Trump vs. Powell: What’s Next for the Fed Chair?

Transcript

Ken Fisher

Oh my gosh. Did you know that sometimes this president says things that then he later reverses? No, no, no, I read it in the newspaper somewhere. The fact of the matter is, he has said repeated negative comments about Fed Chair Jerome Powell, including the notion that his term couldn't be over soon enough, making many people envision the president trying to fire him. Jerome Powell has said that he will not go softly into that dark night—and the fact of the matter is, this has led many people to wonder if the president is going to just do it. Just try to fire him. Now, mind you, that may well happen a good long time after America takes over Canada and Greenland.

The fact is, legally, Powell is in pretty secure terms. The president knows that Powell's term is up come next May, he'll nominate someone to replace him before May. I don't think people see this stuff right. The more the president criticizes Powell, the more certain it is that Powell does not do what the president wants.

What the president said he's wanted— he said he's wanted the Fed to lower interest rates. He wants the Fed to lower interest rates, at least partly, to offset the drag on the economy that the tariffs that the president wants will impose. So, it's not difficult to envision the rationality that the president deploys when he wants that.

But the fundamental feature of the Fed—almost above and beyond all others— is to want and need to appear to be truly independent from political pressure from the administration, Congress or otherwise. The fact is, their independence and their image of integrity is central to getting people to believe that what they're doing is not jerry-rigged by politics.

And so, the more the president wants Powell and the Fed to lower interest rates, the more they can't do it, because they would appear to be a presidential toady at that point, and in fact, that would be bad.

Now, I'm going to go back to a point that many people may not appreciate. When I say appreciate, I mean they might not appreciate it in terms of liking it, or they might not appreciate it in terms of thinking it through. In May of 2026, the president, hopefully, will have had someone picked and confirmed by the Senate—because it requires Senate confirmation—to replace Powell.

It's, in theory, not even impossible that the president changes his mind between now and then and puts Powell up again, because the Senate would reconfirm him easily. Why would they reconfirm him easily? Because they already have.

It's really an extensive background check more than anything else. But the president can clearly put up someone that the Senate will confirm, may put someone else up first, that the Senate doesn't confirm, but that doesn't work out. President puts someone up that the Senate will confirm. But here's the tricky part.

Sometimes, these people—and this is not just Fed chairs, but this is also true of judges, this is also, I mean, this goes back to the days of Earl Warren becoming Chief Justice of US Supreme Court. Thought he would be very conservative based on his prior political background. Ends up actually leaning to the left once he's in the SCOTUS seat.

Now, why is that important? One of the things that I cite all the time is, is the line that I love from William Chesney Martin, the longest running head of the Fed ever, that when you become the head of the Fed, you take a little pill and it makes you forget everything you ever knew, and it lasts just as long as you're head of the Fed. And, as I've said often, since then, almost every head of the Fed has taken Martin's pill, and some of them have said so.

The fact in that is that it's really easy for the president to nominate someone that he thinks will be a toady, do exactly what he wants, and then have the person, once he's head of the Fed, decide that for the purpose of the Fed's integrity and his own integrity, he can't do that, and he won't do necessarily what the president wants. Will that happen? I'm not sure, I don't know—but it's far enough off in the future, we don't need to worry about that right now.

What you can know is that the president is not going to be able to fire Jerome Powell. Jerome Powell is going to finish out his term. And then we'll go off to do other things, whatever that may be. And the president has to pick people to replace him, the Senate has to confirm. It's a real simple process.

Thank you so much for listening to me. I always enjoy speaking to you.

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