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Can Trump Fire Powell?

Whether Trump has the authority to do so is unclear.

The Federal Reserve Act of 1913 establishing the Fed stipulates that members of its Board of Governors, appointed by the president and confirmed by the Senate to staggered 14-year terms, can be only be removed for "cause" - long thought to mean misconduct, not policy disagreement.

That said, the law omits reference to limits on removal from its description of the four-year term of the Fed chair, who is one of the seven governors.

WOULD THIS BE UNCHARTED TERRITORY?

There is no direct legal precedent, since no president has ever tried to fire a Fed chief. There are, however, lawsuits now working their way through the courts over unrelated firings by Trump being watched as possible proxies for whether he has that power. One is currently pending before the Supreme Court, where any attempt to fire Powell would almost certainly end up.

WHAT WOULD FIRING POWELL MEAN IN PRACTICAL TERMS?

A lot would hinge on just how Trump might choose to "fire" the Fed chief.

As each of his predecessors has done, Powell holds three roles - chair of the Federal Reserve System, member of the Board of Governors and chair of the Fed's interest-rate-setting Federal Open Market Committee.

CAN TRUMP OUST HIM JUST AS FED CHAIR?

Were Trump to try to remove Powell only as chair of the Fed system, Powell could remain a governor until that term expires at the end of January 2028. The next scheduled board vacancy does not occur until January 2026, which in the meantime would leave Trump only the option of nominating one of the other incumbent governors to be chair. Two of those other six were appointed by Trump in his first term - governors Christopher Waller and Michelle Bowman, whom Trump recently nominated as vice chair for bank oversight. Both, like Powell, have spoken about the importance of Fed independence, so it's not clear that either immediately would deliver the rate cuts Trump wants.

WHAT ABOUT REMOVING HIM AS FOMC HEAD?

Trump has no direct control over who heads the FOMC. The FOMC chair is chosen annually by the panel's 12 members - the seven governors, the president of the Federal Reserve Bank of New York and four of the other regional bank presidents, who serve on the panel on a rotating basis.

By tradition the FOMC chooses the Fed chair as its head, with the New York Fed president as its vice chair. In theory, though, they could choose any of the members, including Powell should he still be a governor.

... OR AS A GOVERNOR?

Removing Powell as a governor would have the largest impact. Were it to withstand legal challenge, it would give Trump both a board vacancy and chair vacancy to fill with a nominee of his own choosing. Also it would open the door to Trump firing as many of the other governors as he pleased to install a wider Fed leadership he saw as compliant with his wishes.

WOULD POWELL BE ABLE TO CHALLENGE IT?

Should it occur, Powell would have the standing to challenge his firing in federal court, but he would have to fund that effort with personal resources. A lawyer and former private equity leader, he has the personal wealth to finance such an effort.

Powell has said repeatedly that he believes his removal is not allowed under the law, and said more recently that he does not believe the cases working their way through the courts now over Trump's firing of other independent federal board and agency members will apply to the Fed.

WILL IT ACTUALLY HAPPEN?

The Wall Street Journal reported that Trump has discussed firing Powell and replacing him with Kevin Warsh, who served as a Fed governor between 2006 and 2011. Warsh, the paper said, has advised against that, advocating that Trump should allow Powell to remain until his term as Fed chair expires in May 2026.

White House economic adviser Kevin Hassett, also seen as a potential replacement to Powell, said the matter was the subject of ongoing study inside the administration.

Source: Reuters

Urge for grassroots outreach on ACRE Act

With Congress potentially taking up tax legislation when it returns from the current congressional recess, ICBA and ACB are calling on community bankers to urge their lawmakers to co-sponsor legislation that would provide tax relief to support rural lending.

As an ACB member you may use ICBA’s Be Heard Grassroots Action Center to contact members of Congress in support of the Access to Credit for our Rural Economy (ACRE) Act (H.R. 1822 and S. 838). This legislation would exempt interest income on farm real estate and rural mortgage loans, in small towns, from taxation.

The ACRE Act would:    

• Provide farmers, ranchers and rural homeowners with lower-cost credit.    
• Allow producers to improve their cashflow positions at a time of tremendous economic stress in the farm sector.    
• Enable family farmers to remain on their farms and ranches, preventing further consolidation within the farm sector.    
• Offer community banks flexibility to work with struggling family farmers and ranchers.    

ICBA along with ACB and 43 other state banking associations have sent letters to Congress asking for support, plus ICBA is meeting with members of the House Ways and Means Committee about including it in the upcoming tax bill.

