Since Warsh has not yet been confirmed by the Senate, Powell has made it clear that he will continue to perform his duties in accordance with the law until a successor is in place. Trump also stated that he does not intend to abandon the investigation into Powell and hopes that Warsh will be successfully confirmed by the Senate. According to Nick Timiraos of the 'New Fed Wire,' a third legal battle may erupt between the Trump administration and the Federal Reserve.
The position of the Federal Reserve Chair remains undecided as tensions between the White House and the central bank escalate into a potential legal and institutional confrontation.
On the 15th, Trump stated that if Powell continues to stay in office after his term expires, he will be dismissed. Powell’s term as Chair is set to end on May 15 (if he remains a governor, his term will last until January 2028). However, since Kevin Warsh, Trump's nominee as successor, has not yet been confirmed by the Senate, Powell has already made it clear that he will continue to perform his duties legally until the successor assumes office. Trump’s remarks in the interview were straightforward: "If he does not leave, then I will have no choice but to fire him."
This statement has plunged the transition of power for the Federal Reserve Chair into uncertainty, further exacerbating market concerns about the independence of the Federal Reserve. Meanwhile, Trump also indicated that he does not intend to drop the investigation into Powell and hopes that Warsh will successfully gain Senate confirmation. According to Nick Timiraos of the 'New Fed Wire,' there may be a third courtroom battle between the Trump administration and the Federal Reserve.
Power vacuum arises from transitional gap
The time lag between Powell’s term expiration and Warsh’s Senate confirmation lies at the heart of the current controversy. In accordance with Federal Reserve regulations, if the successor is not promptly in place, the incumbent Chair can continue to serve temporarily. Powell himself has cited this provision as the basis for staying on.
In a previous article by Wall Street News, it was mentioned that on April 21, Fed nominee Warsh will attend a confirmation hearing held by the Senate Banking Committee. Warsh needs to secure confirmation from both the Senate Banking Committee and the full Senate before replacing Powell, who is set to step down on May 15.
Trump's tough stance means that if there are delays in Warsh’s confirmation process, the confrontation between the two sides could rapidly escalate from the political to the legal level. Currently, Trump has publicly expressed hope for Warsh’s confirmation, but the Senate review process remains incomplete.
Rising risk of legal confrontation; Federal Reserve independence under continued pressure
According to Nick Timiraos, the Trump administration did not succeed in either of the two previous legal actions involving the Federal Reserve — failing both to subpoena relevant personnel and to dismiss Federal Reserve Governor Lisa Cook. This background has led to cautious skepticism about whether the White House can force Powell’s departure.
Analysts believe that dismissing a Federal Reserve Chair faces significant legal obstacles, and related litigation may become the main battleground for the next phase of the White House-Fed standoff. The setbacks faced by the Trump administration in judicial proceedings suggest that any enforcement action may lead to prolonged legal battles.
Trump's public pressure on Powell has persisted for months, spanning various levels including the direction of monetary policy, interest rate decisions, and investigations into Powell personally. This 'threat of dismissal' is the most direct statement to date, marking a further public rift between the White House and the Federal Reserve.
The independence of the Federal Reserve has long been regarded as a crucial cornerstone for maintaining the credibility of monetary policy and stabilizing market expectations. The evolution of the current situation will directly impact investors' assessment of the Fed's future policy direction and institutional credibility.
Editor/Doris