The Justice Department’s investigation into Federal Reserve Chair Jerome Powell has intensified scrutiny of a key question that will shape the central bank’s leadership in the months ahead: whether Powell will step down when his chair term ends in May or remain on the Federal Reserve’s board of governors.
Powell’s term as Fed chair ends May 15. But because he also serves as one of seven members of the Fed’s governing board, his separate board term continues until Jan. 31, 2028. The usual pattern among Fed chairs is to leave the board when their chairmanship ends, and the article says Powell could be the first in nearly 50 years to stay on as a governor.
Many Fed-watchers believe the criminal investigation connected to Powell’s testimony about cost overruns for Fed building renovations was intended to intimidate him out of taking that step. If Powell remains a governor, the story says, it would deny the White House a chance to gain a majority on the board and undercut the Trump administration’s efforts to gain greater control over an institution that has long been insulated from day-to-day politics.
David Wilcox, a former top Fed economist and senior fellow at the Peterson Institute for International Economics, argued that Powell is unlikely to leave before his board term expires. “I find it very difficult to see Powell leaving before midnight on Jan. 31, 2028,” Wilcox said. He added that “This is a mortal threat to the governance structure of the Fed as we’ve known it for 90 years,” and that Powell takes the situation “exceedingly seriously,” which Wilcox said would lead him to believe it is his “solemn duty to continue to occupy his seat on the board of governors.”
Powell, 72, was appointed as Fed chair by Trump in 2018 and must step down from the chair role in May because his second four-year term is ending. The article says Powell has declined several times to comment on his plans beyond his chairmanship when asked by reporters, and that a spokesperson declined to comment for the story.
The article also describes Trump’s sustained pressure on Powell, saying Trump has sought to push him out before his time is up and has criticized Powell for not cutting interest rates as sharply as the president wants. It notes that Trump has focused on costs for households, including groceries, utilities and housing, as inflation has cooled, and it includes Trump’s remarks on Tuesday that mortgage rates have declined over the past year. Trump said, “If I had the help of the Fed, it would be easier,” and later added, “But that jerk will be gone soon.”
The story ties the investigation to testimony about a Fed renovation project and describes the legal process underway. It says subpoenas were sent to the Fed by U.S. attorney for the District of Columbia Jeanine Pirro, in connection with Powell’s June testimony about cost overruns for the Fed’s $2.5 billion renovation of two office buildings. It adds that Trump has criticized that renovation as excessive.
The article lays out how Powell staying on the board could affect the White House’s timetable and the pace of rate decisions. It says Trump has suggested he hopes to name a new Fed chair in the next few weeks, but that the criminal investigation could delay the process. It reports that several Republican senators, including at least two on the Senate banking committee, have expressed skepticism that Powell committed crimes during his testimony and that Sen. Thom Tillis said he would not vote for any Fed nominees until the legal cloud around Powell is resolved. If a new chair is not confirmed by May 15, Powell could remain as a governor until a replacement is confirmed, the article says, which could slow efforts to cut interest rates as quickly as Trump wants.
It also explains that even if Trump nominates a chair while Powell remains a governor, the administration would still have a limited number of board appointments. The story says Powell’s continued presence could leave Trump with three appointments on the board—two from his first term plus a new nomination—short of a majority. Wilcox said that under those circumstances, even a chair seeking to align decisions with the president’s preferences “would have very little persuasive power with his colleagues,” because Powell and other members of the Fed’s 19-member interest-rate setting committee could outvote a new chair. The story says that outvoting scenario has not happened since 1986.
By contrast, the article says if Powell leaves the board, Trump could nominate a fourth person and gain a majority. It adds that Trump could potentially add a fifth appointment if the Supreme Court allows his attempt to fire Governor Lisa Cook to proceed, and says the court will hear her case on Wednesday. It also says a board majority would enable sweeping changes to the Fed, citing the administration’s interest in reducing the central bank’s influence in the economy and markets. It describes Scott Bessent, Trump’s Treasury secretary, as having advocated reforms aimed at reducing the central bank’s influence.
Finally, the article discusses the policy and institutional consequences that could follow board control. It says a majority could remove some presidents of the 12 regional banks, who serve as members of the rate-setting committee, including a New York Fed president who has a vote along with four other rotating presidents. The story reports that some regional bank presidents have expressed opposition to deep rate cuts Trump demanded, and it says the board could seek to have presidents fired if a Fed chair wanted to do so.
The article also looks at historical precedents for Fed chairs staying on the board after finishing as chair. It says Arthur Burns stayed for about three weeks after his chairmanship ended in 1978, and that Marriner Eccles remained as a governor for three years after finishing as chair in 1948, partly because President Harry Truman asked him to remain. It notes that Eccles played a key role in a later dispute over interest rates involving Truman that contributed to the Fed-Treasury Accord, which helped establish the modern Fed as largely independent. It quotes Lev Menand, a Columbia University law professor who studies the Fed, calling the history a warning for Trump. “So it’s a cautionary tale also for Trump, thinking he’s going to get his own Fed chair in there,” Menand said, adding that “Martin didn’t do what Truman wanted.”