Trump could target three Fed governors. Removing them may be hard

President Donald Trump has new ammunition he can use in his campaign against his perceived opponents at the Federal Reserve, although a watchdog report released Wednesday found no basis for criminal charges stemming from the Fed’s costly headquarters renovations.

Combined with separate disputes involving governors Lisa Cook and Michael Barr, Trump’s decision to pin the headquarters spending issues on former Chair Jerome Powell means the president could potentially seek the removal of as many as three of the Fed’s seven board members. But recent court rulings suggest any attempt would face significant legal hurdles. 

Any legal maneuvers could take months to play out and may in practice have the effect of persuading his targets to postpone any plans to leave the Fed, as Powell has already done. Trump’s ability to force the Fed off its recent decision to raise interest rates appears limited, despite the institutional damage he could do if he took further legal action.

Trump appears to be weighing his options for how to proceed. The Fed is scheduled to announce its latest interest-rate decision on Oct. 28, only days before the Nov. 3 midterm election. The administration faces a deadline in the Cook case shortly after the vote.

If the administration does move against any of the three governors, it may backfire for Trump, former Fed General Counsel Scott Alvarez said. 

“All have an incentive to litigate and stay,” Alvarez said.

“The Supreme Court said that Lisa Cook can stay while the litigation goes on. If they all stay while he goes on, then all he’s done is hurt his own agenda,” Alvarez said of Trump.

Trump fumed in the wake of Wednesday’s IG report. “Powell is a disaster,” the president said Wednesday when asked by reporters about the findings. Powell “should not be sitting on the Federal Reserve Board.” 

Trump appointed Powell during his first term, then quickly soured on him.

Trump asked Attorney General Todd Blanche to review the inspector general’s report. A spokesman for Jeanine Pirro, the U.S. attorney for the District of Columbia said her office was also reviewing the report.

The DOJ didn’t respond to emailed questions about its plans and how Blanche’s review might differ from Pirro’s. Pirro previously oversaw a criminal investigation into Powell. A judge quashed her subpoenas in the matter, saying their “dominant (if not sole) purpose is to harass and pressure Powell.” 

The Fed declined to comment on Trump’s remarks about Powell. 

The long-awaited IG report found a raft of managerial problems had allowed construction costs to jump by about a billion dollars as the Fed renovated its Washington office space. But the report found no evidence of administrative misconduct and saw nothing meriting a criminal referral to prosecutors. 

“I personally don’t think the renovation report would be enough for a court to remove Jay for cause,” said Scott Alvarez, a former Fed general counsel. “It exonerates him on the criminal side, but it also says they…