Reclaiming the Fed: Legal Paths for Trump to Install a New Chair
History rarely grants a second chance to test the limits of executive power over America’s central bank, yet the present moment offers exactly that. The Federal Reserve Act endows its Board of Governors with long terms and for‑cause protections, but it is not a suit of armor. Two perfectly plausible avenues remain open to a President intent on remaking the institution’s leadership. One avenue exploits statutory silence, the other leans on statutory language. Either, pursued with discipline, can unseat Jerome Powell from the commanding heights of monetary policy while respecting both the text of the law and the rule of law.
The first course is deceptively simple. Remove Powell from the Chairmanship while leaving him on the Board. Section 242 of the Federal Reserve Act speaks explicitly when terms and tenure of Governors are concerned and speaks explicitly again when it grants the President power to designate a Chair for a four‑year stint subject to Senate confirmation. It grows silent only at the point of removing that Chair designation. Statutory silence normally invites the ordinary constitutional presumption that appointment power entails removal power, at least as to the office to which one has been appointed. In 1977 Congress required separate Senate consent for the Chair, yet it still refrained from spelling out any removal constraint for that title. One cannot plausibly claim Congress forgot how to write the words “shall serve as Chair unless sooner removed for cause.” It chose not to. The most straightforward reading, therefore, is that the President retains inherent authority to reconfigure the Fed’s leadership, provided he does not terminate Powell’s underlying fourteen‑year tenure as a Governor.
A demotion letter would suffice. The President would notify Powell that, effective immediately, he is relieved of the Chair’s administrative duties. The Vice Chair would serve ad interim while the Senate considers a successor. Powell would remain free to vote on the Federal Open Market Committee, satisfying the Act’s design that Governors speak through collective deliberation, but the bully pulpit of the Chair would pass to new hands. Should Powell sue, his complaint would raise a question no court has yet answered: does implicit removal protection extend to an office Congress itself left unprotected? There is no decisive precedent sealing off that inquiry, and the best textual evidence supports the President. If the judiciary reads silence differently, the court’s judgment will arrive only after months of litigation, by which time a new Chair may already be in place and the equities of settled governance will weigh heavily against reversal.
Skeptics warn that demotion might unsettle markets or provoke Congressional ire. True, but market anxiety reflects uncertainty, not decisiveness. A crisp executive explanation grounded in statutory text can calm investors more than a slow bleed of public quarrels between White House and Fed. As for Capitol Hill, Senators will retain their advice‑and‑consent prerogative over the incoming nominee, thereby preserving institutional dignity. The President is not bulldozing independence, he is merely exercising the very discretion the statute presupposes when it names him, and no one else, as the designator of the Chair.
The second path, removal for cause, is more dramatic yet sturdier once properly constructed. The same Section 242 that protects Governors from at‑will dismissal empowers a President to remove “for cause,” a phrase left undefined by Congress and thus open to judicial elaboration. Precedent beginning with Humphrey’s Executor confines cause to inefficiency, neglect of duty, or malfeasance. Courts have been clear that mere policy disagreement is not enough. The question then becomes whether Powell’s managerial conduct fits one of the accepted categories. It can, provided the focus is not interest rate policy but Powell’s sustained commitment to diversity, equity, and inclusion programs in defiance of the President’s January 20 executive order abolishing DEI initiatives in federal entities.
Consider the record. Within days of that order the Board quietly stripped its website of DEI banners, yet Powell reaffirmed at his January 29 press conference that the Fed maintains “a strong and persistent commitment to diversity and inclusion.” Bloomberg subsequently reported that the Fed remains on the defensive about an internal diversity effort critics say distracted officials from inflation risks. Reuters added that Powell had long linked diversity to better economic outcomes, a view he repeated even after the order. The contradiction is unmistakable. The President directed a housecleaning, the Chair polished the furniture and called it compliance.
Cause is therefore identifiable as neglect of duty. The duty at issue is straightforward: obey duly issued executive directives where they bind. Independent does not mean immune. The Fed must file its budget with OMB, must submit reports to Congress, and must heed lawful presidential orders that touch on administrative governance rather than monetary deliberation. An order terminating DEI programming is exactly such a directive. Powell’s partial compliance, cosmetic website edits while preserving the underlying managerial agenda, constitutes neglect. Not all neglect is insubordination, yet when an executive officer chooses symbolism over substance after explicit instruction, the law recognizes cause.
