Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: President Trump has a long standing feud with one man
Speaker 2: who's central to the US financial system, FET Reserve Chair
Speaker 2: Jerome Powell, and at the White House on Thursday, the
Speaker 2: President laid down one of his sharpest attacks on Powell. Yet, Powell,
Speaker 2: you said that the germination of Rome Powell would not
Speaker 2: come fast enough.
Speaker 1: He says he didn't.
Speaker 3: Ask him to.
Speaker 4: Oh he'll live.
Speaker 2: If I asked him to, he'll be out of there.
Speaker 3: But I don't think he's I don't think he's I
Speaker 3: don't think he's doing the job.
Speaker 2: He's too late, always too late, a.
Speaker 1: Little slow, and I'm not happy with him.
Speaker 2: Trump nominated Powell to the top job at the FED
Speaker 2: in his first term, but the two have had a
Speaker 2: rocky relationship ever since. Just days after Trump was re
Speaker 2: elected in November, Powell told a reporter he would not
Speaker 2: resign if Trump asked, if he asked you to leave,
Speaker 2: would you go?
Speaker 3: No?
Speaker 2: Can you follow up on do you think that legally
Speaker 2: you're not required to leave? No? But Trump's latest threats
Speaker 2: to Powell's job on social media and in front of
Speaker 2: microphones and cameras in the Oval office have set off
Speaker 2: new alarm bells. They've also introduced some questions, can the
Speaker 2: President actually fire the FED chair? What would that do
Speaker 2: to financial market seeking stability? And if he follows through,
Speaker 2: what would happen next.
Speaker 3: I'm David Gera and I'm Sarah Holder. This is the
Speaker 3: Big Take from Bloomberg News Today.
Speaker 2: On the show Donald Trump Versus Jerome Powell, Michael McKee,
Speaker 2: Bloomberg's International economics and policy correspondent, joins me to unpack
Speaker 2: Trump's threats and whether the President actually has the legal
Speaker 2: authority to fire his own FED chair.
Speaker 3: And I talked to Seliah Mosen, Bloomberg senior Washington correspondent
Speaker 3: and host of The Big Take DC podcast about what
Speaker 3: this fight could meet for the value of the dollar
Speaker 3: and the status of US treasuries as a safe haven
Speaker 3: in global markets.
Speaker 2: Mike, you and I are speaking on Monday morning, and
Speaker 2: already today, President Trump has called Federalserve Church Rome Powell
Speaker 2: a major loser in a post on truth Social I
Speaker 2: think it's worth noting that Powell was President Trump's pick
Speaker 2: to run the FED back in twenty seventeen. How would
Speaker 2: you characterize their relationship today?
Speaker 1: Oh, I'd say there's probably very little relationship between the
Speaker 1: two of them. Now, Powell and Scott Bessen's, the Treasury Secretary,
Speaker 1: meet every week and both of them have described the
Speaker 1: meetings as cordial and friendly and businesslike. But I don't
Speaker 1: think that the President has spoken to Powell since the
Speaker 1: day he nominated him, and it doesn't look like they're
Speaker 1: going to be speaking anytime soon.
Speaker 2: Does the President have specific grievances that he's upset with j? Powell?
Speaker 1: For, well, it's all about lowering interest rates. He began
Speaker 1: this latest round by noting that the European Central Bank
Speaker 1: was going to be cutting rates last week, which they did,
Speaker 1: And why isn't the FED doing that? He asked, And
Speaker 1: he suggested that the FED is going to be late
Speaker 1: if the economy slows down, not mentioning the fact that
Speaker 1: Trump would be the reason the economy slows down, and
Speaker 1: so he's trying to put pressure on, perhaps create a
Speaker 1: scapegoat for whatever happens between now and the end of
Speaker 1: the chairman's term.
Speaker 2: Mike, you've covered four Fed chares, Greenspan, Bernank, Yell, and
Speaker 2: now Powell, and I wonder how unusual it is to
Speaker 2: have the FED chair and the President butting heads like this.
