American traders have been showing their overall ignorance of politics in reaction to President Trump’s expressions of disgust with Jerome Powell’s approach to interbank rates. The chairman of the Board of Governors of the Federal Reserve System has long pushed back against threats from the President to dismiss Mr. Powell from the chairmanship.
Caselaw found in Humphrey’s Executor v. United States (1935) and Seila Law LLC v. Consumer Financial Protection Bureau (2020) suggests that Mr. Powell could only be removed for cause including inefficiency, neglect of duty, or malfeasance. Mr. Trump would have to make the argument that Mr. Powell’s reliance on data and his holding of the line on interbank rates amount to neglect of duty, inefficiency, or malfeasance.
My initial impression is that if Mr. Trump tries to go down this road, his travel will encounter a dead end. Mr. Powell will point to the Federal Reserve’s long record of applying overnight rates when carrying out monetary policy and its use of data and some reflection to arrive at those rates. Fed minutes, surveys of market makers and primary dealers, and the collection of data on consumer sentiment will be used as evidence to push back against the President’s claims of malfeasance or neglect.
Any risks that the President would be successful in an attempt to remove the chairman should not, in my opinion, even be reflected in the interest rates that determine the forward and futures contracts traded today.
I can see somewhere in the near future where the political risk increases of Executive branch involvement in the determination of the value of the USD. Were a president in the near future to gain the influence over rate making that the current President covets, there would be a volatile rate environment especially if that president had this President’s unpredictive mindset.
EUR/USD=1.1435
USD/JPY=141.32
Alton Drew
22 April 2025
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Lawyers Write the Bets. Bankers Sell the Bets. 