Fed Chair Powell, Appointed by Trump and Then Opposed Him, Makes a 'Partial Exit'

Fed Chair Powell, appointed by Trump and then opposed him, makes a 'partial exit'

Fear of retaliation from Trump... decided to retain his board membership for the time being even after his term as chair ends next month.

Despite his conservative leaning as an investment banker and financial official, he leaves an 'anti-Trump' image.

The 'unprecedented' last year of clashes with Trump, a 'period of hardship' for the U.S. central bank.

When referring to people he dislikes, former U.S. President Donald Trump arbitrarily invents middle names for them.

For example, he called Marjorie Taylor Greene, a former Republican U.S. House Representative who was once an ardent supporter but then turned her back, 'Marjorie Traitor Brown' (implying Greene has faded).

Trump habitually calls Jerome Powell, the Chairman of the Federal Reserve (Fed), who is nearing the end of his eight-year term as chair, 'Jerome Too Late Powell.'

This expression was first used by President Trump in a post on the social media platform Truth Social in May last year, expressing his dissatisfaction that Chairman Powell 'responds too late' despite his repeated demands for interest rate cuts.

Chairman Powell, a former Wall Street investment banker, served as Under Secretary of the Treasury in the George H.W. Bush administration before becoming a Fed governor in 2012, nominated by then-President Barack Obama.

With a conservative leaning and a Republican, Chairman Powell took office in 2018, succeeding former Chair Janet Yellen. It was President Trump during his first term who appointed him.

Then, in 2022, then-President Joe Biden re-nominated him, allowing him to serve another four years as Fed Chair. His term is set to expire on the 15th of next month.

In particular, the last year of his term was a period of trials and resistance for Chairman Powell personally, and for the U.S. central bank, the Fed, it was a time when unprecedented scenes unfolded continuously, pushing the value of its independence to the brink.

As soon as Chairman Powell faced President Trump, his appointer who returned to the White House in January last year, he was immediately confronted with pressure to cut interest rates.

At that time, the U.S. benchmark interest rate was 4.25-4.50%. In the process of overcoming the 'COVID pandemic,' the Fed maintained virtually zero interest rates (0.00-0.25%) in 2020-2021.

At that time, a large amount of money released stimulated inflation, and he pursued a hawkish policy of sharply raising interest rates to the 5% range to curb skyrocketing prices and tighten liquidity.

President Trump believed interest rates were too high. He argues that interest rates should be lowered to the 1% range even now, believing that government debt should be reduced by lowering Treasury bond interest rates for a large-scale tax cut policy.

As the head of the central bank pursuing price stability and full employment, Chairman Powell ignored President Trump's demands. He froze interest rates five consecutive times from January to July last year.

President Trump, who complained about the interest rate freeze, saying "He (Powell) and I don't get along," eventually began calling Chairman Powell "this too-late guy" from May last year and poured out crude criticisms like "an idiot who knows nothing."

President Trump's pressure on Chairman Powell was not just verbal. He publicly hinted at his dismissal and even took 'action' by raising issues with the cost of renovating the Fed building in Washington D.C.

President Trump's visit to the Fed building in July last year under the pretext of inspecting the construction site was unusual. Previous presidents had refrained from such actions out of respect for the Fed's independence.

President Trump stood side by side with Chairman Powell in front of the cameras, both wearing hard hats. The construction cost was interpreted as a 'pretext,' and the actual intention was pressure to cut interest rates.

The Fed cut interest rates three consecutive times by 0.25 percentage points each from September to December last year. This only met market expectations, considering price and employment conditions, and fell short of President Trump's expectations for a sharp cut.

In early August last year, President Trump appointed his close aide, Stephen Myron, who was serving as the White House National Economic Council Director, as a Fed governor to fill a vacancy left by a predecessor's resignation.

Later that month, he abruptly notified Lisa Cook, a Fed governor considered a hawk, of her dismissal, citing indications of mortgage fraud. This was unprecedented in the Fed's history.

While appointing a White House aide as a Fed governor, he decided to dismiss an existing Fed governor whose stance differed from his own, even before any judicial judgment was made. These two personnel decisions were seen as shaking the Fed's independence.

In the case of Governor Cook's dismissal, it faced a lawsuit amid criticism that it lacked legitimacy. This case is awaiting a final decision from the Supreme Court, and U.S. media observes that there is a high possibility that a decision to retain her board membership will be made.

Chairman Powell attended the Supreme Court's public hearing for Governor Cook's case, feeling 'shared sorrow.' He explained his attendance by saying, "This case is probably the most important legal case in the Fed's 113-year history."

The relationship between President Trump and Chairman Powell, who have clashed on every issue, spiraled into a crisis when the U.S. Department of Justice initiated an investigation into Chairman Powell earlier this year regarding alleged overspending on the renovation of the Fed building.

On January 11, Chairman Powell disclosed, "I received a grand jury subpoena and a threat of criminal indictment from the Department of Justice on the 9th, related to my congressional testimony in June last year regarding the renovation of the Fed building."

The initiation of an investigation into a Fed chair was unprecedented. It was equally unprecedented for a Fed chair to issue a video statement directly criticizing the president who appointed him.

Chairman Powell directly criticized President Trump, stating, "The threat of criminal indictment is a result of the Fed deciding interest rates based on what it deems best for the public interest, rather than following the president's preferences."

He emphasized, "This is a question of whether the Fed can continue to make interest rate decisions based on evidence and economic conditions, or whether monetary policy will be dictated by political pressure or threats."

The investigation into Chairman Powell, which acted as a stumbling block in the federal Senate confirmation process for his successor, nominee Kevin Warsh, was ambiguously suspended, but it will not be erased from the Fed's 'history of tribulations.'

In a press conference today explaining the results of the Federal Open Market Committee (FOMC) meeting, which concluded on the 29th (local time), Chairman Powell announced that this would be his last press conference as chair, indicating his intention to step down from the chairmanship after his term ends next month, even if the confirmation of his successor is delayed.

However, Chairman Powell stated at the press conference that he would retain his position as a Fed governor for the time being even after his term as chair ends, saying, "I have stated that I will not leave the board until this investigation (regarding the Fed building renovation costs) is transparently, finally, and completely concluded, and I still adhere to that."

Although it is customary for a Fed chair to resign from their remaining term as a governor after completing their term as chair, Chairman Powell decided to retain his board membership even after his term as chair expires. He can serve as a Fed governor until January 2028 at the latest.

This is interpreted as a judgment that the Trump administration's offensive regarding the Fed building renovation costs has not been completely concluded. Given the Trump administration's relentless 'retaliation against political opponents' stance, it is difficult to see the embers of the investigation as completely extinguished, and with the judgment that civil liability could be pursued separately from the investigation, Chairman Powell seems to think it is better to remain at the Fed for the time being to protect himself.

Previously, in response to Chairman Powell's statement that he would not leave the Fed until the prosecutorial investigation into the Fed building renovation allegations was concluded, President Trump said on the 15th, "I should fire him."