President Trump has initiated significant disruptions to established norms in his presidency’s initial months, notably through actions such as dismissing commissioners of independent agencies and increasing tariffs on both allies and adversaries of the United States. However, he has not yet attempted to dismiss the head of the central bank. Recent developments, though, have sparked concerns that Trump may consider the unprecedented move of firing Federal Reserve Chair Jerome Powell.
On Thursday, Trump publicly criticized Powell on his social media platform, Truth Social, describing the Fed chair as repeatedly “too late and wrong” regarding interest rate cuts, and expressed impatience for Powell’s removal, stating it “cannot come fast enough.”
In addition, a recent report claims that Trump has been privately communicating to his aides his desire to remove Powell before the completion of his term, which is set to end in a year. Powell, for his part, has stated that he would not resign if Trump requested it. These circumstances pave the way for a potentially significant legal confrontation that could challenge nearly a century of legal and political precedents, a development that some critics worry could undermine confidence in the U.S. economy. To explore the implications, Fortune consulted law professors and policy experts for their insights on this rapidly evolving issue likely headed to the Supreme Court.
Understanding Humphrey’s Executor
Trump’s recent outburst followed a speech by Powell indicating that tariffs might worsen inflation. However, Trump has not yet taken formal steps to remove the Fed chair. Historically, he has dismissed commissioners from other independent agencies under the executive branch, such as the Federal Trade Commission and the National Labor Relations Board. This approach directly contests a long-established precedent from a unanimous Supreme Court decision in the case of Humphrey’s Executor v. United States, which determined that President Franklin D. Roosevelt could not remove the heads of an independent agency without justification like neglect or wrongdoing.
According to Hayley Durudogan, a senior policy analyst at the Center for American Progress, this ruling is a foundational Supreme Court precedent, serving as a critical basis for many developments in independent agency governance.
For decades, the conservative legal movement has aimed to challenge this precedent, advocating the “unitary executive” theory, which asserts that the president should have extensive control over the executive branch, including its various agencies.
The movement has seen some success; in a 2020 ruling, the Supreme Court narrowed the scope of Humphrey’s Executor by ruling that presidents can remove heads of agencies without multimember commissions, such as the Consumer Financial Protection Bureau.
Oliver Dunford, a senior attorney at the Pacific Legal Foundation, has expressed the belief that the Supreme Court is inclined to overturn the precedent. He suggests that while President Trump’s actions may influence the trajectory, the Court was already moving toward this direction.
Conversely, Noah Rosenblum, a law professor at New York University, argues that Humphrey’s Executor is a crucial component of U.S. governmental operations. He contends that the attempt of the current conservative legal movement to implement a political theory against historical precedent is primarily driven by a group of judges.
Examining the Federal Reserve’s Status
Trump’s actions in dismissing several commissioners create a potential confrontation with the Supreme Court. However, Joel Alicea, a law professor at the Catholic University of America, suggests these moves align with a longstanding conservative legal position supporting presidential authority to remove subordinate executive officers. Alicea notes that Trump appears willing to challenge this legal question.
Removing Powell would be a distinct matter. Dunford highlights the ambiguity regarding whether the Federal Reserve should be treated like other independent agencies such as the FTC, recognizing that no unified theory entirely explains the Fed’s uniqueness.
The difference may be linked to the historical governance structures of predecessor organizations to the Federal Reserve or the type of authority it wields. Dunford believes that even if the Supreme Court overturns Humphrey’s Executor, it might limit the decision’s applicability to the authority over the Fed chair, a position he believes should not be included.
Rosenblum, however, contends that attempts to differentiate the Federal Reserve from independent agencies are theoretical exercises lacking substantive rationale. He warns that overturning Humphrey’s Executor could jeopardize the Fed’s independence, suggesting that an economic disaster could ensue if such changes were enacted.
One relevant case has already reached the Supreme Court, involving Gwynne Wilcox, an NLRB member, who managed to have a federal court reinstate her after Trump removed her. Following an affirmation by an appeals court, the White House implored the Supreme Court to suspend the reinstatement until a comprehensive review can occur later in the year.
Legal analysts suggest that it is unlikely the Supreme Court will finalize a ruling on the NLRB case—and any potential overturning of Humphrey’s Executor—before the current term concludes this summer. Subsequently, while a final ruling is awaited, the Supreme Court could temporarily block Wilcox’s reinstatement.
Should the Supreme Court ultimately use the NLRB case to overturn Humphrey’s Executor, whether this ruling would encompass the Federal Reserve remains uncertain. However, Trump could still proceed with Powell’s dismissal, triggering legal challenges and likely necessitating an emergency petition to maintain Powell’s position.
Some scholars posit that the Supreme Court has retained Humphrey’s Executor due to concerns regarding the Federal Reserve’s independence. Yet, the prospect of Trump removing Powell signals, in Rosenblum’s view, a moment of reckoning, with implications possibly affecting the power dynamics within the presidency and the traditional rule of law, alongside caution about potential destabilization of the U.S. economy.
