Trump Flirts With Firing Fed Chair Jerome Powell

Trump still wants Powell out.
Reuters
By Michael Rainey and Yuval Rosenberg

Happy Wednesday! Two big stories swirled around the White House today. President Trump again tried to tamp down the renewed uproar, much of it from his own supporters, over the scandalous case of convicted sex offender Jeffrey Epstein. While that self-inflicted political crisis continued to roil Trumpworld and the MAGA base, the president also fueled another round of speculation about whether he was going to fire Federal Reserve Chair Jerome Powell.

Over in Congress, the Senate kicked off another vote-a-rama as it prepared to pass Trump's request to claw back $9 billion in funding for foreign aid and public media. And the House got bogged down for a second straight day because of a standoff over cryptocurrency policy. Here's your evening update.

Trump Again Flirts With Firing Fed Chair Jerome Powell

President Donald Trump reportedly drafted a letter firing Federal Reserve Chair Jerome Powell and polled a group of Republican lawmakers Tuesday night about whether he should oust the bank chief, according to media reports. Asked about it Wednesday, Trump denied that he plans to fire Powell, whose term ends in 2026, but left wiggle room for him to remove the Fed chief if circumstances change.

"We're not planning on doing anything," Trump told reporters in the White House during a meeting with the crown prince of Bahrain, adding, "I don't rule out anything, but I think it's highly unlikely, unless he has to leave for fraud."

Trump has railed against the Fed chief - at times hurling personal insults - for the bank's delay in further cutting interest rates as officials await clearer data on how the president's aggressive tariffs are affecting inflation. Most economists expect to see upward pressure on prices as Trump's historically high tariffs take effect, and yesterday's inflation report for June showed what could be the first signs of the import taxes pushing prices higher for some goods.

Trump admitted that he discussed firing Powell with lawmakers Tuesday night, though he denied drafting a letter. "I talked to them about the concept of firing him," Trump said. "I said, 'What do you think?' Almost all of them said I should." Trump claimed that he is "too conservative" to take their advice.

Still, Trump has talked about possibly firing Powell for months, despite legal protections, historic norms and market fears that could make doing so problematic. Trump said Wednesday that he was surprised that Powell had been named as Fed chief - although Trump is the one who appointed him in late 2017, before President Joe Biden reappointed him in 2021. "He's a terrible Fed chair. I was surprised he was appointed," Trump said. "I was surprised, frankly, that Biden put him in and extended him."

Raising the pressure: The White House appears to be exploring a new avenue for possibly firing Powell, who can be removed for cause from the otherwise largely independent institution. Trump has recently accused the Fed chief of mismanaging the renovation of some of the central bank's facilities in Washington, including its roughly 90-year-old headquarters, the Marriner S. Eccles Federal Reserve Board Building.

Office of Management and Budget Director Russell Vought sent a letter to Powell last week saying that Trump is concerned about the issue. "The president is extremely troubled by your management of the Federal Reserve system," Vought wrote. "Instead of attempting to right the Fed's fiscal ship, you have plowed ahead with an ostentatious overhaul of your Washington DC headquarters."

Costs for the renovation, which began during the first Trump administration, have ballooned to $2.5 billion, about $700 million more than initial estimates. Fed officials say their headquarters building needs a complete overhaul, including all of its major systems. Asbestos removal has proven to be costlier than first estimated, and labor and materials costs jumped during the pandemic.

Powell has defended the work as both necessary and prudent, and attempted to refute the accusation that the building renovation is excessively luxurious. "There's no VIP dining room," Powell told lawmakers last month. "There's no new marble. ... There are no special elevators. There are no new water features. ... And there's no roof terrace gardens." Powell has also asked an inspector general to review the project.

Nevertheless, Trump said on Tuesday that the renovation could provide grounds to dismiss Powell. "I think it sort of is," Trump said. "When you spend $2.5 billion on, really, a renovation, I think it's really disgraceful."

Senators caution: Sen. Thom Tillis, a Republican from North Carolina who sits on the Banking Committee that oversees the Fed, defended the independence of the Fed and urged Trump not to fire Powell.

"There's been some talk about potentially firing the Fed chair," Tillis said on the Senate floor on Wednesday afternoon. "The consequences of firing a Fed chair, just because political people don't agree with that economic decision, will be to undermine the credibility of the United States going forward, and I would argue if it happens, you are going to see a pretty immediate response, and we've got to avoid that."

Republican Sen. John Kennedy of Louisiana specified that potential response: "If you fire the chairman of the Federal Reserve, you will see the stock market crash and you will see the bond market crash."

In a research note, Greg Valliere, chief U.S. policy strategist at AGF Investments, explained why the markets would react so badly. "Trump wants lower interest rates," he wrote, per CNN. "He thinks ousting Powell will make a difference, but most market analysts think it would send a signal that the Fed has lost its independence."

Senate Launches Vote-a-Rama on $9B in DOGE Spending Cuts

The Senate on Wednesday kicked off a marathon round of votes on a White House request to claw back billions in funding for foreign aid and the Corporation for Public Broadcasting, which supports NPR and PBS. The package appears set to pass, though Vice President JD Vance will likely be needed to cast another tie-breaking vote to get it past the finish line.

The White House and Senate Republicans agreed to remove $400 million in proposed cuts to a global AIDS prevention program called PEPFAR from the package, leaving $9 billion in funding clawbacks. Republicans on Wednesday fended off Democratic efforts to shrink the package further. The Senate voted 50-49 to reject an amendment that would have kept roughly $500 million for international disaster relief. Republican Sens. Susan Collins of Maine, Mitch McConnell of Kentucky and Lisa Murkowski of Alaska voted with Democrats.

Those three GOPers also joined Democrats Tuesday night in voting against two procedural votes on the rescissions bill, forcing Vice President JD Vance to break two 50-50 ties and advance the package.

Collins, who heads the Senate Appropriations Committee, and McConnell, the former Senate Republican leader, both complained that the White House Office of Management and Budget had not specified what programs would be cut. Murkowski said she opposes the cuts to public broadcasting, which is vital for residents of her state. Murkowski also objected to what she described as the White House's attempt to direct and intrude upon congressional responsibilities.

The bottom line: Barring any surprises, the Senate is expected to approve the amended rescissions package, sending it back to the House for another vote before the end of the day on Friday. Congress must approve the package by then or the White House would be obligated to spend the funds as appropriated. But Trump appears headed for another legislative victory - one that could pave the way for additional rescissions requests.

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