Trump Allies Double Down on Efforts to Reshape Federal Reserve

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Powell Staying

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Trump remains angry at Powell for staying on the Fed’s board after his tenure as chair expired, according to several people close to the president. Trump was particularly upset when Powell accepted a John F. Kennedy Profile in Courage Award in late May for his stewardship of the Fed and praised Congress for having wisely chosen “to insulate monetary policy decisions from political pressure.”

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Kevin Hassett, director of the White House’s National Economic Council, publicly noted growing unease over Powell and dialed up criticisms this week.

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“I’m concerned with Jay Powell staying,” he said on Fox Business on Wednesday. “There’s a majority of people over at the Fed that are not necessarily going to be voting because they’re patriotic, but rather because they want to get Trump — and we’re going to have to keep a close eye on that.”

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Outgoing Fed chairs have typically departed the central bank at the end of their leadership terms, but Powell is holding onto his underlying role as a governor, which expires in 2028. Powell said he would keep a low profile as he stays on, but cited the administration’s ongoing legal pressures on the Fed in announcing he would remain. 

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Powell made that decision after the Justice Department launched a criminal probe into his handling of a $2.5 billion renovation of the Fed’s Washington headquarters that has seen significant cost overruns. He characterized the investigation as a consequence of the Fed refusing to set interest rates according to Trump’s preferences. A Fed inspector general report on the renovation project is expected later this month.

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While US Attorney for the District of Columbia Jeanine Pirro said in April she was dropping the inquiry, she said she would scrutinize the inspector general’s findings – making it clear the investigation could be reopened.

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Whether by using the IG report or another method, Trump officials and his allies are hoping to find an opening to allow the White House to push Powell out, according to people familiar with the matter.

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Cook Scrutiny

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Cook, a Biden-era appointee, is also still a target. 

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Trump took the unprecedented step last August of attempting to remove a Fed governor when he said he was firing Cook over mortgage-fraud allegations that she denies. The matter made its way to the Supreme Court after Cook sued to block the removal, and a majority on the high court said Monday that she can stay in the job while the underlying case plays out.

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In his opinion, Chief Justice John Roberts said the court was issuing its decision on “narrow ground” because Trump failed to provide Cook procedures to properly dispute the allegations against her.

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Almost immediately after the decision, Trump and allies signaled they intended to carry on with efforts to oust her. 

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The Supreme Court stopped short of ruling on whether the allegations against Cook, if true, would constitute sufficient legal cause for firing her from the Fed. That means any potential subsequent attempts from Trump to fire her could again wind up being tested in the courts.

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Atlanta Fed

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The administration is also turning increasing attention to the 12 regional Fed banks, including the vacancy in Atlanta. Some Trump allies see the opening as an opportunity to install a pick ideologically aligned with the president, according to people familiar with the matter. 

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Bessent and other key economic officials inside the administration are closely watching how the process to choose a new president is unfolding. 

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Regional Fed presidents, who vote on interest-rate decisions on a rotating basis, are chosen by their local board of directors, made up of executives and business leaders from the region, excluding members of financial institutions. Candidates are then approved by the Fed’s board in Washington.