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Trump Waved Draft Powell Firing Letter at House GOP, Vowed Ouster Amid Fed Pressure Campaign | July 16, 2025

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Trump Waved Draft Powell Firing Letter at House GOP, Vowed Ouster Amid Fed Pressure Campaign | July 16, 2025

Key Takeaways

  • President Trump drafted a letter to fire Fed Chair Powell and showed it to GOP lawmakers, despite later calling removal “highly unlikely” .
  • The White House cites the Fed’s $2.5 billion headquarters renovation—$700M over budget—as potential “cause” for removal .
  • Legal experts and a recent Supreme Court opinion argue presidents lack authority to fire Fed chairs over policy disputes .
  • Markets briefly plunged on firing rumors, reflecting Wall Street’s alarm over Fed independence .
  • Top contenders to replace Powell include Kevin Hassett, Kevin Warsh, and Christopher Waller .

The Draft Letter: Trump’s Unprecedented Move Against Powell

President Trump took the extraordinary step of drafting a dismissal letter for Federal Reserve Chair Jerome Powell and presenting it to Republican lawmakers during a July 15 Oval Office meeting. According to multiple sources, Trump polled attendees on whether he should fire Powell, gesturing toward the document as proof of his intent . The move stunned those present, including hardline conservatives who’d blocked a crypto regulation bill Trump supported. Representative Anna Paulina Luna (R-FL) immediately tweeted: “Hearing Jerome Powell is getting fired! From a very serious source... I’m 99% sure firing is imminent” . Yet within hours, Trump publicly reversed course, telling reporters: “We’re not planning on doing it... I think it’s highly unlikely” . This whiplash reflects a months-long pattern—private threats followed by public retreats—as Trump tests the limits of his authority over the central bank.

The $2.5 Billion Renovation: Manufactured “Cause”?

With legal barriers blocking Powell’s removal over policy disputes, the White House has zeroed in on the Federal Reserve’s headquarters renovation as potential grounds for dismissal. The project’s cost ballooned from $1.9 billion to $2.5 billion due to “unforeseen conditions” like asbestos contamination and a higher-than-expected water table . Though funded by Fed earnings—not taxpayer dollars—Office of Management and Budget Director Russell Vought accused Powell of “gross mismanagement” and misleading Congress about lavish additions like VIP dining rooms and marble finishes . The Fed quietly rebutted these claims on its website, stating: “No new VIP dining rooms are being constructed” . Trump seized the issue, declaring the overruns “sort of a fireable offense” while speculating about undiscovered “fraud” . This framing suggests the administration is constructing a paper trail to justify ousting Powell “for cause.”

Legal Minefield: Can Trump Actually Fire Powell?

The law governing Fed chair removals hinges on interpretation—and recent Supreme Court guidance complicates Trump’s path. The Federal Reserve Act states presidents may remove governors “for cause,” but doesn’t define “cause.” In a 2025 opinion, the Court signaled that policy disagreements don’t qualify, emphasizing the Fed’s need for operational independence . Powell himself has repeatedly stated his firing is “not permitted under the law” . Legal scholars warn an attempted removal would trigger immediate lawsuits, potentially reaching the Supreme Court. Even key Trump allies acknowledge the hurdle: Treasury Secretary Scott Bessent and Rep. French Hill (R-AR) both downplayed the likelihood of dismissal . As Senator Thom Tillis (R-NC) argued in a Senate floor speech: “Subjecting the Fed to direct presidential control would undermine U.S. credibility... You’d see an immediate market response” .

Political Theater: The GOP’s Role in Pressuring Powell

Trump’s Oval Office showmanship—displaying the draft letter to lawmakers—reveals a coordinated pressure campaign stretching beyond the White House. During the meeting, Republicans unanimously endorsed firing Powell, energizing Trump to declare imminent action . This aligns with broader GOP efforts to scrutinize the Fed:

  • Russell Vought (OMB Director): Demanded Powell answer 11 detailed questions about renovation costs within 7 business days .
  • Kevin Warsh (Potential Powell successor): Called the project “outrageous” and declared “the Fed has lost its way” during a Fox News interview .
  • Peter Navarro (Trade Advisor): Penned an op-ed branding Powell “one of the worst Fed chairs in history” .
    The administration also replaced three National Capital Planning Commission members with loyalists—a move interpreted as laying groundwork to block the renovation .

