No one argues that it is more efficient to cooperate than to compete. However, some policymakers stubbornly neglect this simple truth. They just cannot come to terms—for example, Donald Trump and the Federal Reserve.
According to Bloomberg, one of the key issues in the US presidential election is the independence of the central bank. Ex-president Donald Trump highlighted this issue. Now the billionaire's supporters and opponents are wondering whether he will strip the Federal Reserve of some privileges and reduce the regulator's autonomy if he is re-elected.
At the moment, Donald Trump’s stance on this topic is unclear. However, in 2018, he said that he would not reappoint Jerome Powell as the Federal Reserve Chairman. The former US President was furious about a series of rate hikes.
According to a survey conducted by Bloomberg, 44% of respondents expect the Federal Reserve's independence to be subdued or its powers challenged if the billionaire wins.
US Presidents have the right to appoint their nominees to the Federal Reserve Board of Governors, including the head of the central bank. Federal Reserve’s governors are elected for a 14-year term, and the Chairman serves a 4-year term. They represent the Federal Open Market Committee (FOMC), which sets monetary policy and fine-tunes interest rates.
Incumbent Fed’s leader Jerome Powell was picked for this post in 2018. Later, in 2021, current US President Joe Biden reappointed Jerome Powell. His term as Fed chairman expires in 2026. If reassigned, Powell's next term will end in 2028. By then, he will have completed a full cycle as central banker and, by law, will not be eligible to be elected again.
Importantly, the Federal Reserve Act states that members of the board of governors, including the head of the central bank, can be removed from office by the president for reasons of gross errors or power abuse. However, even if the Fed’s chairman is deprived of authority, he can still remain on the board of governors. In addition, the former Fed chief may contend for another important position, such as Chair of the Open Market Committee. Reforming the Federal Reserve is a long process that requires amendments to the law and approval by the US Congress.
