The White House has explored the legality of dismissing the Fed president

The White House has explored the legality of rejecting the Chairman of the Federal Reserve, Jerome PowellIn February, shortly after President Donald Trump spoke of dismissal, according to people close to the file.

The White House Prosecutor's Office weighed the legal implications of deprive Powell of his presidency and leave him as governor from the Fed, the sources said, to an unprecedented extent. A replacement should be appointed by Trump and confirmed by the Senate.

The Trump team conducted the legal analysis and came to a conclusion that remained strictly secret in the White House, the informants said. It is unclear whether Trump conducted the legal review and whether the population did not disclose the outcome.

A White House official who refused to be identified said he would not comment on what he called alleged discussions several months ago. Trump's chief economic advisor, Larry Kudlow, said that Powell's deterioration was not under study.

"This does not happen today, so I have nothing to say about it," Kudlow told reporters at the White House.

Fed spokeswoman Michelle Smith said in an email, "Under the law, a Federal Reserve Chairman can only be removed for one cause."

'Stuck with you & # 39;

In December, Bloomberg News reported that Trump had discussed Powell's dismissal out of frustration with rising central bank interest rates. While Trump consistently expresses his discontent with the Fed in tweets, comments on Powell's elimination have diminished. Trump told Powell during a phone call in March: "I guess I'm stuck with you" according to the Wall Street Journal.

The Federal Reserve Act provides explicit protection for all Fed governors against dismissal by the president, except for "cause". The courts interpreted the sentence as obligation to present evidence of a type of misconduct or negligence in the basic duties. A disagreement on monetary policy would not satisfy these conditions.

However, it is less clear if the president can degrade a member, remove him from office and leave him alone as governor.

Scott Alvarez, the Fed's general counsel for more than a decade until 2017, said Powell could be protected thanks to changes made by Congress to the law forty years ago.

Until then, the president simply named the president of the Fed among the governors already confirmed by the Senate. But in 1977, lawmakers changed the law, demanding that the Senate confirm candidates for the presidency and vice-presidency for a period of four years, apart from the confirmation of their governorship, which lasts until the end of the year. 14 years old.

Álvarez stated that the courts would probably interpret the 1977 amendment as a suppression not only of the unilateral authority of the president to appoint the president, but also of his ability to dismiss him without cause. However, there is no precedent for such an approach and there is no way of knowing how the courts would decide whether the Fed, or Powell himself, would dispute the demotion.

Frustrated president

The White House legal team developed its analysis after Trump had privately discussed Powell's dismissal in December, after an interest rate hike had affected the global financial markets. The Fed has raised rates seven times since Trump took office.

Fed decision makers will meet on Tuesday and Wednesday. No movement of the rate is expected immediately, although the Economists and investors generally agree that the central bank will reduce loan costs this year.

Powell, who became president in February 2018, angered Trump for not being more complacent about his trade war with China. The president has complained repeatedly that the Federal Reserve, under Powell, has blocked growth and financial markets by raising rates.

"It's my choice and I do not quite agree with it," Trump said last week in an interview with ABC News. "Frankly, If we had a different person at the Federal Reserve who had not raised interest rates as much, we would have gone up by at least one and a half points more. "

Trump had an informal dinner with Powell and Fed Vice President Richard Clarida in February, said Treasury Secretary Steven Mnuchin. Shortly after the meeting, the Fed issued a statement in which it said the group had discussed the performance and prospects of the US economy, but that Powell did not share his expectations of monetary policy.

"The law is clear"

Powell said on CBS News' "60 Minutes" show in March that he did not think it was appropriate to comment on Trump. But Powell also said that he did not think the president had the power to fire him. "The law makes it clear that I have a four-year term, and I intend to serve it," he said.

Even if he could degrade Powell, Trump can not choose the chairman of the Fed's rate setting committee, the Federal Open Market Committee. According to tradition, committee members choose the president of the Fed as president, but they are free to choose any one of the group. In the absence of a chairman, the vice chairman of the committee, traditionally chairman of the New York Fed, will lead the meetings.

Senate Democratic leader Chuck Schumer of New York said the government's analysis that humiliating, humiliating Powell denounced "chaos" in the White House.

"What we have learned over the decades is that when monetary policy is manipulated politically, the middle class person is aggrieved," Schumer told reporters on Tuesday. "President Trump does not understand history, he does not understand that there are people who know these problems better than him."

Currently, five of the seven Federal Reserve seats are occupied and Trump is evaluating candidates for the other two seats. Trump has appointed four people since last year for these two seats, none of which have been confirmed by the Senate.

In expressing his frustrations with the Federal Reserve, Trump breaks with at least two decades of tradition of presidents who refrain from publicly commenting on monetary policy. The presidents, however, put pressure on the rates.

Former Fed Chairman Paul Volcker said in a recent report that in 1984, President Ronald Reagan had ordered him not to raise his rates before the elections. Former President George H. W. Bush asked Alan Greenspan to lower interest rates in an interview with the New York Times in June 1992.

On Tuesday, Trump led his lobbying campaign against central banks at the European Central Bank. The president accused the eurozone and China of weakening their currencies for economic gain and blamed ECB President Mario Draghi for having promised monetary stimulus just before the meeting. from the Fed this week.

Mr Draghi said at the institution's annual forum in Sintra, Portugal, that "an additional stimulus will be needed" if the economic outlook for the euro area of ​​19 countries does not improve not.