WASHINGTON -- President Donald Trump has discussed whether he can fire Federal Reserve Chairman Jerome Powell as his frustration with the central bank chief intensified after last week's interest-rate increase and months of stock-market losses, according to four people familiar with the matter.
Treasury Secretary Steven Mnuchin later Saturday issued a statement saying Trump denied he'd suggested firing Powell and declaring the president doesn't believe he has legal authority to dismiss the central bank chief.
Mnuchin said in a pair of tweets Saturday evening that he'd spoken with the president about the matter and included a statement that he said came from Trump.
"I never suggested firing Chairman Jay Powell, nor do I believe I have the right to do so," Mnuchin quoted Trump as saying.
He also tweeted that the president said, "I totally disagree with Fed policy. I think the increasing of interest rates and the shrinking of the Fed portfolio is an absolute terrible thing to do at this time, especially in light of my major trade negotiations which are ongoing."
Trump's public and private complaints about members of his administration have often been a first step toward their departures -- including former Attorney General Jeff Sessions, his first Secretary of State Rex Tillerson and outgoing Chief of Staff John Kelly.
The Federal Reserve Act says governors may be "removed for cause by the President." Since the chairman is also a governor, that presumably extends to him, but the rules around firing the leader are legally ambiguous, as Peter Conti-Brown of the University of Pennsylvania notes in his book on Fed independence.
Trump named Powell to head the U.S. central bank in late 2017, and he assumed office in February. In picking Powell, a former investment banker who'd been a member of the Fed board since 2012, Trump passed over Janet Yellen for a second term.
Former Senate Banking Chairman Richard Shelby on Saturday publicly cautioned Trump against firing Powell.
"I'd be very careful about doing that," the Alabama Republican said. "The independence of the Fed is the foundation of our banking system."
Sen. Sherrod Brown, the top Democrat on the Senate Banking Committee, said in a statement that "given the Fed's consensus on monetary policy, any effort to remove Powell would hit the trifecta: unlawful, ineffective, and damaging to the economy."
Sen. Mark Warner, a Virginia Democrat who also sits on the banking panel, urged Trump against trying to remove the Fed chief.
"What the President fails to understand is that monetary policy should be separate from politics," Warner said in a statement issued before Mnuchin's tweets. "Any action taken to dismantle the independence of the Fed would not only be inappropriate, it's just another threat by this president against the institutions that protect our rule of law."
Even routine changes at the top of central banks create uncertainty in markets as investors try to assess how tough a new leader may be in preventing the economy from overheating and accelerating inflation. Another problem with dismissing a sitting Fed chief may be finding a replacement who wants assurance that he won't succumb to the same fate.
Such a move would represent an unprecedented challenge to the Fed's independence.
Trump is in the midst of a rolling shake-up of his administration. Since the November midterm elections, he's announced the exits of Sessions, Kelly, Interior Secretary Ryan Zinke and Defense Secretary James Mattis. At the same time, the threat of a government shutdown has added to the sense among investors of disarray in Washington.
Equities just recorded their worst week since 2011, with the S&P 500 falling 7.1 percent and the Nasdaq composite descending into a bear market. Trump has laid a lot of the blame on the Fed, saying at one point in October that the central bank was "going loco" for raising rates.
Powell has borne the brunt of the criticism recently, peppered by public complaints about interest rates from the president and at least one of his advisers. Less than two weeks ago, before the Fed's latest rate decision, Trump said Powell was "being too aggressive, far too aggressive, actually far too aggressive." He told Reuters the central bank "would be foolish" to proceed with a rate increase.
The Fed announced a widely anticipated rate increase on Wednesday, and Powell signaled he'll be more cautious about tightening next year. But investors' concerns over the chairman's comments led to U.S. equities to record their steepest declines for any Federal Open Market Committee announcement day since 2011.
Information for this article was contributed by Christopher Condon, Jennifer Epstein, Erik Wasson, Billy House, Elizabeth Dexheimer, Jack Fitzpatrick, Vildana Hajric, Elena Popina and Michael Riley of Bloomberg News.
A Section on 12/23/2018