Trump once again "learns from" Nixon, is the Federal Reserve Chairman stepping down due to "transitional renovations"?

White House advisors are intensifying pressure on Federal Reserve Chairman Jerome Powell, accusing him of lying or gross mismanagement regarding the Fed's headquarters renovation project in Congress, paving the way for new legal avenues to remove Powell. This strategy echoes the Nixon administration's tactics in 1972, which involved spreading false information to undermine the Fed's credibility.

According to a previous article by Wall Street Journal, Trump stated on Friday that there are currently no plans to remove Powell, but described his performance as "terrible" and claimed it has "cost the country a lot of money." White House budget director Russell Vought wrote to Powell on Thursday, suggesting that he may have perjured himself before Congress regarding the $2.5 billion renovation project or violated building permit regulations.

On July 11, Nick Timiraos, a reporter for the Wall Street Journal known as the "New Fed Correspondent," wrote that the controversy surrounding the Fed's headquarters renovation could become an excuse for Trump to attempt to remove Powell due to differences over interest rates.

The article stated that Trump has also placed three White House advisors on the federal committee responsible for approving major construction projects in the capital, including Deputy Chief of Staff James Blair. Analysts believe that this is creating a legal basis to remove Powell under "justifiable reasons," as Supreme Court rulings have limited the president's power to dismiss Fed officials over policy disagreements.

This move parallels similar pressure tactics initiated by President Nixon before the 1972 election, when his administration fabricated false information about Fed Chairman Arthur Burns seeking a pay raise while implementing unpopular economic policies, aiming to damage the Fed's credibility.

Fed Headquarters Renovation Project Becomes New Battleground

Timiraos noted in his article that the cost of the Fed's headquarters renovation project has soared to $2.5 billion, involving the renovation of three office buildings near the National Mall in Washington. The Wall Street Journal reported two years ago that the project was facing severe cost overruns.

In June of this year, South Carolina Senator Tim Scott questioned Powell about the renovation costs and luxurious features during a congressional hearing. Powell denied media reports regarding certain high-end renovations, stating that they were not part of the latest design plans.

Fed officials stated that Powell honestly presented the construction plans in his congressional testimony. It remains unclear whether design changes are significant enough to require resubmission to the planning board. The official noted that the Fed's external construction management did not recommend resubmitting any plan changes.

The article stated that the White House advisory group accused Powell of serious management issues regarding the Fed's $2.5 billion headquarters renovation project. According to a Wall Street Journal article, Vought's letter to Powell raised a series of questions, including cost overruns, aimed at uncovering contradictions in Powell's testimony or flaws in the documents submitted by the Fed to the planning department In addition, Watters stated on Friday that he would raise "very, very sharp questions" regarding Powell's recent statements and the "shocking" cost overruns. White House Deputy Chief of Staff Blair also expressed a "strong desire to investigate" whether the Federal Reserve complied with the submitted building plans, warning that:

If it is found that Powell lied to Congress, the Board of Governors, the American people, and the Senate will be seriously concerned about this.

The article noted that the renovation controversy has emboldened factions within the Trump administration that have long sought to challenge the independence of the Federal Reserve. However, some economic advisors, including Treasury Secretary Mnuchin, generally advocate for maintaining the Fed's independence, with Mnuchin recently refusing to criticize Powell over the renovation issue in an interview.

History Repeats: Mimicking Nixon's Strategy

Analysts believe that this renovation controversy provides new ammunition for factions within the Trump administration that have long sought to challenge the independence of the Federal Reserve. This action is also seen as part of Trump's broader efforts to pressure the Fed into lowering interest rates.

A recent Supreme Court order indicates that Federal Reserve officials cannot be dismissed for policy disagreements, meaning they must be removed for "just cause," which is typically interpreted as misconduct or dereliction of duty.

Timiraos noted that this pressure campaign is reminiscent of President Nixon's similar tactics before the 1972 election. At that time, the Nixon administration spread false rumors about Federal Reserve Chairman Burns seeking a pay raise while pushing unpopular economic policies, aiming to undermine the Fed's credibility.

Federal Reserve scholars view the latest developments as a transparent attempt to pressure the central bank, and in the worst-case scenario, a dangerous step to create legal grounds for Powell's removal. Peter Conti-Brown, a Federal Reserve scholar at the University of Pennsylvania, stated: "We are in a high-risk moment in the history of the Federal Reserve."

"The Trump administration is clearly fabricating reasons for Powell's removal through various mechanisms," Conti-Brown said. He warned that if Trump launches an attack on the Federal Reserve, "it will bring profound instability to almost every aspect of the global economy."