Several outside lawyers recently warned President Donald Trump that a new strategy to remove Federal Reserve Chair Jerome Powell over the central bank’s $2.5 billion headquarters renovation project is on shaky legal ground, according to two people familiar with discussions around Powell’s firing.
Privately, White House officials also acknowledged uncertainty about whether the argument would hold up in court. That doesn’t mean the president is going to drop the subject as he works to undermine Powell’s credibility and pressure him into submission.
“Whether or not it’s illegal, I don’t know,” said one official, granted anonymity to speak candidly about the legal strategy. “But is it a good thing to point out to damage this guy’s image? Yeah.”
The conversations were a backdrop to the latest drama this week over whether Trump might attempt to oust Powell, whom he appointed as chair in 2017 but now regularly blasts for keeping interest rates elevated. In an Oval Office meeting Tuesday with a group of House Republicans, the president suggested he might fire the Fed chief, only to publicly say the following day that it was “highly unlikely” that he would do so.
But Trump has not ruled out moving against Powell.
The lawyers in recent days told the White House counsel’s office that it would likely lose a court fight if Trump fired Powell solely based on accusations that he mismanaged the multi-year renovation project and misled Congress about it, according to the people, who were granted anonymity to discuss internal deliberations.
Uneasy markets are also among the factors influencing Trump. The president worried that firing Powell would undermine the government’s ability to cheaply finance its debt, the people added. Treasury bonds, stocks and the dollar briefly fell Wednesday in response to news reports that Trump was poised to fire Powell.
The market for U.S. government debt showed signs of dysfunction in early April after Trump announced unexpectedly high tariffs on countries, a precarious situation that led the president to pause many of those levies. Fears about further turmoil in that market hang over the prospect of removing Powell.
White House aides referred back to the president’s Wednesday remarks, adding that Trump takes into consideration many factors and listens to a variety of people in his decision-making process.
Speaking to reporters on Wednesday, Trump kept the door open to the renovation-related legal strategy.
“I mean, it’s possible there’s fraud involved with the $2.5, $2.7 billion renovation. This is a renovation,” he said. “How do you spend $2.7 billion, and he didn’t have proper clearance, et cetera, et cetera? So you know that’s going on. There could be something to that, but I think he’s not doing a good job.”
Trump has grown more publicly frustrated with Powell, who has held interest rates steady as he waits to see how tariffs play out in the economy. Import taxes can lead to both higher inflation — which would call for higher rates — and slower growth, which would call for lower rates.
But Fed board members can only be removed from their position “for cause.” That provision has not been fully litigated but has generally been interpreted to mean that the president can’t fire a central banker over policy disagreements. The Supreme Court in May signaled that Powell is legally protected from being removed by Trump.
Administration officials seized on the new strategy earlier this month after Senate Banking Chair Tim Scott pressed Powell on the ballooning costs of upgrades to the Fed’s headquarters on the National Mall and an adjacent building owned by the central bank.
Last week, White House Budget Director Russ Vought launched a probe into the project and the Fed chief’s congressional testimony, calling for a response from Powell within seven business days. Vought, speaking at a breakfast with reporters hosted by the Christian Science Monitor Thursday morning, said his office is planning a site visit to the Fed’s headquarters in the next week to get “the answers to some of our questions” about the project’s cost overruns.
“They either misled Congress, or they need to go back to the National Capital Planning Commission and have a reassessment of the project,” Vought said. “Those are the important things that we’re going to get to the bottom of.”
The central bank has attributed the hefty price tag to a range of factors, including remediation for asbestos and lead contamination, the rising cost of building materials and the historic nature of the building. Powell told Scott and Sen. Elizabeth Warren (D-Mass.) in a letter this week that the headquarters has not been comprehensively renovated since it was built in the 1930s.
The Fed chief also asked the central bank’s inspector-general to look into the project, a step that National Economic Council Director Kevin Hassett told NBC News “impressed” him.
Sophia Cai contributed to this report.