The ACRE Act is a key priority of ICBA’s “Repair, Reform, and Thrive” plan and open letter to the 119th Congress, which outline comprehensive reforms to address the nation’s policy challenges.

Source: ICBA; ACB

Regulator staff: restructuring - reduction - slashing - layoff - firing - gutting

The Consumer Financial Protection Bureau issued another round of termination notices to staff, the latest effort to dismantle a regulatory agency that has long been a target of Republicans. The bureau sent reduction-in-force (layoff) notices to 1,483, roughly 90% of its staff, with plans to cut off terminated employees’ access to CFPB systems. The cuts would leave the CFPB with a headcount of around 200, according to figures reported in September.

“This RIF action is necessary to restructure the Bureau’s operations to better reflect the agency’s priorities and mission,” Acting CFPB Director Russ Vought said in reduction-in-force notices sent to employees and seen by Bloomberg News.

A federal judge again temporarily paused an effort by the Consumer Financial Protection Bureau to decimate itself.

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FDIC plans to cut its workforce by roughly 20% as part of the Trump administration's broader efforts to cull the federal workforce.

The staff was told in an email it plans to launch several initiatives aimed at reducing the workforce, including early retirement, incentives for resigning, and ultimately layoffs if necessary. The goal is to reduce staffing by about 1,250 people, according to a copy of the email seen by Reuters.

However, the email states that the FDIC may reject offers to exit from some employees, including for workers who examine and help resolve failed banks or keep sensitive bank information safe.

The agency would pursue wider involuntary layoffs if necessary sometime after May 13, according to the email.

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The Office of the Comptroller of the Currency (OCC) announced a restructuring of its supervisory approach that it said is intended to meet contemporary challenges, streamline operations and promote efficiency.

The agency will merge its midsize and community bank supervision with large bank supervision to form a new bank supervision and examination division, according to an April 16 release. The agency said the move will facilitate the sharing of expertise and resources across different bank sizes, enabling the agency to better address specific banking issues and create career advancement opportunities for its examination staff.

Independent Community Bankers of America President and CEO Rebeca Romero Rainey opposed the OCC's decision, stating that it contradicts the ongoing calls for enhanced financial oversight by consolidating supervisory approaches for institutions with fundamentally different business models and risk profiles. She argued that this shift undermines the OCC's commitment to tailored supervision based on a bank's size, complexity and risk.

The organizational changes at the OCC will be effective on June 2.

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President Donald Trump fired National Credit Union Administration Board Members Todd Harper and Tanya Otsuka, leaving Kyle Hauptman as the sole member.

Without at least two members on the board, the NCUA is unable to implement any new action but can perform its supervisory and examination duties.

The president fired a Democratic member of the National Labor Relations Board in January and two Democratic commissioners at the Federal Trade Commission in March.

Both matters are being challenged in court.

Source: American Banker; Banking Dive; Bloomberg; ICBA; Reuters; S&P Global Market Intelligence

An article from Travelers

How Does Cyber Insurance Work?

The cost of dealing with a data breach goes beyond repairing databases, strengthening security procedures or replacing lost laptops. Traditional business insurance may not be enough to protect companies from cyber crime.

In this article by Travelers, an ACB Preferred Solutions Provider, they explore why "It's not a question of whether your organization will be the target of a cyberattack, but when. Cyber liability insurance provides businesses with a combination of coverage options to help protect the company from ransomware and other cybersecurity issues. Travelers CyberRisk policyholders can also access tools and resources to help manage and mitigate cyber risk both pre-breach and post-breach."

Click here to learn more.

Source: Travelers

Treasury in talks with federal agencies to ease bank oversight

Treasury Secretary Scott Bessent is hosting private meetings with federal and other bank agencies as a part of his expanded effort to streamline oversight and coordinate plans to ease regulation, Bloomberg News reported on Thursday.

The Treasury Department will take the lead on creating recommendations on the policy agenda, the report added, citing people with knowledge of the matter.

The Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) declined to comment on the report, while the U.S. Treasury did not immediately respond to Reuters requests for comment.

Treasury will play a greater role in banking regulation to better balance costs and benefits and ensure that lenders can finance growth in the U.S. economy.

He called for "commonsense principles" in banking regulations to ease burdens, especially for community banks that have had to deal with rules tailored for larger institutions.

The rules would be achieved through the Financial Stability Oversight Council, which meets regularly and includes the heads of the Federal Reserve and other bank regulators.

He also plans to use the President's Working Group on Financial Markets, a smaller council that has occasionally convened during financial crises and monitors financial trends.

Source: Reuters