Swamp Notes: Trump’s Case Against Fed Chair Powell
Unhedged Podcast Episode Summary
Release Date: August 7, 2025

In this episode of Swamp Notes, hosted by Mark Filippino of the Financial Times in collaboration with Pushkin Industries, the discussion centers around the escalating tensions between former U.S. President Donald Trump and Federal Reserve Chair Jay Powell. The conversation delves into the implications of Trump's attempts to undermine the Fed's independence and scrutinizes the potential consequences for U.S. financial stability.

Introduction

The episode kicks off with Mark Filippino addressing a significant political development: Donald Trump's recent visit to the Federal Reserve building in Washington, D.C., where he confronted Fed Chair Jay Powell. This act symbolizes Trump's ongoing dissatisfaction with the Federal Reserve's monetary policies, particularly its stance on interest rates.

Trump’s Attempt to Oust Powell

Mark Filippino introduces the central issue:

"The Federal Reserve doesn't want to cut interest rates nearly as fast as the President does. And that has infuriated Trump. Now it looks like he's building a case to fire Powell and upend the central bank in the process."
[01:04]

Claire Jones, FT's US Economics Editor, provides context on the legality and motivation behind Trump's actions:

"It's very difficult for Trump to fire Jay Powell over monetary policy. The Supreme Court has made it clear that it doesn't think the executive branch has the power to fire either the Fed chair or the other six governors on the Fed board for disputes over interest rates."
[02:07]

Jones suggests that Trump's move may be a pretext to pursue other grievances:

"Attention's now turned to a renovation that's been running for years to kind of serve as a pretext to go after Powell on other grounds."
[02:48]

The discussion shifts to the Federal Reserve's ongoing renovation:

"The Fed's renovation is costing a lot of money. It's costing $2.5 billion... This has now attracted a lot of attention. It's really been over recent weeks where we've seen certain allies of Trump really try to attack the Fed over the cost of this building work."
[02:52 - 03:42]

Legitimacy of Trump’s Arguments

Adam Posen, President of the Peterson Institute for International Economics, critically assesses Trump's rationale:

"No, they have a pretext... they're trying to make up something that will additionally pressure the chair in a very overt way."
[03:53 - 04:43]

Posen elaborates on historical precedents of presidential interference with the Fed, noting the rarity and severity of Trump's approach:

"These kinds of things happen, but never quite so personal in your face, unremitting, and never so much by the president as opposed to Congress."
[05:00]

He underscores the importance of central bank independence, referencing past instances where political pressures led to economic instability.

Potential Consequences of Firing Powell

Filippino probes the possible outcomes if Trump manages to oust Powell:

"What would happen to markets? What would happen to the economy, what would happen to the global economy if Trump were to go ahead and fire Powell?"
[08:25]

Posen responds by highlighting the likely negative impacts on financial markets:

"The focus would have to be on the dollar market and the long-term treasury market... we would expect... a risk premium, meaning an average higher rate, no matter how much it goes up and down for US Treasuries on interest rates."
[08:40 - 09:07]

Claire Jones adds that undermining the Fed's independence could lead to higher borrowing costs for the U.S. government:

"If the Fed does look as though it's responding to Trump and its independence is compromised, then the US government will likely have a higher cost of borrowing."
[11:35 - 11:49]

Institutional Resilience and Future Outlook

The conversation shifts to the resilience of the Federal Reserve as an institution:

Claire Jones posits that the Fed’s institutional safeguards may prevent total subversion:

"Powell understands what's at stake here. He understands how important it is for the institution that he remains in place, and he's definitely not going to be bullied out of the job and resign."
[17:26 - 17:56]

Adam Posen agrees, emphasizing Powell's commitment to institutional integrity:

"Jay Powell is standing up for the institution, standing up for rule of law, standing up for competent government, and he will go down fighting."
[17:56 - 18:20]

However, Posen warns of the broader implications for institutional independence beyond Powell's tenure:

"They're eroding the independence and quality of a whole bunch of government institutions, particularly independent agencies... we’re going to end up with more inflation in the short term and we're going to weaker currency in the short term."
[17:09 - 17:26]

Conclusion

As the episode wraps up, Mark Filippino synthesizes the insights from Jones and Posen, reinforcing the precariousness of the situation. While the likelihood of Trump successfully firing Powell remains low, the persistent attacks and political maneuvers pose a serious threat to the Federal Reserve's autonomy and, by extension, to the stability of the U.S. and global economies.

Notable Takeaways

• Legal Constraints: The Supreme Court has affirmed that the executive branch lacks the authority to dismiss Fed officials over monetary policies.

• Historical Precedents: While presidents have occasionally criticized the Fed, Trump's direct and personal attacks are unprecedented in intensity and public nature.

• Economic Implications: Attempts to undermine the Fed could lead to higher borrowing costs, currency devaluation, and increased inflation, destabilizing both national and global markets.

• Institutional Integrity: Jay Powell's steadfast defense of the Fed underscores the importance of maintaining independent monetary policy to ensure economic stability.

This analysis underscores the delicate balance between political influence and institutional independence, highlighting the critical role of the Federal Reserve in safeguarding economic health irrespective of partisan pressures.