Speaker 2: By like this, I mean so publicly.
Speaker 1: There has always been criticism of the FED up on
Speaker 1: Capitol Hill, but Pole has worked very hard to win
Speaker 1: friends and influence people up on the Hill. He spends
Speaker 1: a lot of time up there talking to members, which
Speaker 1: is one reason he doesn't seem to be nervous about
Speaker 1: what the President is talking about, because he says, I
Speaker 1: have a lot of support up there. But presidents generally
Speaker 1: stay away from the FED. This began really under Bill
Speaker 1: Clinton when Bob Rubin was Treasury Secretary and head of
Speaker 1: the National Economic Council, and he suggested that the best
Speaker 1: thing for the president to do is not talk about
Speaker 1: the FED. And it's been honored by every president except
Speaker 1: for Donald Trump. Since we're going.
Speaker 2: To talk about the impact this is having on the
Speaker 2: markets in a minute, but I'm curious what you think
Speaker 2: the impact is on the FED itself, on the institution,
Speaker 2: having the President talking about it and the chairman in
Speaker 2: the way that he is.
Speaker 3: Well.
Speaker 1: I've talked to a number of FED officials and they
Speaker 1: call it an astraction. It's not something that's going to
Speaker 1: interfere with what they're doing, but because they're going to
Speaker 1: be asked about it regularly, it is kind of something
Speaker 1: that gets in the way a little bit. But remember
Speaker 1: what their decision is. They can hold or they can
Speaker 1: raise their lower rates, and beyond that, there isn't a
Speaker 1: whole lot that they can do.
Speaker 2: So there's the innuendo. There's President Trump calling J. Powell
Speaker 2: a loser. There's him raising this kind of specious allegation
Speaker 2: that he cut rates to help present and byen Win
Speaker 2: or to try to help Vice President Harris Win. Putting
Speaker 2: that all aside, there's also this argument that the president's
Speaker 2: making that he has the right or the ability to
Speaker 2: remove J. Powell as FED chair. He said, you were
Speaker 2: talking to experts. I wonder what they say about that
Speaker 2: argument that the president's making that he has the latitude
Speaker 2: and ability to do that.
Speaker 1: It's been controversial because it's something that's never been tried
Speaker 1: and never been litigated in.
Speaker 2: A one d eleven year history of the event.
Speaker 1: Right, in the past, presidents have complained about FED chairs.
Speaker 2: George H. W.
Speaker 1: Bush blamed Alan Greenspan for losing him the nineteen ninety
Speaker 1: two election, but they haven't tried to do this. In
Speaker 1: the Federal Reserve Act, it says that the president can
Speaker 1: only fire a Federal Reserve governor for cause. Now, what
Speaker 1: is for cause mean? Historically it's meant malfeasance, in competence,
Speaker 1: committing a crime, or being unable to do the job
Speaker 1: physically or mentally. Nobody has ever tested that. It is
Speaker 1: now being tested by the President in cases involving the
Speaker 1: National Labor Relations Board and the Merit Systems Protection Board.
Speaker 1: The main case is called Wilcox versus Trump. It's now
Speaker 1: before the Supreme Court, and they too have four cause
Speaker 1: clauses in their founding documents, and so if the court
Speaker 1: were to rule that they could be fired, then it
Speaker 1: might open the door to fire Powell. There's a feeling
Speaker 1: that the FED is structured differently. When Congress created the FED,
Speaker 1: they created it in a number of different ways to
Speaker 1: keep political influence out of it. Fourteen year staggered terms
Speaker 1: and that sort of thing. So it isn't clear even
Speaker 1: if the President wins the right to fire these other people,
Speaker 1: that they can fire J. Powell. I think the only
Speaker 1: thing we can say is that it would also end
Speaker 1: up into the Supreme Court.
Speaker 2: How has all of this played out in the market
Speaker 2: so far, this uncertainty.
