Incoming acting White House Chief of Staff Mick Mulvaney said Sunday that President Trump “now realizes” he can’t fire Federal Reserve Chairman Jerome Powell, an acknowledgment that came after reports that Trump has discussed dismissing the Fed chief in recent days amid the stock market’s meltdown.
“I think (Trump) put out a tweet last night specifically saying he now realizes he does not have the authority to fire” Powell, Mulvaney said on ABCs This Week. Mulvaney corrected himself after program host Jonathan Karl pointed out it was Treasury Secretary Steven Mnuchin who tweeted about Trump’s reversal.
In a tweet on Saturday, Mnuchin quoted Trump as saying, “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, but I never suggested firing Chairman Jay Powell, nor do I believe I have the right to do so.”
Bloomberg News reported late Friday that Trump has talked privately about firing Powell many times over the past few days, quoting unnamed sources.
More: Government shutdown: How small businesses are hurt
More: Are you a small business Scrooge? Better mend your Grinchy ways
More: Christmas tree sales are up this year – thanks to Millennials
Although the president appoints Fed governors, the Fed is an independent agency and the governors can be fired only “for cause.” It’s unclear if Trump could remove Powell as chairman while he remains a governor. But Fed scholars say it would be a disastrous move that would undermine the belief the central bank will act in the best interest of the economy regardless of political pressure.
In recent months, Trump has repeatedly criticized Powell for raising interest rates and urged the Fed not to hike before central bank policymakers last week unanimously agreed to a fourth rate increase this year.
More: Dow slide deepens as shadow of bear market hovers over battered stock market
More: Q&A: Does the stock market sell-off mean a recession is coming?
More: Don’t let volatility in the market be a lump of coal in your stocking
After the move, the market plummeted, extending a sell-off that began a couple of months ago and leading to its worse December since the dark days of the Great Depression in 1931. Investors are worried the hikes will further crimp an economy that’s projected to slow next year amid the fading effects of federal tax cuts and spending increases, Trump’s trade standoff with China and a shakier global economy.
Via Twitter on Sunday, Mnuchin’s office announced that the secretary had conducted a series of phone calls with the CEOs of the nation’s six largest banks, with each confirming “that they have ample liquidity available for lending to consumer, business markets, and all other market operations.”
“We continue to see strong economic growth in the U.S. economy with robust activity from consumers and business,” Mnuchin said in the release. “With the government shutdown, Treasury will have critical employees to maintain its core operations at Fiscal Services, IRS, and other critical functions within the department.”
For his part, Powell has cited strong economic growth this year and a 3.7 percent unemployment rate that marks a 49-year low. The Fed, he said, simply needs to bring rates that are still historically low closer to normal to head off an eventual spike in inflation.
On This Week, Mulvaney said, “It’s not at all unusual for a president to complain about the actions of the Federal Reserve chairman.
“The tension between the president and an independent Fed is a tradition, it’s part of our system, so it shouldn’t be surprising to anybody that the president is not happy that the Fed is raising rates and, we think, driving down the value of the stock market.”
In fact, Trump has broken a 25-year tradition of presidents refraining from making public comments on Fed interest rate moves to preserve its independence. Before that, presidents such as Richard Nixon, Jimmy Carter, Ronald Reagan and George H.W. Bush did comment publicly on Fed rate hikes.
If anything, Trump’s comments could force Powell and his Fed colleagues to lift rates more rapidly to assert the agency’s independence, Peter Cont-Brown, a Wharton School professor and author of “The Power and Independence of the Federal Reserve,” told USA TODAY earlier this year.