Latest news with #FederalReserveAct
Yahoo
23-05-2025
- Business
- Yahoo
Supreme Court ruling protects Fed officials from Trump firings
The US Supreme Court ruled that certain Federal Reserve officials have protections from being fired by the Trump administration, outlined while justices presided over a case challenging federal employee firings at the National Labor Relations Board (NLRB) and the Merit Systems Protection Board. Yahoo Finance senior Fed reporter Jennifer Schonberger examines the Supreme Court's ruling and how it insulates the US central bank from executive pressures. To watch more expert insights and analysis on the latest market action, check out more Morning Brief here. A Supreme Court ruling may pave the way for greater protection of Fed officials against being fired by a US president. Yahoo Finance Fed correspondent, Jennifer Schonberger, has the story for us. Jennifer, what do we need to know? Good morning, Brad. The Supreme Court moved late Thursday to essentially insulate members of the Federal Reserve board, including Fed chair, Jay Powell, from being fired by the president. The high court protecting the Fed even as it let firings of board members stand at the National Labor Relations Board and the Merit Systems Protection Board, while those legal challenges to those removals make their way through the legal system. The justices said that, "We disagree with arguments made by the National Labor Relations Board and the Merit Systems Protection Board that their legal challenges necessarily implicate the constitutionality of for-cause removal protections for members of the Federal Reserve's Board of Governors or other members of the Federal Open Market Committee." The central bank, the court added, is, quote, "Uniquely structured, quasi private entity that follows in the distinct historical tradition of the first and second banks of the United States." Now, the only language in the law pertaining specifically to the removal of Fed board members can be found in section 10 of the Federal Reserve Act. That law states that each member of the board shall hold office for 14 years unless sooner removed for cause by the president. The statute doesn't necessary doesn't specifically address the Fed chair, nor does it detail what exactly constitutes, quote, "For cause." That term has been interpreted in legal rulings to mean inefficiency or neglect of duty or malfeasance. Of course, President Trump posted on social media earlier this year that Fed chair, Jay Powell's quote, "Termination cannot come soon enough." before clarifying that he has no intention of removing the Fed chair before his term concludes in May 2026. And guys, separately this morning, Chicago Fed president, Austin Goolsbee, told CNBC that he is gratified that the Supreme Court of the United States has acknowledged the importance of central bank independence. Back to you. Thank you, Jennifer.
Business Times
30-04-2025
- Business
- Business Times
Trump and the Federal Reserve's independence
PRESIDENT Donald Trump recently escalated his long-running attack on Federal Reserve chair Jerome Powell, lambasting him for keeping interest rates too high and accusing him of 'playing politics'. He lamented that 'Powell's termination cannot come fast enough!' and warned: 'If I want him out, he'll be out of there real fast, believe me.' After a strong negative market reaction, the president backtracked, until further notice, and said he does not intend to fire the Fed chair. Such an attempt would test the legal safeguards that protect the Federal Reserve from political pressure and destabilise financial markets, as Treasury Secretary Scott Bessent reportedly warned Trump and the White House in private. The legal background The Federal Reserve Act sets clear limits: Under Title 12 of the United States Code paragraph 242, the president may remove a Fed governor or chair only 'for cause'. Courts have long held that 'cause' means misconduct or incapacity and does not apply to differing views on policy. This suggests that any attempt to dismiss Powell on those grounds would collapse under legal scrutiny. Another safeguard of the Fed's independence is the 1935 Supreme Court decision in Humphrey's Executor v United States. That ruling established that Congress may insulate officials of independent agencies from removal except for 'inefficiency, neglect of duty, or malfeasance in office'. Fed governors and chairs have relied on this decision for protection. However, Trump's legal team is seeking to strip similar 'for cause' protections from the National Labour Relations Board and the Merit Systems Protection Board. They argue the president cannot be constrained in shaping his executive team. The Supreme Court decisions on these cases could reshape the contours of agency independence, including that of the Federal Reserve. That the Fed sets monetary policy independently has historically been a cornerstone of financial system stability. The US Congress granted the central bank this status to ensure that it could set policies affecting the economy and banking system free from political interference. Indeed, the financial community as well as members of both parties in Congress see an independent Fed as vital to preserving a strong economy. