President Trump is threatening to remove Federal Reserve Chair Jerome Powell. Whether such a move is legal could soon be decided by the Supreme Court.
The president has asked the nation’s highest court in an emergency petition to endorse his decision to fire the board members of two other independent agencies — the National Labor Relations Board and the Merit Systems Protection Board.
It is a direct challenge to a 90-year-old Supreme Court precedent limiting the power of the president to dismiss independent agency board members except in cases of neglect or malfeasance. If that precedent falls, a Powell firing could be a lot easier to pull off at the Fed.
Trump has also delivered pink slips to leaders of other federal agencies, including the Federal Trade Commission and the Federal Election Commission, and those firings are also being challenged in lower courts.
"There is no legal difference between Jerome Powell and me," one FTC board member let go by Trump told Bloomberg. "If the president can legally remove me, he can legally remove Jerome Powell."
The president is now musing publicly about his wish to show Powell the door, saying last week in a post to Truth Social that his "termination cannot come fast enough" and telling reporters, "If I want him out, he’ll be out of there real fast, believe me."
U.S. President Donald Trump looks on as his nominee for the chairman of the Federal Reserve Jerome Powell takes to the podium during a press event in the Rose Garden at the White House, in 2017. (Photo by Drew Angerer/Getty Images) ·Drew Angerer via Getty Images
Trump has held private talks with a potential replacement for Powell, former Fed governor Kevin Warsh, the Wall Street Journal reported, but some of Trump’s economic aides have advised against removing Powell before his term is up in May 2026.
National Economic Council Director Kevin Hassett told a reporter Friday that Trump and his team were indeed studying whether to fire Powell.
Powell, for his part, has repeatedly stressed that his firing is not permitted by law — and did so again this past week.
He acknowledged he is following the case now before the Supreme Court testing Trump’s ability to remove board members at other independent agencies, but Powell said, "I don’t think that’s a case that will apply to the Fed."
Nonetheless, the central bank is "monitoring it carefully."
The only language in law pertaining specifically to the removal of Fed board members can be found in Section 10 of the Federal Reserve Act. The law states that each member of the board shall hold office for 14 years "unless sooner removed for cause by the President."
The statute doesn't have any language that specifically addresses the chairman of the Board of Governors, nor does it detail what exactly constitutes "for cause." The term has been interpreted in legal rulings to mean “inefficiency, neglect of duty, or malfeasance."
From FDR to Trump
Trump’s legal authority to fire Powell and other agency chiefs is no sure thing, according to constitutional law experts who note that a complicated mix of legal, political, and financial risks makes it hard to handicap whether Trump would get his way.
Key to Trump’s argument that he has the power to remove board members of independent agencies is Article II of the US Constitution. Article II vests "executive power" in the president to "take care that the laws be faithfully executed."
The Supreme Court’s first major case to wrestle with the president's Article II removal power goes back to the 1920s in a case titled Myers v. United States.
There, the court rejected a 1876 law that empowered the Senate to protect US postmasters from being fired by the president, ruling that the law infringed on the president’s Article II power.
But a decade later, the Supreme Court clamped down on the president's power in a 1935 case titled Humphrey's Executor v. US that challenged President Franklin Roosevelt’s termination of the US Federal Trade Commissioner.
The court held that the president’s authority to terminate agency officials at will was limited to purely executive officers, and not those leading independent agencies that engage in regulation and adjudication.
Franklin Delano Roosevelt, 32nd President of the United States. (Photo by: Photo12/Universal Images Group via Getty Images) ·Photo 12 via Getty Images
The court distinguished between executive branch officers within agencies that carried out legislative and judicial functions — such as the Securities and Exchange Commission and the Federal Trade Commission — and those that did not.
Congress, the court said, had power to limit the president's removal power over those officials "for cause" — then describing that term to mean inefficiency, neglect of duty, or malfeasance.
That precedent was stable for five decades. President Carter even suggested the expansion of removal protections to protect the US attorney general from being terminated by the president at will, according to University of Michigan law professor Julian Davis Mortenson.
But in the 1980s, he said, things began to shift.
In a 1988 case titled Morrison v. Olson, the Supreme Court was asked to decide the president’s authority to terminate the independent counsel Alexia Morrison, who launched an investigation into President Reagan’s Assistant Attorney General Ted Olson.
Olson allegedly lied to Congress concerning a document provided to the Environmental Protection Agency.
U.S. Supreme Court Justice Antonin Scalia in 2012. Photo: REUTERS/Brendan McDermid ·REUTERS / Reuters
The court upheld Congress’s removal limitation under the Ethics in Government Act of 1978, reasoning that Congress could protect the special counsel and the role’s quasi-prosecutorial functions.
But that decision didn’t sit well with ideologically conservative jurists, lawyers, and politicians. They focused instead on an argument made in a lone dissent from Justice Antonin Scalia, who argued the president has to be able to control all uses of the executive power.
Scalia reasoned that if the president can’t fire someone, then the president can’t control how that person implements laws.
There has been persistent debate ever since about whether Scalia’s theory can hold up.
"There's been a lot of embracing that's already happened of Scalia’s theory," said Mortenson, the professor at the University of Michigan’s School of Law.
Another decision in 2010, Free Enterprise Fund v. Public Company Accounting Oversight Board, confirmed the court’s position that Congress could protect certain agency officials. But in 2020 the Supreme Court did give Trump the power during his first term to fire the head of the CFPB.
'No such thing as an independent agency'
Mortenson and Duke Law’s Jeff Powell said only time will tell how today’s Supreme Court would rule.
Some legal scholars, they said, are confident the court would shy away from handing the president enough power to disrupt the agency that controls the nation’s money supply.
Every time the modern court has been presented an opportunity to expand the president’s removal power, Mortenson said, it has carved out exceptions that suggest some reluctance by at least some of the justices to take the theory all the way to its completely logical conclusion.
Powell, the Duke professor, said he thinks there’s an argument that the court might make another exception, this time for the Fed chair.
The Federal Reserve building in Washington. REUTERS/Joshua Roberts/File Photo ·Reuters / Reuters
"The thinking is that under the Constitution, finances are the crucial point at which Congress controls the executive, because it’s Congress alone that can raise money, and it's Congress alone that can dispense money," Powell said.
"And the Fed is the central mechanism by which Congress regulates financial matters."
But he isn’t convinced that the court would hold on to the exact reasoning that past justices relied upon to Congress over the president.
"Don’t be fooled by talk of independent agencies," Powell said. "I'm quite sure that the modern Supreme Court majority would say there's really no such thing as an independent agency."
The Fed chair this past week was adamant that the independence of his agency was assured.
It is a "matter of law," he said, and something that is "very widely understood and supported in Washington and in Congress, where it really matters."
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on X @alexiskweed.