Building the evidentiary foundation requires choreography rather than speed. First, the White House should instruct Treasury’s Inspector General to audit the Board’s human‑resources policies for traces of prohibited DEI criteria. Second, House Financial Services and Senate Banking Committees ought to summon Powell and document his defense of DEI metrics in hiring and promotion. Congressional testimony supplies the sworn record. If Powell insists, as he has before, that diversity goals enhance institutional performance, he pits his managerial philosophy against presidential policy, crystalizing the conflict in a public forum and under oath. That transcript, attached to an Inspector General report showing continued demographic targets in staff evaluations, furnishes the President with a dossier demonstrating inefficiency and neglect.
A removal letter should then cite those materials, not a difference of economic opinion. The letter should emphasize that the cause is failure to implement the President’s management directive, a directive facially neutral with respect to monetary policy. By divorcing cause from interest rates or asset purchases, the White House inoculates itself against the allegation that it seeks to politicize monetary decisions. Powell’s removal would stand as a discipline for ignoring lawful orders, no different in principle from dismissing an agency head who refuses to execute a regulation rollback.
Litigation will follow. Powell will argue that the real motive is policy hostility. Courts will weigh motive but will also examine the factual dossier. A judge cannot wave away evidence of continuing DEI metrics when a presidential order banned them. The President need not convince the court that DEI is bad economics, only that Powell disregarded a direct and lawful instruction. That case is much stronger than any argument over basis‑point moves. If the district court nevertheless issues a preliminary injunction, the White House should seek expedited review, noting the absence of irreparable harm to Powell, who may remain a Governor pending resolution.
The two approaches, though distinct, are not mutually exclusive. Attempted demotion may nudge Powell to resign, sparing both sides the spectacle of a cause proceeding. Conversely, a well‑publicized cause investigation may persuade Powell that his authority is fatally compromised, making demotion unnecessary. The common thread is leverage. The President wields statutory leverage, Powell wields litigation leverage, and markets watch the exchange of force. The side that marries legal precision with public clarity will prevail.
Critics invoke the specter of Harry Truman’s clash with Thomas McCabe and the 1951 Treasury–Fed Accord, warning that presidential interference risks inflationary pandemonium. The lesson of that episode cuts both ways. Truman confronted a Chair who resisted wartime Treasury financing, declared his dissatisfaction, and McCabe resigned without judicial drama. The sky did not fall. The Accord followed only after negotiation, and the economy marched on. Independence is meaningful only within the constitutionally bounded space that Congress has defined. When a Chair strays beyond statutory autonomy into managerial disobedience, the President’s corrective intervention affirms, rather than imperils, the balance of powers.
Pursuing either route demands discipline. The White House must communicate that its goal is not partisan rate‑setting but restoration of sound governance. Demotion highlights that restoration by respecting Powell’s Board tenure. Cause removal vindicates executive unity by enforcing compliance with lawful orders. Each path offers a constitutional means to align the Fed with national policy without transforming the central bank into a mere arm of the Oval Office.
One might ask whether the political cost exceeds the benefit. Market volatility is a fact of any leadership change, yet volatility bred of decisive lawful action is fleeting. Volatility born of muddled authority can last years. Moreover, confidence in the currency ultimately depends on disciplined monetary stewardship, something jeopardized when managerial energies divert into identity activism. Removing or demoting a Chair who champions that activism undercuts the very credibility skeptics say they cherish.
Finally, the choice carries symbolic weight. The Federal Reserve was established to guard the value of the dollar, not to curate demographic spreadsheets. A President who insists on that mission, and who backs the insistence with lawful measures, recovers a principle older than the Fed itself: republican accountability. When citizens elect an administration, they deserve institutions that heed the administration’s lawful directives. Selective obedience cannot masquerade as independence.
Advice, then, resolves into three sentences. Remove the Chair title if statutory silence allows, and defend the move as an exercise of clear presidential authority. Prepare a meticulous record of managerial neglect on DEI, and, if necessary, invoke the statutory cause provision to dismiss outright. Proceed always with public statements that frame the action as fidelity to law and to the Fed’s narrow mandate.
That course is bold yet constitutional. It respects the text Congress wrote, the cases the Supreme Court decided, and the electorate’s choice for executive direction. It offers a path to new leadership without vandalizing the institution. Above all, it reminds every Governor, present and future, that independence is liberty to make monetary judgments, not license to ignore lawful orders. The chair that controls the money supply must first control the agenda of its own bureaucracy, not the other way around. Should President Trump take either path, he will tilt the balance back toward efficiency, clarity, and the constitutional hierarchy that places a single accountable head at the apex of the executive branch, precisely as Article II envisions.
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