Legal ambiguity layered with accumulated precedent support makes Powell's temporary leadership of the Federal Reserve after his term ends indeed "a real possibility."

The term of Federal Reserve Chair Jerome Powell ends in May, but the Trump administration is now locked in a legal dispute with the Federal Reserve, increasing the likelihood that the next chair will not be confirmed by the Senate in time.

In response to speculation about what might happen in such a situation, Powell said last week that he plans to continue leading the Federal Reserve, citing reasons from both legal provisions and past precedents.

“If my successor has not been confirmed before the end of my term, then I will serve as acting chair until he is confirmed,” Powell said at a news conference on March 18. “The law requires it that way. We’ve done it several times in the past, and I’ve personally experienced it once—we’ll do it this time too.”

However, the law does not directly spell out how to handle a situation like this. Moreover, the background conditions that produced those precedents are quite different from today, because President Donald Trump has clearly said he wants Powell out.

Under the Federal Reserve Act, which lays the foundation for the Federal Reserve and governs how it operates, the Act explicitly provides that if the chair is not present, the vice chair presides over meetings of the board. But it does not specify what should happen if the chair’s term has ended and the successor has not yet been confirmed. Trump has nominated former Federal Reserve governor Kevin Wosh to replace Powell, but Wosh’s path into the Federal Reserve has been blocked in the Senate because the Department of Justice’s investigation of Powell has faced opposition.

Scott Alvarez, a former general counsel for the Federal Reserve, said Powell’s position can be supported by finding it in two places within the Federal Reserve Act.

First, Article 10 states that when a Federal Reserve governor’s term ends, the governor “shall continue to serve until a successor has been appointed and has qualified.”

Governor Stephen Mielan is the latest example. His term ended in January, and Wosh has been nominated as his successor. But because Wosh’s nomination has not yet been confirmed, Mielan is still serving in the role. Alvarez said that if the chair’s term has expired, the Federal Reserve could argue that this provision applies in the same way.

“Therefore, the sitting chair will continue to stay in office until the new chair is confirmed,” Alvarez said.

Alvarez also noted that Article 11 grants the Federal Reserve board broad authority, allowing it to delegate any duties that are not related to rulemaking and to monetary and credit policy to any member of the board.

Alvarez said the board could, by choosing Powell as acting chair, in effect authorize him to continue performing the chair’s responsibilities—for example, reviewing the budget and serving as the Federal Reserve’s chief spokesperson.

“The chair’s responsibilities that we have in mind are, in fact, authorized by the board,” he said. “The board will vote to delegate all of those responsibilities to him.”

Kathryn Judge, a law professor who studies the Federal Reserve at Columbia University, said the Federal Reserve Act does not clearly state what should happen after May 15.

However, she said Powell can also look to the central bank’s past practice for how it handled the gap between two chairs.

She said: “When the fundamental language is unclear, following established precedent is the safest and most cautious approach for the Federal Reserve.”

Powell has served as acting chair, which is the “personal experience” he mentioned earlier. In 2022, he served as acting chair for about three months because he was nominated for reappointment by former President Joe Biden but had to wait for confirmation. In 1996, during the Clinton administration, Alan Greenspan also served as acting chair for more than three months for the same reason.

But this time there is a key difference. In the earlier cases, presidents chose to let the outgoing chair serve another four years. This time, Trump has clearly demonstrated his disdain for Powell and has repeatedly said he wants him gone.

Some Federal Reserve observers have also pointed to a memorandum issued by the Office of Legal Counsel in the U.S. Department of Justice in 1978. The memorandum said that if the position of Federal Reserve chair becomes vacant, the president has the power to pick one person from among the governors to serve as an “acting chair.” Some people believe this at least gives Trump a possible opening to argue that he has the authority to designate an acting nominee.

“Previously, the selection of an acting chair was not controversial, because it was different from today’s situation—back then, the White House wanted the sitting Federal Reserve chair to continue,” Michael McLean, a senior research analyst for U.S. public policy at Barclays, wrote in a report to clients.

“We expect the government may challenge the appointment of Powell as acting chair of the Federal Reserve,” McLean wrote. “This situation could prompt arguments about a dispute over Federal Reserve leadership, leading to legal and institutional uncertainty, and possibly causing market volatility.”

But Alvarez pointed out that the 1978 memorandum predates a key amendment to the Federal Reserve Act taking effect. He said the amendment requires that a chair nominee must be specifically confirmed by the Senate before taking office, which limits how applicable that memorandum is today.

In response to Powell’s remarks, the White House reiterated its support for Wosh and said it is working closely with lawmakers to ensure he gets confirmed.

U.S. Treasury Secretary Scott Bessent has said that Powell continuing to stay at the Federal Reserve after the end of his term would go against historical precedent, but did not mention whether Powell would have the right to serve as acting chair in such a situation.

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