Former President's Potential Dismissal of Chair May Spark Market Chaos

Analysts have warned that if the takes action to forcibly remove the Chair, the Chair is expected to contest the move through legal channels, ultimately leading to a decision by the Supreme Court on whether the President has the right to dismiss the Chair on just cause. One scenario predicted by analysts is that the Supreme Court may allow lower courts to maintain an injunction preventing the President from dismissing the Chair during the trial period. "This is likely to be enough for the Chair to complete the term."

The rumors of the dismissing the Chair have drawn significant market attention. Analysts warn that if the forcibly removes the Chair, the Chair is expected to contest the move through legal channels, and regardless of subsequent developments, "this will be a mess."

According to previous reports, a senior White House official revealed that the told Republican congressional members the night before that he might "soon" dismiss the Chair. However, the quickly denied this claim when questioned by reporters in the Oval Office, stating, "We have no plans to do so," unless the Chair must leave due to fraudulent behavior, the possibility of dismissal is "highly unlikely."

Analysts pointed out that if the takes action to forcibly remove the Chair, the Chair is expected to contest the move through legal channels, ultimately leading to a decision by the Supreme Court on whether the President has the right to dismiss the Chair on just cause.

Evercore founder Roger Altman described this as "one of the worst ideas," and predicted that the Chair would not voluntarily resign. The analysis suggests that such a conflict would have a significant negative impact on the market and could trigger constitutional-level legal disputes.

If the actually dismisses the Chair rather than just pressuring the Chair to resign, the Chair is likely to file a lawsuit to stop the action. Evercore founder Roger Altman stated, "I don't think the Chair will agree to the resignation request. So I think this will ultimately be resolved in court."

Analysts noted that the Supreme Court majority recently indicated in an unrelated case that their views on just-cause dismissal protection for the Fed differ from those of other independent agencies. The Supreme Court majority wrote in an order allowing the to dismiss two other agency officials, "The Fed is a uniquely structured quasi-private entity, following the unique historical tradition of the First and Second Banks of the United States."

Wolfe Research analysts believe, "We think the Chair has a fairly good chance of winning in court, but it's not a sure thing." They pointed out that whether the Supreme Court is willing to maintain the just-cause protection for the Chair and whether they are willing to overturn the President's judgment on what constitutes just cause are two different issues.

One scenario predicted by analysts is that the Supreme Court may allow lower courts to maintain an injunction preventing the President from dismissing the Chair during the trial period. Wolfe Research stated, "This is likely to be enough for the Chair to complete the term."

Wolfe Research analysts Tobin Marcus and Chutong Zhu warned in a research report to clients that regardless of what happens specifically, the 's dismissal of the Chair "will be a mess for the market." "We expect this to have a significant negative impact on the market, potentially triggering a stock market sell-off and a reactive surge in long-term yields."

Wolfe Research analysts detailed three scenarios that could arise from the dismissing the Chair: The first scenario is that the Chair retains the actual position of the Chair while the seeks a court order to remove the Chair. The second scenario is that the Chair "voluntarily resigns and seeks reinstatement through litigation." The most dramatic third scenario is that the Chair attempts to continue serving as the Chair while the seeks to remove the Chair through administrative action.

For the third scenario, Wolfe Research analysts cited a similar precedent where in March, Washington D.C. police were summoned to escort employees of the institution out of the building after employees of the alleged government efficiency department accused employees of the U.S. Peace Research Institute of illegal trespassing. "Needless to say, the Chair being escorted out of the Fed building by Washington D.C. police or federal law enforcement would be a concerning image for the market."

Evercore founder Altman stated, "The President dismissing the Chair, or attempting to do so—because I'm not sure he can 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 (such as the United States) have significantly different economic trajectories from those where central banks are controlled by government leaders (such as Turkey and Argentina), the latter of which have experienced double-digit inflation rates in recent years.