How Trump Is Sabotaging Himself on the Federal Reserve

President Donald Trump is threatening — again — to fire Federal Reserve Chair Jerome Powell, this time in the event that Powell doesn’t step down from the Fed when his term as chair ends on May 15.

Let’s play out how that might unfold.

Imagine Trump did decide to fire Powell: The early phases might go the same way as Trump’s attempt to fire another Fed board member, Lisa Cook. In that case, the Supreme Court has allowed Cook to stay in her role while justices deliberate whether Trump has grounds to remove her “for cause.” The president claims that she committed mortgage fraud, but that underlying allegation has not been litigated.

The ruling in that case could come any day now, but questions from the justices hinted that they would prioritize the Fed’s autonomy. Trump would need an advantageous ruling to make his Powell firing work.

While the legal process unfolds, there are other players in this game of chicken, including Sen. Thom Tillis of North Carolina, who has vowed to block Trump’s Fed nominees as long as the Justice Department continues an investigation of the Fed that Tillis views as politicized. An attempt to fire Powell would almost certainly not change his mind. And a growing list of Republicans are also now calling on the DOJ to wrap up its probe.

Then there’s Powell himself, who I understand has grown less and less likely to leave the Fed as Trump’s legal threats against him have intensified. Before the Justice Department went after the Fed, Powell probably would have departed when his chairmanship expired. Now, he is said to be far more open to staying on as a governor beyond that. His board term doesn’t end until 2028.

So, does threatening to fire Powell — or actually following through with that threat — seem likely to get Trump what he wants?

On the contrary, Trump seems to be trying to find a way to turn an easy win on the Fed into a long slog of a loss.

His choice to replace Powell, Kevin Warsh, at this point enjoys broad support within the Senate GOP caucus, and he could be on track to be confirmed in time to take office when Powell’s term atop the central bank is over.

Instead, Warsh’s nomination is in limbo because of the Justice Department investigation into the Fed’s headquarters renovations, where the government itself has admitted it doesn’t have evidence of a crime. Tillis is putting a hold on Fed nominees because he fears the probe is an attempt to undermine the central bank’s autonomy to set interest rates as it sees fit.

The president isn’t backing down. In a Fox Business interview aired Wednesday morning, he backed the DOJ probe and said if Powell doesn’t leave “on time,” he’ll fire him, wrecking any hopes that Warsh’s Senate confirmation hearing, set for Tuesday, was a sign that this would all play out smoothly.

Probably, the best-case scenario for Trump is for Powell to no longer be in his way, which is something that is already within the president’s power to make happen within a matter of weeks.

And sticking to this path both makes it more likely that Powell stays on past May and delays the installation of Trump’s chosen man. That opens up a sticky legal conversation about whether Powell should continue as chair pro tem, or whether — as one person close to the White House suggested to me — the president should be allowed to pick from among the Fed board members.

Many Republicans in Congress don’t think this whole situation is worth it. “It’s in everybody’s best interest to wrap up the investigation,” Majority Leader John Thune told reporters Wednesday.

“I just would urge the administration to move on from the DOJ investigation of Mr. Powell to facilitate a prompt confirmation of the president’s nominee as chairman,” House Financial Services Chair French Hill (R-Ark.) told my colleague Katherine Hapgood. “To do otherwise, it seems to me, delays the implementation of the president’s economic policy.”

The person close to the White House argued that it’s the principle of the thing driving Trump.

“He wants to find out what the Fed is hiding” on the renovation project, this person said. “My suspicion is, there was no wrongdoing. But there’s a principle here that’s bigger than Jay Powell. If you let them get away” with refusing to turn over information, “other agencies might follow suit.”

But the tricky part for Trump is that people in both the judiciary and Congress don’t seem to be buying that argument — another reason why it isn’t obvious how this ends well.

Multiple Senate Republicans, including Banking Chair Tim Scott (R-S.C.), have said Powell did not seem to have committed a crime in his congressional testimony to the committee — allegedly a central point of inquiry in the probe.

And a federal judge ruled that the DOJ’s subpoenas to the Fed were a “mere pretext” to pressure the institution on rates and quashed them.

Still, the saga continues. U.S. Attorney for D.C. Jeanine Pirro, whose office is leading the investigation, has said she will appeal, and officials from her office showed up unannounced on Tuesday to try to visit the site.

“Any construction project that has cost overruns of almost 80 percent over the original construction budget deserves some serious review,” Pirro said in an emailed statement about that HQ visit. (Trump himself, no stranger to construction sites, toured the renovations in a memorable episode where he spoke to the press alongside Powell wearing hard hats.)

A dispassionate political strategist — or economic adviser — might ask if frustrating cost overruns on a construction project are worth imperiling one of the most important appointments Trump has the opportunity to make at this point in his term, in the midst of a highly precarious moment in the global economy.

Some members of the administration seem to be crossing their fingers that all this controversy somehow dissipates.

On Wednesday, Treasury Secretary Scott Bessent said he’s “very optimistic” that it will be a “moot question” by the time Powell’s chair term ends. “Let’s get to the hearings and see where we are then,” Bessent said during a press conference.

A White House official told me the same: “We remain confident in and focused on Warsh’s confirmation, which would sidestep this whole discussion.”

But we’re hurtling rapidly toward a point where the discussion is unavoidable.

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