Speaker 1: Well, right now the market is trying to process so
Speaker 1: much that it's a little hard to disentangle J. Powell
Speaker 1: from tariffs and things like that. But it does appear
Speaker 1: that the markets have reacted to the latest stories about
Speaker 1: the possibility of firing Powell because the fear is that
Speaker 1: the President would try to put in somebody who will
Speaker 1: do his bidding to cut rates, and that has always
Speaker 1: been seen as a terrible thing for the markets and
Speaker 1: for economies, because then you don't react to what the
Speaker 1: economy needs. You're looking at what the president needs that
Speaker 1: would probably bring about high inflation, could slow the economy tremendously.
Speaker 1: So that's going to be always on the market's minds.
Speaker 1: If J. Powell were removed as chairman of the FED,
Speaker 1: that's a separate job from his job as FED governor.
Speaker 1: If they can't fire him as a FED governor because
Speaker 1: he's one of seven and not the head of it anymore, and.
Speaker 2: These are jobs at those fourteen year terms that you mentioned.
Speaker 1: Yes, and his term as governor runs until January of
Speaker 1: twenty twenty eight, where his FED chair runs until May
Speaker 1: of next year, and so he could remain on the
Speaker 1: Board of Governors, which would mean there is in theory
Speaker 1: no opening for the President to appoint somebody else as chair.
Speaker 1: There is a FED governor rolling off in January, so
Speaker 1: they could put somebody in earlier and say that person's
Speaker 1: going to be the chair, and if he stayed around,
Speaker 1: he could still influence what happens on the FED because
Speaker 1: the Open Market Committee, the group of FED presidents and
Speaker 1: governors who set interest rate policy, elect their own chair,
Speaker 1: separate from whoever is chair of the FED. Now it's
Speaker 1: always been the Chair of the FED, but they can
Speaker 1: pick somebody else. So you could have President Trump appoint
Speaker 1: somebody as chair of the Federal Reserve Board and then
Speaker 1: have the Open Market Committee picked j Poll there remain
Speaker 1: as head of the Monetary Policy Committee, and that probably
Speaker 1: wouldn't make Donald Trump very happy.
Speaker 2: Last question, Mike, what would happen if the FED were
Speaker 2: to lose its long standing foundational independence. Why would that
Speaker 2: be so significant?
Speaker 1: Well, what you would have is a loss of confidence
Speaker 1: on Wall Street in the FED doing the right thing.
Speaker 1: And when people on Wall Street are not confident in something,
Speaker 1: they want protection, and so they would raise interest rates
Speaker 1: because they would want more compensation for the possibility of
Speaker 1: something going wrong. And that would affect everybody. Because the
Speaker 1: Fed's the basic interest rate center for the economy, and
Speaker 1: so you'd see interest rates in all kinds of categories
Speaker 1: rise and that would be a cost to the American people.
Speaker 2: So how could this impact US assets and the US
Speaker 2: dollars status as the world's reserve currency. Like colleagues Sarah
Speaker 2: Holder and Salaia Mosen tackle those questions after the break, This.
Speaker 3: Isn't the first time President Trump has said he wanted
Speaker 3: to removed your own Powell as the head of the
Speaker 3: Federal Reserve. Our colleague and Big Take DC host sala
Speaker 3: Mosen helped break that story back in twenty eighteen during
Speaker 3: the first Trump administration.
Speaker 4: What happened was in December, AFTERW. Powell made a move
Speaker 4: that was not aligned with what Trump wanted for the economy.
Speaker 4: To juice the economy, Trump publicly said, I think J.
Speaker 4: Powell made a mistake. He should have cut rates. And
Speaker 4: then at Bloomberg we heard that behind closed doors, Trump
Speaker 4: had talked to his White House General Counsel, his lawyer
Speaker 4: at the White House to look into ways in which
Speaker 4: he could fire J.
Speaker 1: Powell.
