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Trump's push to oust Powell gives the former Fed chair a reason to keep his board seat
Donald Trump wants Jerome Powell forced off the Fed board over a renovation audit and sued if he stays, in a seat whose term runs to January 2028. TD Cowen expects the threat to keep Powell there until at least early January 2027, so Trump gets no vacancy to fill.
The Investor · Invest desk
What happened
- Trump told Attorney General Todd Blanche to "study" the inspector general's report and explore options, but did not explicitly call for criminal charges.
- Powell stayed on the board after his term as chair expired in May, an unusual step because Fed chairs usually give up their board seats when the chair term ends.
- He has said he will stay until the Justice Department's investigations into him are "well and truly over, with transparency and finality."
- Powell has called the investigation a pretext for removing him as chair, and in January he called that an affront to the Fed's independence.
- Trump first picked Powell to lead the Fed in 2017, and President Joe Biden renominated him in 2022.
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Why it matters
- constraint On TD Cowen's forecast, the resignation demand pushes back Trump's own chance to appoint a governor to Powell's seat until early January 2027 at the soonest.
- exposure A sitting Fed governor could be sued by the federal government over a construction budget, and the president has named the grounds in advance.
- decision When Powell leaves now depends on who controls the Senate and House after November, as well as on what Blanche does with the report.
"He can't manage a Building, and he certainly shouldn't be allowed to manage his High Interest Rate Policy (only on 'TRUMP!')," Trump's post said [2]. The building is the stated grievance. The rate is the one he keeps coming back to. On Sept. 16, the day of the last FOMC meeting, Trump wrote that rates "should be 1%, or less," against a current range of 3.75% to 4% [9]. That puts his target 2.75 to 3 percentage points below where the Fed sits [1]. The American Banker account does not give the size of the renovation overrun, only Trump's claim that the building is "over budget, at a Record Setting rate" [1].
Powell's own exit condition is where the post works against itself. He tied his departure to the end of the Justice Department's investigations [6], and American Banker says Trump's statement indicates they are not over [8]. "We believe the President's response to the Inspector General's report will convince Jerome Powell to keep his seat at the Federal Reserve at least through early January 2027," Jaret Seiberg, managing director at TD Cowen, wrote in a note on Thursday [10].
That leaves three exit dates, each set by a different decision. If the post is the end of it, early January 2027 is Seiberg's floor. If the Justice Department moves, Seiberg wrote that whether Powell stays "until his term expires in January 2028 likely will depend upon whether the Justice Department acts on Trump's social media post" [11]. January 2028 is about a year past the floor [2]. The third path runs through November. A Democratic Senate could block Trump from appointing a replacement, which Seiberg says could open the way to an earlier exit [12]. "Even just the House going Democratic could convince Powell that he can depart without the risk of Trump ordering him prosecuted," Seiberg wrote, because House Democrats "would be able to investigate the prosecution and why the President is focused on him" [13].
I think the post gets Trump the opposite of what it asks for. While Powell holds the seat, Trump has no replacement to appoint [12]. An instruction to Blanche costs nothing to issue, and it gives Powell grounds to treat the inquiries as unfinished [3]. The counter-case is that a government suit for "corruption or incompetence" [4] makes staying expensive for Powell personally, and a governor facing one could decide the seat is not worth defending. The view is wrong if Powell resigns before early January 2027 while the Justice Department question is still open.
What to watch
- Whether Attorney General Todd Blanche files a suit or opens a new inquiry after studying the inspector general's report.
- Senate and House control after November's midterms; Seiberg ties Powell's exit timing to both chambers.
- Any Powell resignation before early January 2027 while the Justice Department question is open, which would break TD Cowen's forecast.