Washington, July 16 (AP) - President Donald Trump has announced a strategy to achieve his longstanding ambition of removing Federal Reserve Chair Jerome Powell. Trump accuses Powell of mismanaging the US central bank's $2.5 billion renovation project.
The president's initiative follows months of attempts to replace Powell, who has resisted Trump's demands for aggressive interest rate cuts due to concerns that such moves could result in inflation exacerbated by the administration's tariffs.
On Tuesday, Trump suggested that Powell's oversight of the multi-billion dollar renovation of two Fed buildings in Washington could justify an unprecedented and potentially legally controversial decision to dismiss him. “I think it sort of is,” Trump remarked.
“Spending $2.5 billion on basically a renovation is really disgraceful,” Trump asserted, adding that Powell never needed a “palace.”
The renovation has been in progress since Trump's first term, but only recently drew the White House's scrutiny. Trump's interest cuts aim to lower government borrowing costs, while Powell believes premature cuts could fuel inflation, hiking borrowing costs over time.
Firing Powell could jeopardize the Federal Reserve's political independence and destabilize financial markets, potentially driving a stock market crash and leading investors to demand higher premiums for loans to the US.
The risk of Powell's ousting is a concern, as it contradicts the tradition of an independent Fed, able to make unpopular decisions like rate hikes to curb inflation.
The independence of the Fed from political interference allows it to address economic needs free from political pressures, beyond presidential appointments of Fed officials.
An attempt to remove Powell before his term expires in May 2026 could weaken Fed autonomy, causing economic instability through inflation, higher interest rates, and economic stagnation.
The Supreme Court has hinted that political disagreement is not grounds for firing Powell, but the president could possibly do so “for cause” related to misconduct or neglect of duty.
Trump claims Powell misrepresented the renovation in congressional testimony and argues that the excessive costs justify Powell’s removal.
The Marriner S. Eccles building, the Fed’s headquarters, is over 90 years old, with outdated infrastructure requiring modernization. The historic structure is undergoing its first comprehensive renovation to address these concerns.
The project’s costs have escalated to $2.5 billion, about $600 million over budget, driven by rising construction costs and unforeseen challenges like extensive asbestos removal and the necessity for costly underground construction due to local restrictions.
Renovations to a third building were canceled in 2024 due to skyrocketing costs. The Fed’s board argues the renovations will save costs by consolidating the workforce into fewer spaces, reducing rental expenses.
Russ Vought, the administration’s budget director, criticized the renovations as excessively luxurious, citing claims of extravagant features which Powell denies, asserting those elements were removed from the 2021 plans.
The White House questions the legality of the Fed's cost reductions, claiming non-compliance with the original approvals from the National Capital Planning Commission after altering project plans.
James Blair, White House deputy chief of staff, stated that Powell’s congressional testimony does not align with the approved plans, indicating potential ethical concerns.
The Federal Reserve maintains it voluntarily complies with commission guidance and remains accountable to Congress and an independent inspector general. Powell has sought an independent review of the renovation project costs. (AP)
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