Speaker 4: What we saw happen was markets started to panic. We
Speaker 4: saw a sell off in multiple assets across the board,
Speaker 4: A lot of volatility because it is a third rail
Speaker 4: of global finance that the US Central Bank, the most
Speaker 4: powerful building almost in the world for the global financial system,
Speaker 4: should be independent from political meddling. And it is something
Speaker 4: that the Central Bank fought for over decades. It was
Speaker 4: kind of solidified in the fifties and then the modern
Speaker 4: version of an independent Federal Reserve I've took root in
Speaker 4: the nineties, and it was a shock to the system
Speaker 4: that any US president would go as far as to
Speaker 4: try to find a way to fire this person and
Speaker 4: show that politics and what the president wants could affect
Speaker 4: what the Fed can and can't do.
Speaker 3: Trump's second term threats to remove Powell have been even stronger.
Speaker 3: He said, Powell's termination can't come fast enough. He's renewing
Speaker 3: these calls. You mentioned last time. It was a shock
Speaker 3: to the system, But we've already had several shocks to
Speaker 3: the system already this year. We spoke just a few
Speaker 3: weeks ago about how Trump's chaotic tariff rollout was shaking
Speaker 3: the foundations of American assets, particularly the dollar and the
Speaker 3: market for federal bonds and US treasuries. So can you
Speaker 3: just help us understand how the past few weeks, including
Speaker 3: this latest statement by Trump about Powell, have started to
Speaker 3: change the way the world looks at US assets.
Speaker 4: Sarah, it's a story of American credibility. The US is
Speaker 4: looked at as a safe hay in and the world's
Speaker 4: best place to invest in for some very key concrete reasons.
Speaker 4: The world looks to the US for innovation, for a
Speaker 4: great place to park your cash, because there's a guarantee
Speaker 4: that it is yours, but most likely you'll get more back.
Speaker 4: You'll get a return on that investment. And the foundations
Speaker 4: of that are basically American democracy. It's the rule of law.
Speaker 4: It's the free and fair elections that we have, a
Speaker 4: court system, independent agencies like an independent central bank, press freedoms.
Speaker 4: All of these things support a government that backs a
Speaker 4: currency that can be trusted. And what we've seen happen
Speaker 4: in the last couple of months is he has been
Speaker 4: able to fire the heads of some independent agencies, not
Speaker 4: the Felleral Reserve, but others, and courts are trying to
Speaker 4: reinstate those and now there's a legal battle. He has
Speaker 4: ignored court orders to have people who have been deported
Speaker 4: illegally have been brought back into the country. He has
Speaker 4: done a u turn in global trade that has shaken
Speaker 4: the core of the global vigel system, and it is
Speaker 4: making every tenant that supports American democracy look weaker, therefore
Speaker 4: making American credibility and the credibility of American policy makers
Speaker 4: look volatile. And so all of a sudden, American assets
Speaker 4: are being questioned, is this the right place to park
Speaker 4: my cash?
Speaker 3: Can you give us some context for the depth of
Speaker 3: that crisis and confidence for US assets? How has the
Speaker 3: US dollars value changed over the past few weeks.
Speaker 4: There's a couple of measuring sticks that we can look at.
Speaker 4: One is just the S and P five hundred. We
Speaker 4: saw something like six trillion wiped out between April second
Speaker 4: and the day that the ninety day pause was announced
Speaker 4: for tariffs. We've seen the dollar trade oddly. Actually, theory
Speaker 4: predicts that if the US applies tariffs, the world will panic.
Speaker 4: And when the world panics, you want the safest asset,
Speaker 4: that is the dollar. Laws of supply and demand mean
Speaker 4: that if everyone wants the same asset, the value goes up,
Speaker 4: the price goes up. That's not what happened. All of
Speaker 4: a sudden, people thought, we don't know if the dollar
Speaker 4: is safe from Donald Trump. There was a flight of capital.
Speaker 4: That's another component.
Speaker 3: And if the US dollar and US assets were to
Speaker 3: lose their reserve currency status and were to lose that
Speaker 3: reputation and that confidence of the rest of the world,
Speaker 3: how would that impact the US economy and indeed the
Speaker 3: global economy.
