President President Trump has threatened to fire Federal Reserve Chairman Jerome Powell. It would be a terrible decision. It is critical to the trust Americans have in the management of our economy, and the stability of international finance as well, that United States monetary policy be crafted by independent experts, without political pressure. If he wanted to do it, nevertheless, could Trump get away with firing Powell—and the other Federal Reserve officials who decide on monetary policy?
In a case challenging Trump’s firing of two members of other independent agencies, Trump v. Wilcox, the Supreme Court allowed their dismissals to stand for the duration of the case.
This was only a preliminary decision; but the court took the exceptional step of saying they would likely rule against Trump on the merits, not in that case, but in another case if it involved the Federal Reserve: “[The fired board members] . . . contend that arguments in this case necessarily implicate the constitutionality of . . . protections for members of the Federal Reserve’s Board of Governors or other members of the Federal Open Market Committee. . . . We disagree. The Federal Reserve is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States.”
“The Fed is different; don’t touch it,” the court seemed to be saying. Hopefully, Trump won’t even start the battle to replace Powell, a fight that would cause tremendous economic harm while it played out. Trump’s focusing on cost overruns in the renovation of the Federal Reserve Building is an inept attempt to manufacture a reason to fire Powell “for cause,” which the law would allow. Even Trump has said it would have to rise to the level of fraud before he had “cause” to fire Powell. This is not the case, and his toying with the idea exposes the transparency of this pretext.
However, there are other influences that might tempt Trump to fire Powell and take his chances with the Court. Trump will likely win in his attempt to fire commissioners and board members at other federal agencies, whose statutes protect them from being fired except “for cause.”
The interim decision in Trump v. Wilcox ruled that those fired commissioners were not likely eventually to succeed. The reason is the court’s embracing of the “unitary executive” theory. Since Article II, section 2 of the Constitution gives the president authority to appoint “Officers of the United States,” he logically also has the right to fire any of them.
The court has so ruled for many years, but it has made two exceptions. The first was in 1935, when the court ruled that a Federal Trade Commissioner exercised no significant executive branch functions but was more legislative and judicial in function. The president’s power to remove appointees is only in the executive branch. The second was in 1988, where the court upheld the prohibition against removal of an Independent Counsel except for cause, holding that this position was an “inferior officer,” who the Constitution says does not have to come under the President’s appointments power. Independent Counsels were chosen to investigate specific alleged cases of high-level misconduct; they did not make policy.
Neither exception applies to the Fed. It makes policy, and it has executive authority to regulate the banks in the Federal Reserve system. Nor could a ruling for Powell be limited to him. The “quasi-private” nature of the Fed and the history of the now defunct pre-civil war Bank of the United States would not limit the broader applicability of a ruling that the President lacked authority to fire someone he appointed. To protect Powell, the court would have to cut back on the “unitary executive” theory, an outcome neither this court nor this president would want.
The court’s warning to the president is not to start on this path.
Tom Campbell is a professor of law and a professor of economics at Chapman University. He is the author of a constitutional law text, “Separation of Powers in Practice,” and teaches separation of powers at Chapman. He served in Congress for five terms, served two years in the State Senate, and was a law clerk to Justice Byron White on the US Supreme Court.