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up However, although the risk that Trump tries to fire Powell has now receded, during his four-year term, Trump and his team will have the possibility of increasing their influence on how the Fed sets US monetary policy. Powell's term as Fed chair ends in May 2026. In the past, former Fed chairs stepped down from the position as Fed governors immediately or shortly after the end of their term as chair. If Powell resigns from the Fed, Trump will nominate one governor in his place, who would also be expected to become the new Fed chair. Also, vice-chairs normally step down from their governor position after the end of their vice-chair term. Michael Barr resigned as vice-chair for supervision at the end of February 2025, and Trump nominated Governor Michelle Bowman in his place. It would not be surprising if Barr would soon also step down from his governor position, leaving another vacancy in the Fed board of governors for President Trump to fill. In addition, Governor Adriana Kugler's term on the Fed's board expires at the end of January 2026, and Governor Philip Jefferon's term as vice-chair ends in September 2027. All in all, President Trump seems likely to have the chance to nominate four Fed governors, including the next chair and another vice-chair, before his presidential term ends in January 2029. Likely market impact Investors value stability and predictability highly. If Trump tried to fire Fed chair Powell, this would have likely prompted an even more violent reaction against US assets than was recently seen, encouraging money to flee abroad. Although less imminent, the risk remains that the Fed's anti-inflation credentials will be diminished under Trump's presidency. Waning confidence in the Fed's resolve to curb inflation would lead bondholders to demand an increased risk premium to hold Treasuries, pushing up medium-to-long dated bond yields. As a counterexample of what could happen to bond yields if the Fed's independence is diminished is the market reaction to the Bank of England unexpectedly becoming independent in 1997. Several authors have documented how UK inflation expectations and bond yields fell, and long-term inflation expectations became less sensitive to the current state of the economy. As short-term rates would be expected to be cut aggressively under a new Trump-appointed Fed leadership, the US yield curve would steepen dramatically, although that would not necessarily signal an improved growth outlook. Any attempt by the Fed under the new chair to limit the surge in yields, for instance by restarting quantitative easing, would likely be met with even stronger selling flows by private and international investors. The US dollar would also be negatively impacted. Its role as the world's reserve currency rests on trust in US institutions. A politicised Fed would erode that trust. Foreign holders of US dollars will seek to diversify into other currencies and gold. The selloff in US government bonds would be mirrored by a sharp fall in the US dollar, compounding a trend that has already emerged after Trump's tariff announcements. In an adverse feedback loop, a weaker US dollar would eventually raise the price of imported goods, stoking inflation and inflation expectations and pushing bond yields higher. Equity markets would not be spared the shock. Volatility would spike as investors price in the implications of a central bank subject to the will of the US president. An increased equity risk premium would depress US share prices and negatively affect their expected returns relative to other markets. The writer is senior economist at EFG Asset Management
Yahoo
28-04-2025
- Politics
- Yahoo
Firing Fed chief Jerome Powell is more problematic than Trump thinks
Question: Can the president remove heads of independent agencies, such as the Federal Reserve and U.S. Postal Service? Answer: The question of whether the president can simply remove the heads of federal agencies has become more complicated. The answer used to be straightforward, and depended on the legislation that created the agency or position. There is usually a process in the law which explains how and when an agency head can be removed, and under what circumstances. In some cases, the president's power to act is limited under the law, usually as an attempt to insulate the agency from direct political influence. A good example is the U.S. Postal Service. I have discussed previously in this space why then-President Joe Biden could not simply remove Louis DeJoy, the controversial postmaster who was appointed during Donald Trump's first term. Unlike most executive branch agencies which have a single leader appointed and removable by the president, the Postal Service is overseen by a Board of Governors. Under the Postal Reorganization Act of 1970, there are nine governors appointed by the president and confirmed by the Senate for staggered seven-year terms. Under that law, the postmaster is appointed or removed by the other members of the board, not the president or the Senate. Opinion: Trump tariffs impact markets and economy. Should Congress intervene Similarly, under the Federal Reserve Act of 1932, persons nominated by the president and approved by the Senate as governors to the U.S. Central Bank are to serve 14-year terms, with one serving a concurrent four-year term as chair. The current Federal Reserve chair is Jerome Powell, and his term runs through May 2026. Under the Federal Reserve Act, governors can only be dismissed for cause. "Cause" is a legal term which generally means some type of malfeasance, not a policy disagreement. The