Governor Powell's First Speech Doesn't Sound 'Quiet'

Fed Governor Powell, who vowed to be a “low-profile” Fed governor in support of Chairman Warsh, made sure everyone still heard him in his first speech after handing over the chairmanship.

The speech was delivered upon his acceptance of the 2026 John F. Kennedy Profile in Courage Award. Worth noting that this year’s honour was shared with The People of the Twin Cities, Minnesota, “for risking their lives to protect their neighbors and immigrant community members from an unprecedented federal law enforcement operation” — a citation that carries a hardly subtle political connotation. This was the kind of venue Chairman Powell would have quietly avoided a year earlier. Not so, evidently, for Governor Powell.

The speech itself also did not pull punches. Powell closed by touching on two contentious subjects. (For comparison, his acceptance remarks for the Paul A. Volcker Public Integrity Award in March were genuinely “quiet.”)

The first was his emphasis that US presidents should refrain from attacking the Fed’s independence — or else:

If any administration finds a way to remove Fed officials over policy differences, then future administrations will do so as well. The public would lose faith that the central bank will make decisions based only on what’s best for all Americans. The Fed’s credibility would be lost. That credibility enables the Fed to support a strong and stable economy for the benefit of American families and businesses. Our credibility has been built and sustained over many decades, and we have a duty to safeguard that priceless asset for our fellow citizens and for generations to come.

The second message was simpler: don’t you dare touch any Reserve Bank president.

Fed governors and Reserve Bank presidents hold office with legal protection against removal.

Administrations play no role in the selection or oversight of the 12 Reserve Bank presidents.

While the first point grabbed all the headlines, the second is the more significant of the two. It speaks directly to the next plausible front in the Trump administration’s pressure on the Fed: the so-called Fed Board Majority problem.

This is a relatively new talking point from Powell — that he aims to protect Reserve Bank leaders from being fired “at will” by the administration.

As we have previously discussed, the issue is controversial in the sense that it has never been tested and the law itself is not exactly clear. One view holds that the President cannot fire regional Fed presidents because the authority to do so sits with the Fed Board:

A 2019 legal opinion from the Department of Justice’s Office of Legal Counsel states that Fed Governors are likely “Principal Officers,” as they are directly appointed by the President, while regional Fed presidents are “Inferior Officers” to the Fed Board. This means the Board of Governors can likely dismiss Fed presidents “at will,” rather than “for cause.” They only have to provide a reason in writing, not necessarily a “legitimate cause.”

Both Powell and Waller had publicly discussed this in April. Governor Chris Waller, at an April Brookings event, was asked whether he would ever agree to consider firing Reserve Bank presidents because their views on interest rates differed from those of the administration. He answered:

Well, that’s not the design of the system. Period.

Powell, at the April FOMC press conference, concurred:

The other thing [Waller] touched on was the idea of removing reserve bank presidents from office over different views on monetary policy... That’s not something that I would support. Chris [Waller] said the same thing.

Without the two votes from Powell and Waller, the Fed Board majority is not on the Trump administration’s side — and the route to exerting control over interest rates by removing Reserve Bank presidents is not, for now, viable.

Powell’s repositioning is notable for bringing this argument into public view. The legal protection of Fed governors, which is expected to be reaffirmed by the Supreme Court through the Lisa Cook case, should also extend to regional Fed presidents. Powell won’t and can’t stay on the Board forever — his governor term runs until January 2028 — and when he leaves, Waller will be the one holding out against a majority that may be willing to try firing Reserve Bank presidents.

By raising this topic more openly, Powell can help encourage more Fed officials, and even Senators, to express their view that Reserve Bank presidents are “untouchable.” It seems to me this is the legacy project “quiet” Governor Powell has set for himself.