Jerome Powell will go down in history as the chairman of the Federal Reserve Board who fought hardest to preserve the Fed’s independence. But his days in the chair are numbered. The question is: What’s the number?
The answer should be simple. Mr. Powell’s current four-year term ends on May 15, and President Trump has nominated Kevin Warsh to succeed him. But this is the Trump presidency, and nothing is simple.
For starters, the law allows members of the board to remain in place until their successor is confirmed by the Senate and ready to take over. Interregnums like that are common at the Fed, including at the start of Mr. Powell’s second term. Mr. Powell has made it clear that he will remain on the job until Mr. Warsh is confirmed.
Mr. Warsh wasn’t a particularly controversial choice by the president, but the main reasons for delay have nothing to do with him. They have everything to do with Mr. Trump. The president’s campaign against Mr. Powell took a turn for the worse in November, when the Justice Department opened a criminal investigation of Mr. Powell.
Criminal? Disappointing the president on interest rates isn’t a crime. So the Justice Department went after Mr. Powell on trumped-up charges about cost overruns on the Fed’s extensive building renovations and things Mr. Powell said about them. No one save MAGA diehards believed that was the real reason. The ridiculous charges were clearly designed to make Mr. Powell’s life miserable in the hope that he would resign.
The strategy backfired in multiple ways. Mr. Powell fired back strongly that the charges were a ruse, that what Mr. Trump really wanted was much lower interest rates, and that he would fight, not quit. Sen. Thom Tillis (R., N.C.) similarly made it clear that he didn’t buy the ruse and that he valued the Fed’s independence. That’s important because Mr. Tillis is a member of the Banking Committee and therefore in a position to stop the confirmation train.
In his words: “I will oppose the confirmation of any Federal Reserve nominee, including for the position of Chairman, until the DOJ’s inquiry into Chairman Powell is fully and transparently resolved.” Wow. A rare case of a Republican member of Congress standing up to the president.
Then U.S. District Judge James Boasberg quashed the subpoenas in the case because the government has “produced essentially zero evidence to suspect Chair Powell of a crime.” End of case? No. Jeanine Pirro, the feisty former Fox News host whom Mr. Trump made U.S. attorney for the District of Columbia, vowed to appeal, and Mr. Trump recently backed her. So the case will drag on until the president pulls the plug—as I predict he will.
There are further complications. In August, the president tried to fire Lisa Cook, a Fed governor, as part of his campaign to subjugate the central bank to the White House. But an important detail intervened: The Federal Reserve Act states that Fed governors can be removed only “for cause,” not at the president’s whim.
Ms. Cook bravely brought the case to court, where so far she has won. The Supreme Court heard oral arguments in Trump v. Cook in January, and it was clear the justices were likely to find for Ms. Cook. The questions are when and whether the decision will be broad or narrow. If Ms. Cook prevails and Mr. Powell remains on the board, all seven seats on the Federal Reserve Board will be taken—leaving no place to put Mr. Warsh.
It is widely presumed that Stephen Miran, the Trump sycophant now on the board, will resign to make room for Mr. Warsh. But that would leave the board with only one sure Trump vote. The two appointees from Mr. Trump’s first term, Christopher Waller and Michelle Bowman, have shown themselves not to be puppets. And Mr. Powell has been tight-lipped about whether he might stay on as a governor even after the legal case is over. That’s his right. It’s been done once before in Fed history.
Monetary-policy decisions are made by vote of the Federal Open Market Committee, which in addition to the Board of Governors, includes five Federal Reserve Bank presidents—one (from New York) voting permanently and the other four rotating. The latter aren’t presidential appointees and hence are beyond Mr. Trump’s reach.
Or are they? A little-known and never used provision of the Federal Reserve Act allows the Board of Governors to remove district bank presidents. So if Mr. Trump can cobble together four votes on the seven-member board, he could start threatening district bank presidents with dismissal or even replace them with sycophants. That would truly spell the end of Fed independence.
So there are grave perils ahead for the Fed. Mr. Powell will do what he can, but he won’t be in office forever.
Mr. Blinder is a professor of economics and public affairs at Princeton. He served as vice chairman of the Federal Reserve, 1994-96.