purpose here was to preserve the Central Bank's ability to fight inflation, which is often unpopular and contrary to elected leaders who often prefer to push growth through low interest rates. Courts have upheld limitations of the president's ability to remove some officials. In the landmark U.S. Supreme Court case of Humphrey's Executor v. United States (1935), the Court held that President Franklin D. Roosevelt could not remove a commissioner of the Federal Trade Commission (FTC) for policy disagreements. Similarly, in Morrison v. Olson (1988), the Court confirmed that Congress could constrain the President's removal of "inferior officers with limited duties and no policymaking." Opinion: Trump's tariff policies hurt local businesses like this West Palm Beach team However, some lawyers and pundits argue that the precedent is wrong and the president, as the head of the executive branch, should not be bound by the limitations created by Congress and can terminate anyone in the executive branch without limitation. This is sometimes called the "unitary executive" theory. The idea received some support in Seila Law v. CFPB (2020), where then-President Trump was able to replace the head of the Consumer Financial Protection Bureau despite the restrictions in the law. Nonetheless, as the law currently stands, the president does not have the freedom to remove the postmaster or the chair of the Federal Reserve. However, that may change as this issue is likely to be the subject of more litigation in the coming years. Kevin Wagner is a noted constitutional scholar and political science professor at Florida Atlantic University. The answers provided do not necessarily represent the views of the university. If you have a question about how American government and politics work, email him at kwagne15@ This article originally appeared on Palm Beach Post: Trump and Powell are likely stuck with one another - for now | Opinion
Yahoo
23-04-2025
- Business
- Yahoo
Trump backs off his push to fire Fed's Powell
This story was originally published on Banking Dive. To receive daily news and insights, subscribe to our free daily Banking Dive newsletter. President Donald Trump said Tuesday he has 'no intention' of firing Federal Reserve Chair Jerome Powell. 'Never did,' Trump told reporters in the Oval Office. 'The press runs away with things.' Trump's comments Tuesday may seem at odds with a post he made last week on Truth Social, expressing that Powell's 'termination cannot come fast enough!' 'The [European Central Bank] is expected to cut interest rates for the 7th time, and yet, 'Too Late' Jerome Powell of the Fed, who is always TOO LATE AND WRONG, yesterday issued a report which was another, and typical, complete 'mess!'' Trump wrote. 'Oil prices are down, groceries (even eggs!) are down, and the USA is getting RICH ON TARIFFS. Too Late should have lowered Interest Rates, like the ECB, long ago, but he should certainly lower them now.' Trump doubled down Monday, asserting, in another post, that there is 'virtually no inflation … but there can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW.' Kevin Hassett, director of the National Economic Council, told reporters Friday that Trump was studying whether he's able to fire Powell. 'Not permitted under the law,' Powell said in November, after Trump's reelection, in response to a reporter's question on the subject. The seven members of the Fed's Board of Governors can only be removed 'for cause,' according to the Federal Reserve Act. That typically is interpreted as malfeasance, dereliction of duty or other serious misconduct. A 1930s Supreme Court ruling commonly referred to as Humphrey's Executor also backs that up. The Justice Department, however, is seeking to overturn that standard as part of its argument pertaining to Trump's move to fire the top brass at several independent agencies over policy disagreements. 'The [Supreme Court] has a route available to it if it wants to distinguish the Fed,' former Fed Gov. Dan Tarullo, told The New York Times. Despite the turnabout in his comments, Trump reiterated some criticism of Powell on Tuesday. 'I would like to see him be a little more active in terms of his idea to lower interest rates … and would like to see our chairman be early or on time, as opposed to late,' Trump said. 'If he doesn't, is it the end? No. It's not.' Markets rebounded in the wake of the Tuesday comments. Futures tracking the S&P 500 increased 2.5%, while those for the Nasdaq index jumped 2.7% on Wednesday. 'Clearly other folks have talked to [Trump] and explained that [firing Powell] would have caused huge volatility,' Dec Mullarkey, managing director at fund manager SLC Management, told the Financial Times. Mullarkey credited Treasury Secretary Scott Bessent, whom he said 'recognizes that the integrity of markets has to be maintained.' 'This shows there are some guardrails around this president,' Mullarkey said. Mark Spindel, an investment manager who co-wrote a history of Fed independence, added Trump 'got the hint.' 'Firing Jay would be a catastrophic own goal,' Spindel told The Wall Street Journal. David Wilcox, a senior fellow at the Peterson Institute for International Economics, stressed the importance of keeping the Fed's independence. 'This is an existentially threatening moment for the institution,' Wilcox told The New York Times. 'We may be on the cusp of throwing away an asset that has taken decades to accumulate.'