Speaker 4: There's a lot of talk about the US dollar losing
Speaker 4: its reserve status, and while it is definitely losing its sheen,
Speaker 4: it's not as exciting and it's not as charming anymore.
Speaker 4: There's no second place there that could easily step in.
Speaker 4: So we're most likely if the dollar is no longer
Speaker 4: going to be as high on this pedestal anymore, either
Speaker 4: it's going to be a little bit less powerful, or
Speaker 4: we're entering into like a multi polar world where several
Speaker 4: currencies have more power. The dollar still has the most power,
Speaker 4: but less than it used to in other currencies are
Speaker 4: starting to rise up. That's one thing, But there are
Speaker 4: still huge implications that make their way all the way
Speaker 4: from just this very obscure thought of the dollar being
Speaker 4: a reserve asset all the way into the pockets of
Speaker 4: everyday Americans. And that is the only way that a
Speaker 4: country like ours can have the amount of debt and
Speaker 4: deficit that we have is because we are the owners
Speaker 4: of the reserve asset. That means all of our debt
Speaker 4: is so attractive to the world that the interest rate
Speaker 4: cost on that debt is low, very very low compared
Speaker 4: to any other country. When interest rates are low on
Speaker 4: American debt, that means that the interest rate on American mortgages,
Speaker 4: on student loans, on our credit card built, all of
Speaker 4: that is lower than it could be by several percentage
Speaker 4: points and maybe even higher. So that means if the
Speaker 4: dollar is all of a sudden losing its attractiveness and
Speaker 4: fewer people want to own dollar debt, that means they
Speaker 4: don't want our mortgage debt either.
Speaker 2: You know, Fanny and.
Speaker 4: Freddy own most of American mortgages. Foreign investors own most
Speaker 4: of that debt.
Speaker 3: Right, So those are the implications for US consumers, US
Speaker 3: households if the US dollar loses its reserve currency status.
Speaker 3: These are big stakes. Our concerns about the continued strength
Speaker 3: of the US dollar and US treasuries and the bond
Speaker 3: market premature.
Speaker 4: Concern is definitely warranted. There's a lot of hysteria out there,
Speaker 4: and it's hard to cut through that, and that panic
Speaker 4: is real, and I can understand where it's coming from.
Speaker 4: There should definitely be people thinking about this and hoping
Speaker 4: that this steamboat can be turned and we can find
Speaker 4: a way back to some stability and predictability. But it's
Speaker 4: not a black and white issue. There's no other currency
Speaker 4: that can easily come and fill that gap. The Euro
Speaker 4: and the Chinese yuan are the two that come up
Speaker 4: most frequently. They're two very large currencies, but the Euro
Speaker 4: doesn't have the debt instruments and liquidity in their debt
Speaker 4: markets that the world needs from a reserve asset, meaning
Speaker 4: that they can quickly sell and buy European debt. You
Speaker 4: can always find a buyer. You can always find a seller.
Speaker 4: US assets are different. There's always a seller and always
Speaker 4: a buyer in there. With the Chinese yuan, the key
Speaker 4: problem is that they don't have the transparency in their economy.
Speaker 4: In finance. They have capital controls. The government controls to
Speaker 4: a certain extent, the pricing of the yuan, rather than
Speaker 4: letting just market forces and laws of supply and demand
Speaker 4: control what the foreign exchange rate is. So most likely
Speaker 4: it's not that today we have the dollar as a
Speaker 4: world's reserve asset, and we come back into the studio
Speaker 4: one year from now, and it's not the reserve asset.
Speaker 4: It's not that black and white. It's just that it's
Speaker 4: a little less central to the world, and that does
Speaker 4: have huge consequences.
Speaker 3: This is The Big Take from Bloomberg News. I'm Sarah Holder.
Speaker 2: And I'm David Gerre. This episode is produced by David
Speaker 2: Fox and Julia Press, with assistant from Rachel Lewis Chrisky.
Speaker 3: It was edited by Aaron Edwards and Matt Bosler. It
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Speaker 2: Our senior producer is Naomi Shaven. Our senior editor is
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