Summary

Jerome Powell’s decision to remain on the Fed’s Board of Governors after being replaced as Chairman marks a historic shift in institutional independence. By refusing to step down entirely, Powell is attempting to block further political encroachment by the Trump administration, effectively forcing an awkward, divided leadership structure.

Key Topics

• Board of Governors Leverage: The Board of Governors is a powerful body that dictates monetary policy. By refusing to leave, Powell effectively denies the President a new appointment, maintaining his influence over the board's internal direction.
• Balance Sheet Expansion: Warsh views the Fed’s massive balance sheet—which grew from under $1 trillion to nearly $9 trillion post-pandemic—as a distortion of the market. He believes it is 'fiscal policy in disguise' and harmful to institutional credibility.
• Institutional Independence: The core of the conflict. Trump’s repeated attacks on the Fed during Powell’s tenure pushed the boundaries of the Fed’s independence, and Powell’s refusal to leave is his final attempt to uphold this separation.

Key Takeaways

• Monitor the Federal Open Market Committee (FOMC) meeting in mid-June for Kevin Warsh's first decision on interest rates.