Financial and political news in the second half of this week has been dominated by stories of steep decline on the stock market. After the Dow Jones Industrial Average fell more than 800 points on Wednesday, the market was again in the negative figures on Thursday.President Trump was furious with the Federal Reserve on Wednesday, blaming rising interest rates for a loss of market confidence.
5 Day performance for the Dow is currently tracking at -5.91%, and similar figures can be seen across all major indexes. While stocks are still up for the year to date, the losses will be significant for some traders.
The President’s criticism has led some to ponder whether he has the power to fire Jerome Powell, the Fed’s current Governor and Chairman. Although Trump has made no indication that he wants to do so, it is an interesting topic to consider when thinking about finances and the government.
The Federal Reserve is an Independent Branch of the Federal Government
The Federal Reserve is an independent agency that operates without any control from the executive branch. The Fed was designed in a way that it could remain independent, so that monetary policy would not be influenced by partisan politics.
During the 1940s, President Roosevelt attempted to fire one member of the Federal Trade Commission, which operates in a similar way to the Federal Reserve. Roosevelt felt the FTC was hindering his policies.
The firing was reversed by the Supreme Court, with every single Justice ruling against the executive branch. The court said that independent agencies need to be separated from executive influence and control. This precedent sets the stage for the law today.
The Federal Reserve Act states that a Governor can be fired, but only “for cause”. Essentially, this means that without crime, gross mismanagement, corruption etc., the President does not have the power to remove Jerome Powell.
Powell Will Remain Until 2028
Powell will remain the Fed Chairman until 2022 and will hold his Fed Governor position until 2028.
The Federal Reserve plans to increase rates a final time this year, and up to three more times within the next two years if economic growth continues.
Most analysts believe that the stock market will rally again after the current slump, which could last throughout October.
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| The reports, research and newsletter are based on current and historical market data, as well as publicly available financial data.They are intended to be a starting point for investors. They do not provide every material fact about a company or industry, nor are they recommendations to buy or sell. The writers and the company make no warranties or representations as to the accuracy of these reports. You should NOT rely solely upon the information or opinions read in the content. Rather, you should use the content as a starting point for doing independent research on the independent analysis and trading methods in the content. The content is impersonal and does not provide individualized advice or recommendations for any specific reader or individual portfolio. By accessing this website you have agreed to our disclaimers and privacy policy. |
