Can the president of the U.S. fire, or have fired, the Fed Chair for not being 'independent'?

Question

https://www.federalreserve.gov/aboutthefed/section10.htm

The Section 10 of the Federal Reserve section 10 states that the President can remove the Fed chair for cause, but what does that mean?

The members of the Board shall be ineligible during the time they are in office and for two years thereafter to hold any office, position, or employment in any member bank, except that this restriction shall not apply to a member who has served the full term for which he was appointed. Upon the expiration of the term of any appointive member of the Federal Reserve Board in office on the date of enactment of the Banking Act of 1935, the President shall fix the term of the successor to such member at not to exceed fourteen years, as designated by the President at the time of nomination, but in such manner as to provide for the expiration of the term of not more than one member in any two-year period, and thereafter each member shall hold office for a term of fourteen years from the expiration of the term of his predecessor, unless sooner removed for cause by the President. Of the persons thus appointed, 1 shall be designated by the President, by and with the advice and consent of the Senate, to serve as Chairman of the Board for a term of 4 years, and 2 shall be designated by the President, by and with the advice and consent of the Senate, to serve as Vice Chairmen of the Board, each for a term of 4 years, 1 of whom shall serve in the absence of the Chairman, as provided in the fourth undesignated paragraph of this section, and 1 of whom shall be designated Vice Chairman for Supervision. The Vice Chairman for Supervision shall develop policy recommendations for the Board regarding supervision and regulation of depository institution holding companies and other financial firms supervised by the Board, and shall oversee the supervision and regulation of such firms. The chairman of the Board, subject to its supervision, shall be its active executive officer. Each member of the Board shall within fifteen days after notice of appointment make and subscribe to the oath of office. Upon the expiration of their terms of office, members of the Board shall continue to serve until their successors are appointed and have qualified. Any person appointed as a member of the Board after the date of enactment of the Banking Act of 1935 shall not be eligible for reappointment as such member after he shall have served a full term of fourteen years.

I am thinking it means he can fire him if he has a legitimate reason for this, but is the argument that the Fed Chair is not independent (as some media pundits suggested) as he seems to be influenced by the President's statement a good reason to fire him? Could this be a valid argument, and can someone else other than the President use this as an argument to fire the Fed chair?

Answer 1

There's nothing in the Federal Reserve Act that I can see that requires the Federal Reserve governors or the chair to act without influence from the president or anyone else. Rather, the "independence" of the Fed describes the mechanism of their selection and removal. That is, it rests on the fact that the board members may only be removed "for cause." That is by contrast with many executive branch officers (for example, officers of the diplomatic service), who serve "at the pleasure of the president," meaning that they can be removed for any reason or for no reason at all.

"Independence" also refers to the provision found at 12 USC 250 (I didn't see it on the page linked in the question; it was enacted in 1974, so it's not necessarily part of the Federal Reserve Act proper) which prevents anyone from requiring Fed governors (among others) to submit their official communications to Congress for review or approval, provided that the communications include a disclaimer that they do not necessarily represent the view of the president. Again, this is not a prohibition on presidential review of a Fed governor's testimony to Congress if the Fed governor consents to such review.

In fact, a prohibition of doing what the president wants would be ill founded, because it would prevent the Fed what it wants if the president happens to be of the same opinion about a given course of action.

I can't go into a detailed analysis of exactly what reasons are encompassed by "for cause," but there are some cases that clearly are or are not. The commission of a felony, even if it were unrelated to the office, would certainly qualify. Not acting on the president's instructions clearly would not qualify: a president cannot fire a governor for refusing to do the president's bidding. That does not, however, equate to a prohibition on doing the president's bidding.

There are statutory requirements that guide the Fed's actions. They are pretty vague, but it ought to be fairly clear that failing to follow them would be grounds for dismissal "for cause." So, if a president told the Fed chair to do something that violated the statutory guidelines, and the Fed chair did it, then the Fed chair could be dismissed by that president or by a subsequent one.

If a president were to exercise undue influence on a Fed governor, that would theoretically be grounds for impeachment of the president, although the possibility seems quite remote. If a president refused to fire a Fed governor "for cause," that might also be grounds for impeachment.

Whether a Fed governor can be impeached by Congress depends on whether Fed governors are considered "civil officers of the United States." I believe that they are, but I do not know much about any precedent that might have a bearing on that question. If a Fed governor is a civil officer, then Congress can impeach a Fed governor for acting inconsistently with the statutory guidelines or other violations. But acting in accordance with the president's wishes isn't necessarily of itself a violation.