to the role of chair, he added. (See MNI INTERVIEW: FOMC To Go Own Way If Chair Lacks Credibility) 

"It's not guaranteed that the chairman will be able to control the crowd. It's not a given that the Fed chair is the chair of the FOMC. It's always been that way, but it doesn't have to be that way. If somebody overtly political came in, I could easily see the Reserve Bank presidents and the remaining governors, or some of the governors, the non-Trump appointees saying, ‘Wait a minute, we value the credibility of this institution, and we're not just going to nominate or elect a political hack as the chairman.’”