NEW YORK �� William Dudley, Jerome Powell's former Federal Open Market Committee vice chairman, has some advice for the leader of the U.S. central bank should President Donald Trump try to fire him: For the sake of the institution, don't leave.
Trump has been talking with advisers about trying to remove Powell, Bloomberg News reported Friday. Treasury Secretary Steven Mnuchin said on Twitter Saturday that Trump is not considering firing Powell, and it's unclear whether the president has the legal authority to do it. It might be possible to remove Powell from the Fed chairmanship but he can be fired from his role as a Fed governor only for "cause" �� usually neglect or misconduct.
Dudley said he doubts Trump would try to remove Powell. But if he did, and if sticking around the Fed is legally possible, "my advice to him �� I would stay on as a governor," Dudley said in an interview. "You have to protect the institution."
If he stayed, Powell's colleagues could elect him chairman for monetary policy, even if he were no longer head of the Fed board, said University of Pennsylvania Fed historian Peter Conti-Brown.
Current and former Fed policymakers fiercely defend the central bank's independence. Research has shown that central banks that function free of politics can make decisions that are good for the economy in the longer run, even if it means inflicting short-term financial pain. Threats from heads of state to fire their central bankers are more common in less advanced economies than the U.S., such as Turkey.
The Fed is structured so that it's insulated from politics, and since President Bill Clinton's administration the White House has left the Fed alone, at least publicly.
Trump has regularly violated that decades-old norm, sending Twitter posts and giving interviews critical of Fed policy. The central bank has four times this year to prevent a solid economy from overheating.
Fed officials have remained quiet during the onslaught from Trump, repeating that they're focused on doing the job that Congress has assigned them: sustaining stable inflation and maximum employment.
"Certainly the Fed doesn't want to get into it with the president," Dudley said, who retired from the New York Fed in June. "They have been silent on this, and I think that is the right approach."
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(Kathleen Hays contributed to this report.)