Int'l Business Times
22-04-2025
- Business
- Int'l Business Times
Kendal Ludden, CPA, Esq. Launches '1913 The Death of US' to Reignite Constitution Literacy & Entrepreneurial Spirit
Entrepreneur, CPA, and former US Congressional candidate Kendal Ludden, Esq. announces the launch of '1913 The Death of US,' a nonprofit organization dedicated to education. It focuses on business, rebuilding America's understanding of its founding principles, and empowering all generations, including the next, with knowledge of the Constitution, limited government, and entrepreneurial independence. Named after the pivotal year when the 16th Amendment, 17th Amendment, and the Federal Reserve Act were enacted, creating the modern income tax system, shifting Senatorial elections, and founding the IRS, this nonprofit organization is Kendal's bold response to what he calls 'the systematic erosion of liberty.' "The Constitution was a perfect document before the addition of the 16th and 17th Amendments," Kendal says. "But if people aren't taught it, they won't know their rights." As a longtime tax expert, founder of the accounting firm, Better Tax & Accounting LLC , and founder of the organization Ludden4Liberty , Kendal's career has been steeped in the very system he now seeks to challenge. He began doing taxes at age eight for his mother and later earned a Master's in Taxation. While he acknowledges the irony of his professional path, Kendal says it has given him insider knowledge and fire to help others avoid blindly accepting systems that strip away their money and freedom through taxation. The nonprofit will offer an interactive learning system and experience rooted in his experience in business and law and allow others to contribute their own knowledge. The foundation will be on America's founding texts—the Constitution, the Declaration of Independence, and overlooked financial truths of the Federal Reserve System. Designed as an alternative education platform, 1913 The Death of US will eventually include a series of innovative programs. This includes the Ludden School of Law (LSL), a non-accredited law school dedicated to teaching Constitutional law from a freedom-first lens. Another program under its helm is the College of Ken Doll (CKD), a tongue-in-cheek take on traditional higher education that emphasizes practical knowledge and skills that are needed in today's world. Monkey Business School (MBS) is another unique program. Kendal states, "In this program, kids will teach kids what kids are not taught in school. And for the adults out there, you weren't taught this in school either so you need this knowledge as well!" All schools will be taught through interactive online platforms and Kendal's YouTube channel. Kendal also references a board game to explain inflation and monetary supply using real-world analogies. "When you put $500 in the middle of the board for free parking, that's a 33% inflation every 40 turns," he explains. "It's not in the rules, but everyone does it. That's what's happening in our economy." Kendal emphasizes that taxation is theft. He says, "In 1912, 100% of the federal government's revenue came from tariffs. Today, we've got an income tax system that penalizes productivity, inflates our money supply, and robs people of property through stealth taxes and regulation. We need to go back to principles that work." This educator believes that today's education system needs to teach business, American civics, and critical thinking, combined with the fundamentals of liberty. "Schools nowadays have only been teaching on how to get a job. But a job means you're 'Just Over Broke.' We need to bring back the entrepreneurial spirit and teach people how to own something, build something, and think independently," Kendal states. A self-identified Libertarian, Kendal says the nonprofit 1913 is not about partisan politics but about returning to what unites all Americans: freedom. "Everyone's a Libertarian. They just don't know it yet," he says. "Once they read the Constitution, they'll understand. And when they understand, they'll be truly free to have a nonpartisan discussion about government." While previously, Kendal ran for two Congress seats, the US House of Representatives District #10 and South Carolina State District #20, he intends to run against Nancy Mace for US House of Representatives District #1. His idea is to remove income tax and property tax and bring sound money to his district as a model to others.
