What would happen if Trump forcibly fired Powell? See you in court!

Rumors of Trump firing Federal Reserve Chairman Powell have sparked strong market attention. Analysts warn that if Trump forcibly dismisses Powell, it is expected that Powell will fight back through legal means, and regardless of how the situation develops, "this will be a mess."

According to a previous article from Jianwen, senior White House officials revealed to the media earlier on Wednesday that Trump told Republican congressional members the night before that he might "soon" fire Powell. However, Trump quickly denied this claim during a press conference in the Oval Office, stating, "We have no plans to do that," and that the possibility of dismissal is "highly unlikely" unless Powell must leave due to fraudulent behavior.

Wolfe Research analysts pointed out, if Trump really takes action to forcibly dismiss Powell, it is expected that Powell will fight back through legal means, and it may ultimately be decided by the Supreme Court whether the president has the authority to dismiss the Federal Reserve Chairman for just cause.

Evercore founder Roger Altman called this "one of the worst ideas" and predicted that Powell would not voluntarily resign. Analysts believe that such a conflict would have a significant negative impact on the market and could trigger constitutional legal disputes.

Court Litigation Becomes the Key Battleground

If Trump does fire Powell rather than merely pressuring him to resign, Powell is likely to file a lawsuit to block this action. Evercore founder Roger Altman stated:

"I do not believe Chairman Powell will agree to the request to resign. So I think this will ultimately be resolved in court."

Media reports indicate that if Trump's firing of Powell leads to a lawsuit, the case is likely to be submitted to the Supreme Court for review.

Analysts noted that the Supreme Court majority recently indicated in an unrelated case that their view on just cause dismissal protections for the Federal Reserve differs from that of other independent agencies.

In the order allowing Trump to dismiss officials from two other agencies, the Supreme Court majority wrote: "The Federal Reserve is a uniquely structured quasi-private entity, following the unique historical traditions of the First and Second Banks of the United States."

Wolfe Research analysts believe, "We think Powell has a fair chance of winning in court, but it is not a sure thing."

They pointed out that whether the Supreme Court is willing to uphold the just cause protection for the Federal Reserve Chairman is a different question from whether they are willing to overturn the president's judgment on what constitutes just cause.

One scenario speculated by analysts is that the Supreme Court may allow lower courts to keep an injunction preventing Trump from firing Powell in effect during the case proceedings. Wolfe Research stated:

"This is likely enough for him to complete his term as chairman."

Market Concerns Over Dismissal Turmoil

Wolfe Research analysts Tobin Marcus and Chutong Zhu warned in a research report to clients that regardless of what specifically happens, Trump's firing of Powell will be "a mess" for the market

"We expect, like others, that this will have a significant negative impact on the market, potentially triggering a stock market sell-off and a counterintuitive surge in long-term yields."

Wolfe Research analysts detailed three scenarios that could arise from Trump's firing of Powell:

The first scenario is that Powell retains the actual position of Federal Reserve Chairman while Trump seeks a judicial order to remove him.

The second scenario is that Powell "voluntarily resigns and seeks reinstatement through litigation."

The most dramatic third scenario is that Powell attempts to continue serving as Chairman while Trump seeks to remove him through executive action.

For the third scenario, Wolfe Research analysts cited a similar precedent where the Washington D.C. police were called in March to escort employees of the U.S. Institute of Peace out of the building after staff from Musk's so-called government efficiency department accused them of illegal trespassing.

"Needless to say, Powell being escorted out of the Federal Reserve building by Washington D.C. police or federal law enforcement would be a concerning sight for the market."

Evercore founder Altman stated, "The president firing the Federal Reserve Chairman, or attempting to fire him—because I have no idea if he could succeed—is one of the worst ideas. It’s a terrible idea."

Altman also emphasized the "stark" difference between an independent central bank and a politicized central bank. He pointed out that countries with truly independent central banks (like the United States) have significantly different economic trajectories compared to those where central banks are controlled by government heads (like Turkey and Argentina), which have both experienced double-digit inflation rates in recent years