LIVE MARKETS-Trump vs Powell: How messy might it get?
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TRUMP VS POWELL: HOW MESSY MIGHT IT GET?
Team Trump appears to be building a case to fire Federal Reserve Chair Jerome Powell for failing to correctly manage the renovation of the central bank's headquarters complex, a project whose costs have increased since it was approved in 2018.
As Jaret Seiberg, managing director, Washington Research Group - financial services policy analyst at TD Cowen, sees it, the conservative media is focused on whether Powell has mismanaged the renovation, and they contend this provides grounds for the president to fire Powell for cause.
Seiberg argues that Powell's firing is unlikely though he admits the risk is growing and if the pressure from the conservative media becomes intense enough, the president might feel compelled to act.
Seiberg also thinks that the market is likely to react negatively if the president fires Powell even though it has been largely ignoring the headlines because it may be exhausted by the quarrel, and it simply assumes Trump will back down.
"We expect Powell will litigate if Trump removes him. Our view is that Powell would prevail as the Supreme Court has suggested the President only may remove a Fed chair for cause. And we do not see how the renovation project meets that definition," writes Seiberg in a note out on Monday.
He adds that Trump would need to dismiss Powell as chair and as a governor, which could present further complications.
"If Trump only fired Powell as Fed Chair then the FOMC could still leave Powell as its chair as the FOMC picks its leader rather than the President."
Seiberg believes it will be key to keep a close eye on Congress as united GOP calls to oust Powell could add pressure on Trump to act.
(Terence Gabriel)
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