Powell’s term as chairman is up in May, but his term on the Fed Board of Governors doesn’t end until 2028. Traditionally, Fed chairs retire from the board after their term is up, allowing the president to fill the vacancy.
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But a defiant Powell announced in a video statement Sunday that the Justice Department was investigating him. Powell revealed the Fed recently received grand jury subpoenas related to testimony he gave to the Senate last year about renovation cost overruns of the Fed headquarters building in Washington, D.C.
Powell said that the inquiry was a pretext to put pressure on him to lower interest rates, threatening the independence of the Fed. That perceived threat could prompt Powell to break precedent and remain on the board, according to some.
“I certainly think the Department of Justice action has increased the possibility that Powell would make the judgment that it’s best for him to stay on,” Dennis Lockhart, former president of the Federal Reserve Bank of Atlanta, told the Washington Examiner.
Lockhart, who ran the Atlanta Fed from 2007 to 2017, said he sees Powell as an “institutionalist” and someone who “cares very deeply about Fed independence and making monetary policy,” traits that might make him more inclined to stay.
“I know he’s probably worn out by all of this, but he also is someone who has a really high standard in terms of public service, and he might very well stay on to try to preserve Fed independence as best he can,” he added.
By staying on at the Fed, Powell could deny Trump the ability to control the central bank.
The only opening on the Fed’s seven-member Board of Governors would be the seat currently held by Stephen Miran, who was an adviser to Trump before the president appointed him to the Fed in September. His term ends at the end of this month. Trump would face the prospect of being able to appoint only one sure ally to the board, trying to persuade six others, including Powell.
Aaron Klein, senior fellow in economic studies at the Brookings Institution, pointed out to the Washington Examiner that if Powell steps aside, Trump would appoint the new chair to Powell’s seat, which would only be a two-year term. He said doing so would give the president “tremendous leverage,” as Trump could easily threaten not to reappoint the chair beyond the initial two years.
Powell might also be more inclined to stay on if the legal case against him gets dragged out, because it would allow him to stay in tighter coordination with the Fed’s legal staff, Lockhart said.
Powell has been outspoken on Fed independence in the past. In 2018, Powell told then-Treasury Secretary Steven Mnuchin that he would fight a move to fire him in court, even if the legal costs came out of his own pocket, according to the Wall Street Journal.
Powell, known for his conciliatory attitude and staying far afield from politics, struck a different tone in the two-minute video message the Federal Reserve released on Sunday. Powell called the accusations mere “pretexts” and said the real reason for the investigation is tied to the White House’s pressure campaign to lower interest rates.
“This new threat is not about my testimony last June or about the renovation of the Federal Reserve buildings,” Powell said. “It is not about Congress’s oversight role; the Fed, through testimony and other public disclosures, made every effort to keep Congress informed about the renovation project. Those are pretexts. The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President.”
Ryan Young, a senior economist at the Competitive Enterprise Institute, said that Powell choosing to remain in place is a possibility.
“It’s certainly possible, and with the tone that Powell took in the video, he cares about the Fed’s independence — and if that is something he sees contributing to keeping the Fed independent, yes, I can see him staying on the Board of Governors,” Young told the Washington Examiner.
Steve Kamin, a senior fellow at the American Enterprise Institute and former Federal Reserve official, also said that he thinks there is a possibility that Powell stays on the board after May, although he said he has been skeptical about the prospects of that.
Kamin called the investigation into Powell “utterly insane,” particularly given that Powell’s chairmanship is up in just a matter of months.
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The Washington Examiner reached out to the Fed about Powell’s plans. A Fed spokesperson pointed to the last time Powell was asked during a news conference about his plans after his term as chair ends.
“Again, I’m focused on — I’m focused on my remaining time as chair. I haven’t got anything new on that to tell you,” Powell said.
