Wall Street can't decide what it feels about Fed's board math and Trump’s influence

Chairman Jerome Powell’s term at the Federal Reserve ends in May, but he still has a separate seat as a governor that runs for two more years after that.

Powell has, in his persistent classiness, refused to share whether or not he plans to stay on, opting to instead say the answer to that question is “irrelevant at the moment.”

Cryptopolitan had earlier reported that at December’s press conference, Powell said, “I’m focused on my remaining time as chair. I haven’t got anything new on that to tell you. Please move on.”

Wall Street can’t decide what it feels about Fed’s board math and Trump’s influence

Like most other places on earth, numbers decide power at the Fed, and the Board of Governors has seven seats, with three already filled by allies of President Donald Trump, who has made it embarrassingly clear that he does not like Powell.

He spent a lot of time last year publicly insulting the Fed chair and telling Americans that he is to blame for their economic woes. Not the president of the free world himself.

In June, Trump posted on Truth that:-

If Powell leaves when his chair term ends, Trump would gain an instant majority on the board.

That math matters for the Open Market Committee, which sets rates. Trump has also said publicly that any future chair must agree with him or “will never be Fed Chairman.”

If the board voted together, which is not guaranteed, the president would gain a clearer path to ultra-low rates.

But the Federal Reserve Act does appear to allow a board majority to remove individual regional bank presidents who oppose rate cuts. Legal experts debate whether cause is required. Jerome remaining on the board, even without a majority, could complicate any effort to remove dissenting voices.

This type of question has not come up in decades. Former chairs like Ben Bernanke and Janet Yellen left the board quietly before their governor terms expired. Ben went on to the private sector. Janet later took another government role. The fact that this is even a debate now shows how different the political climate has become.

Fed watchers interviewed by CNBC allegedly described the decision as personal and professional. After 13 years at the Fed, including eight as chair, Jerome is seen as ready for life outside public office. He plays golf, enjoys music, and recently became a grandfather. During much of his tenure, he faced steady public criticism from Trump, who first appointed him to the role.

Powell could face a legal battle with Trump administration but Fed history is on his side

Most observers believe Powell will leave the Fed entirely in May. None rule out a short stay. Only one chair ever stayed on as a governor after stepping down. Marriner Eccles did so in 1948. As a governor, Marriner later helped secure the 1951 Treasury-Fed accord, which ended the Fed’s duty to hold rates down and strengthened central bank independence.

Another factor sits with Fed Governor Lisa Cook. Trump fired Lisa over an alleged mortgage fraud claim. She has denied the allegation. Courts paused the firing. The Justice Department has not filed charges. The Supreme Court is scheduled to hear the case on January 21, with a ruling expected later.

If the court removes Lisa, Trump would gain a board majority immediately. The bigger issue is whether the ruling gives the president broad power to remove other governors. In that scenario, Jerome could face direct pressure next.

Some of the fear assumes the worst. Governors do not always follow the president who appointed them. All three Trump-appointed governors recently voted to reappoint all 12 regional bank presidents to new five-year terms. The board still holds removal power, but the vote showed independence can still exist.

There is also talk that Powell may be using silence as leverage. By refusing to say what he will do, he could be keeping options open based on who Trump nominates next. There is no proof of that thinking. Jerome has stayed largely apolitical on fiscal matters and has not responded publicly to repeated insults from the president.

Several Fed observers say staying on would draw even more political pressure and break recent tradition. Leaving would avoid that outcome. Another theory is simpler. Powell may see his refusal to answer as a basic exercise of independence, showing that the law gives him the right to decide his exit on his own timeline and announce it when he chooses.