Is it Time to Restructure the Federal Reserve's Role in a Wartime Economy?

THE FEDERAL RESERVE AKA "THE FED" COINING THE REALM OR MALIGN ACTOR?

“The Fed would be MUCH better off CUTTING RATES as U.S. Tariffs start to transition (ease!) their way into the economy,” Trump said in a post on Truth Social on Wednesday, adding “Do the right thing.” Donal J. Trump, POTUS

(Ed. Note: SInce we are talking finacial politics, we are submitting this in the form of a "policy paper")

Executive Summary: The Federal Reserve was founded to provide economic stability and prevent systemic collapse in the banking sector. Over time, however, it has evolved into a powerful, independent institution with influence that often supersedes the fiscal and economic plans of elected leaders. In the context of a wartime-like economy driven by strategic industrial reshoring, tariff enforcement, and monetary rearmament, the Federal Reserve's refusal to align with the Executive Branch's growth-centered agenda threatens national coherence. President Donald J. Trump's ongoing disputes with Federal Reserve Chairman Jerome Powell exemplify this institutional friction. This paper explores the legal, historical, and strategic avenues available to rebalance Federal Reserve authority and reassert sovereign monetary direction during times of national exigency.

I. Introduction: Monetary Sovereignty vs. Bureaucratic Independence The Federal Reserve, designed in 1913 to stabilize financial systems and prevent banking panics, has since become an entrenched authority often operating counter to national executive strategies. The founding rationale was to remove monetary policy from the volatility of electoral politics. However, in modern circumstances where economic survival, manufacturing revival, and trade sovereignty are paramount, this independence has morphed into resistance.

President Trump's recent statement that Powell's "termination cannot come fast enough" follows years of tension. From 2017 through 2025, Trump has repeatedly clashed with the Fed over its unwillingness to cut rates, support tariff-induced restructuring, or facilitate economic expansions aligned with the America First agenda. These tensions now exist in a landscape where America is engaged in economic warfare with global competitors, requiring a wartime-style financial alignment.

II. The Federal Reserve: Origins and Consolidation of Power The Federal Reserve Act of 1913, passed in response to the 1907 financial panic, gave birth to the central bank under the premise of monetary stabilization and flexible liquidity. Structurally, it consists of:

• The Board of Governors (appointed by the President, confirmed by the Senate)

• 12 Regional Reserve Banks (with commercial bank stakeholders)

• The Federal Open Market Committee (FOMC), which determines interest rate policy

The Fed's authority grew in stages:

• Post-Great Depression: It absorbed greater control over credit and banking regulations.

• Post-1970s: It adopted a dual mandate of price stability and full employment.

• Post-2008: It began engaging in unconventional monetary interventions (Quantitative Easing, emergency lending facilities).

  
  

Today, the Fed operates as a de facto fourth branch of government, unchecked by voters and often detached from the political will of Congress or the President.

III. Current Conflict: Trump, Powell, and the Wartime Economy The economic war Trump wages involves:

• Tariff pressure on China and non-compliant trade partners

• Strategic reshoring of critical industries (semiconductors, textiles, pharmaceuticals)

• Infrastructure and export incentives to stimulate internal production

These goals require low interest rates, capital access, and monetary flexibility. Yet Jerome Powell's Fed has insisted on a "higher for longer" stance on interest rates, warning that Trump's tariffs will cause inflation and slow growth. This position directly undermines the executive strategy.

Trump's criticisms include:

• The Fed raised rates during his first term even while inflation remained low.

• Powell’s refusal to cut aggressively during trade conflict created headwinds.

• Current Fed policy in 2025 ignores wartime-level economic restructuring.

The Fed argues that:

• Independence is key to credibility and inflation control.

• Tariffs are inflationary and must be offset by tighter money.

• Aligning with the executive would politicize markets and jeopardize long-term financial health.

IV. Legal Standing and Limitations of the Federal Reserve The Fed's power derives solely from congressional delegation under the Constitution’s Article I, Section 8. It is not a constitutional body. Its leadership, including the Chair, serves at the pleasure of the President but with long terms and removal protections to preserve independence.

Key constraints:

• The President cannot directly fire the Chair without cause.

• Congress has authority to rewrite the Federal Reserve Act.

• The Supreme Court has historically affirmed the Fed's legitimacy but has not ruled on more aggressive congressional overhauls.

V. Strategic Options to Reassert Executive Direction

1. Legislative Overhaul: Congress should revisit the Federal Reserve Act with the following proposals:

• Repeal the dual mandate; replace with a single national interest mandate.

• Mandate wartime coordination with the Treasury Department.

• Require FOMC transparency and congressional override powers in times of declared economic emergencies.

2. Structural Reform:

• Nationalize key monetary tools during wartime or economic emergencies.

• Shift rate-setting authority to a joint Treasury-Fed panel during specified crisis windows.

• Rotate regional bank presidents with increased congressional oversight.

3. Appointments and Institutional Pressure:

• Trump should appoint America First economists to vacant Fed Board seats.

• Use Senate hearings and public forums to expose misalignments.

• Mobilize public pressure campaigns linking Fed policy to economic stagnation.

4. Emergency Powers and Treasury-Led Policy:

• Use Treasury facilities to expand access to capital regardless of Fed resistance.

• Engage in targeted stimulus, tax relief, and bond issuance to move markets in line with Executive goals.

VI. Conclusion: Realigning Monetary Power for a New Era The Federal Reserve was never intended to operate as a sovereign entity unto itself. In peacetime, independence may serve to protect long-term policy stability. But in an era of economic warfare, industrial reawakening, and foreign strategic competition, independence without alignment becomes sabotage.

President Trump’s warnings about Jerome Powell are not simply personal attacks—they reflect a deeper recognition that monetary policy has become misaligned with the nation’s survival strategy. The path forward must include a reassertion of sovereign monetary direction, a legislative reshaping of the Federal Reserve Act, and the return of financial policy to elected leadership.

The American people voted for a change in direction. The central bank must not stand in their way.