President Donald Trump's prolonged campaign to remove Jerome Powell could ultimately result in the Federal Reserve Chair serving longer at the central bank.
Powell indicated last week that he plans to remain as the Fed's interim chair if Kevin Warsh, Trump's nominee for the next chair, fails to secure Senate confirmation before Powell's term expires in May.
"This is what the law requires," Powell told reporters on Wednesday, citing historical precedents for such situations, including when his own nomination for a second term by former President Joe Biden faced delayed Senate confirmation.
Powell also stated for the first time that he does not intend to resign from the Federal Reserve Board until the Justice Department's investigation targeting both the Fed and him personally is resolved.
"Until the investigation is thorough, transparent, and reaches a final conclusion, I have no intention of leaving the Board," Powell said following the Fed's policy meeting last Wednesday.
This prompted another round of sharp criticism from Trump, who has repeatedly attacked Powell for not cutting interest rates quickly enough and has frequently threatened to remove him. After the meeting—where the Fed held rates steady amid soaring oil prices and labor market concerns—Trump called Powell "grossly incompetent" and "maybe a dishonest person."
"He should be cutting rates," the President said. "Who doesn't cut rates?"
A Disrupted Timeline
Tensions between the Fed and the administration peaked in January when the Justice Department, under Washington D.C. Prosecutor Jeanna Piro, launched a criminal investigation into Powell's congressional testimony regarding cost overruns in the renovation of the Fed's Washington headquarters.
This month, a federal judge dismissed two subpoenas issued by the Justice Department to the Fed, effectively nullifying the criminal investigation and handing Powell a significant victory. Piro has stated she will appeal.
The case has not only led Powell to reconsider when he will fully step down from the Fed but has also stalled Warsh's confirmation process. A key Republican senator supporting Warsh has vowed to block his confirmation until the investigation into Powell is resolved.
Thus, despite Trump's rhetoric and his administration's efforts to force Powell out early, the outcome may be an extension of his tenure. Powell's term as chair ends in less than two months.
"The irony of the subpoena drama is that it may ultimately succeed in creating a shadow Fed Chair... and that person is Jay Powell," said Krishna Guha, Head of Global Policy and Central Banking at Evercore ISI.
Jim Bullard, former President of the St. Louis Fed and current Dean of Purdue University's business school, said he believes Powell is likely to remain on the Board after his chair term concludes.
"I think he wants to protect the Fed's independence, and I think that weighs heavily on him," Bullard said. "The administration could work out some kind of deal on this, but they don't seem very willing to make a deal. So, as things stand, I expect him to stay."
The week concluded with a new twist in the protracted Trump-Powell saga. The John F. Kennedy Library Foundation announced that Powell will receive the John F. Kennedy "Profiles in Courage" Award in Boston on May 31, honoring his defense of the Fed's independence. The award is given annually to public officials who make courageous decisions of conscience regardless of personal or professional consequences.
"Despite relentless political pressure and unprecedented attempts to influence the Federal Reserve, Jerome Powell has remained steadfast in his commitment to preserving the institution's independence and the nation's economic stability," the foundation said in a statement.