Jerome....You're Fired

CNN is practically ringing the alarm bells that Donald Trump is gearing up to “destroy” the Federal Reserve as we know it if he fires Fed Chair Jerome Powell. Their recent article, “The Federal Reserve as we know it could soon be turned on its head,” features a very somber photo of Powell and sets the tone that the Fed’s independence is at serious risk.

So, let’s dig into what’s at stake. First up, is it even possible for Donald Trump to fire Jerome Powell? And if so, who would he replace him with, and why? Then we’ll address CNN’s worries and figure out if there's actually something substantial behind the fear.

Can Donald Trump Really Fire Jerome Powell?

Yes, he technically can. According to the Federal Reserve Act, a president can remove a Fed governor “for cause.” Now, “for cause” is a pretty broad term, covering everything from “inefficiency” and “neglect of duty” to the big one, “malfeasance.” And anyone familiar with Trump knows that he can take broad interpretations and run with them. If Trump decides Powell’s leadership is inefficient or neglectful—say, for failing to stimulate the economy fast enough—Powell could theoretically be shown the door.

Also, let’s talk about timing. Powell’s term as Fed Chair doesn’t end until May 2026. That’s about 18 months into a hypothetical Trump administration, plenty of time for Trump to consider pushing Powell out if he feels Powell isn’t delivering on his demands for a low-interest, growth-boosting environment.

What Would a Trump Replacement Look Like?

This is where things get intriguing. There’s no shortage of Fed critics who’d be on board with Trump’s economic outlook. One name that comes to mind is Kevin Hassett, former Chair of the Council of Economic Advisors under Trump, who’s well-versed in tax policy and, let’s just say, is unlikely to challenge Trump’s vision. Trump could also lean on other economic voices from his previous circle, such as Art Laffer (though Laffer has indicated he doesn’t want the job) or perhaps Larry Kudlow as an advisor.

Then again, it could be anyone who Trump believes will support policies that keep rates low and money flowing—someone willing to crank up the “money printer” and turn on quantitative easing (QE) if things get rocky. Powell, who has shown a willingness to raise rates and curb inflation at the expense of growth, might just be too conservative for Trump’s playbook.

Would It Help the Economy, or Just Create More Chaos?

Now, here’s where things get murky. If Trump inherits a slowing economy, he’s almost certain to demand rapid rate cuts. In fact, according to Fox Business pundits, if we’re in a recessionary environment, Trump would likely push for a “go big or go home” monetary policy—meaning major rate cuts and potentially even a return to QE.

In the short term, loosening the Fed’s grip could give a jolt to the economy, making borrowing cheaper and boosting asset prices. However, the long-term consequences of such an approach are risky. CNN’s primary concern? That Trump could permanently alter the Fed’s role, turning it into a political instrument rather than an independent guardian of the economy. And there’s a real risk that unbridled stimulus could reignite inflationary pressures down the line, forcing the Fed (or its replacement) into an even tougher spot in the future.

What CNN’s Really Afraid Of

The underlying worry here is independence. For decades, the Fed has operated with autonomy from the White House. It’s why we’ve avoided the kind of hyperinflation that’s plagued other nations with less independent central banks. And it’s also why the Fed has been able to make unpopular decisions—like hiking rates when inflation spikes—even if it means sacrificing short-term growth for long-term stability. CNN argues that if Powell is ousted, this independence could be shattered, and the Fed might become just another wing of the executive branch.

The result? In the short term, lower rates might cushion an economic slowdown, but in the long term, the Fed’s ability to act against inflation could be compromised. If the Fed becomes overly responsive to political demands, we might not have a “punch bowl” remover ready to slow things down when inflation starts picking up again.

So, Should Powell Be Worried?

Absolutely. With all signs pointing to a recession on the horizon, Powell could be seen as the fall guy if things start unraveling. And with Trump at the helm, there’s every reason to believe Powell would be under immense pressure to toe the line or be replaced.

In the end, CNN’s not entirely wrong. The Fed’s independence is crucial for maintaining stability over the long haul, and sacrificing that for short-term gains could have serious consequences. So, could Powell be fired? Yes. Would it have short-term benefits? Likely. But the long-term price might be steep.

Only time will tell if Powell’s out and the Fed turns into Trump’s new favorite economic toy. But if it does, brace yourself—things could get very interesting, very quickly.