Market Jitters: How Wall Street Reacted

Reports of Powell’s potential firing triggered immediate financial turbulence:

  • The S&P 500 slid sharply on July 16 before paring losses after Trump’s denial .
  • The U.S. dollar index fell 0.8%, then recovered to -0.3% by midday .
  • Treasury yields dropped as investors sought safer assets .

Table: Market Reactions to Powell Firing Rumors (July 16, 2025)

Table titled "Financial Asset Movement" with S&P 500, U.S. Dollar Index, and 10-Year Treasury Yield showing declines in initial move and post-denial recovery.

JPMorgan Chase CEO Jamie Dimon captured Wall Street’s unease: “Playing around with the Fed can often have adverse consequences... The independence of the Fed is absolutely critical” .

Policy Divide: Tariffs, Rates, and “Talking to a Chair”

Behind Trump’s ire lies a stark policy rift. The president demands aggressive rate cuts—up to 3 percentage points—claiming: “We have no inflation. Record stock market... He’s costing us a lot of money” . Powell has held rates steady at 4.25%-4.5%, arguing Trump’s tariffs have clouded the inflation outlook . This disconnect turned personal, with Trump dismissing Powell as “terrible” and likening conversations with him to “talking to a chair” . Ironically, Trump appointed not only Powell but also Fed Governors Michelle Bowman and Christopher Waller—both of whom now support cuts, albeit slower than Trump wants .

Succession Battle: Who Could Replace Powell?

If Powell departs, three frontrunners emerge:

  1. Kevin Hassett: Trump’s NEC Director who first floated “cause” for removal. He’s reportedly a “top contender” and defended Trump’s authority to fire Powell on ABC News .
  2. Kevin Warsh: Former Fed governor who criticized Powell’s renovation management on Fox News. His remarks were seen as a subtle audition for the role .
  3. Christopher Waller: Current Fed governor appointed by Trump. Though more hawkish than Trump prefers, he’s signaled openness to near-term cuts .

Boxout: Powell’s Timeline

  • Nov 2017: Nominated by Trump
  • Feb 2018: Confirmed by Senate
  • May 2022: Renominated by Biden
  • Term Expires: May 2026

Global Precedent: Why Central Bank Independence Matters

Firing a central bank leader over political disagreements has no modern U.S. precedent. Past presidents (e.g., Nixon with Arthur Burns; Reagan with Paul Volcker) criticized Fed chairs but never moved to oust them. Economists warn such a step could:

  • Undermine confidence in the U.S. dollar’s stability
  • Politicize interest rate decisions
  • Trigger capital flight from U.S. markets
    As Powell noted, the Fed’s independence allows it to make “unpopular decisions... based on facts, not politics.” The administration’s pressure campaign—whether or not it culminates in dismissal—tests this foundational principle .

Frequently Asked Questions

Can President Trump legally fire Jerome Powell?

Legally uncertain, but unlikely. The Federal Reserve Act permits removing governors “for cause,” but a 2025 Supreme Court opinion suggests policy disputes don’t qualify. Most experts believe Trump would face immediate lawsuits and probable defeat in court .

What is the “cause” Trump claims for firing Powell?

The White House cites mismanagement of the Fed’s $2.5 billion headquarters renovation, which ran $700 million over budget. Officials allege Powell misled Congress about lavish additions like VIP dining rooms—claims the Fed denies .

How did markets react to reports of Powell’s firing?

Stocks, the dollar, and Treasury yields fell sharply on July 16 after Rep. Luna tweeted about an “imminent” firing. Markets partially recovered when Trump called removal “highly unlikely” hours later .

Who might replace Powell if he’s removed?

Top contenders include NEC Director Kevin Hassett, former Fed Governor Kevin Warsh, and current Fed Governor Christopher Waller. All have signaled openness to rate cuts aligned with Trump’s demands .

Is Powell planning to resign?

No. Powell has repeatedly stated he intends to serve his full term, which ends in May 2026 .

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