Trump's power to fire a crucial presidential appointee should frighten investors

Trump Yellen 4x3Carlos Barria/Reuters; Composite by Bob Bryan/Business InsiderPresident Donald Trump and Fed Chair Janet Yellen

It’s impossible to know how President Donald Trump truly feels about Federal Reserve Chair Janet Yellen because, as he does so often, he has both bashed and praised her depending on his whim.

During his campaign, Trump said Yellen was doing a good job but would not renominate her because she is a Democrat, a clear violation of the basic principal of central bank independence from politics.

Later, when the campaign was heating up, Trump accused Yellen of keeping rates low to help President Barack Obama.

Since taking office, Trump has reverted to liking her, saying he might keep her in the job when her term expires early next year after all. “I do like a low-interest rate policy, I must be honest with you,” Trump said.

After Trump’s incendiary firing this week of FBI Director James Comey, who is leading the bureau’s investigation into Trump and his associates’ ties to Russia, a smart market analyst asked me a question over lunch that I did not have the answer to: Could he do the same thing to Yellen if say, she decided to keep raising interest rates and Trump wasn’t happy with the policy?

So I contacted a few smart folks with deep knowledge of the Federal Reserve, and they pointed me to the specific language that shows that yes, the president does have the power to fire Yellen, despite the central bank’s ostensible independence.

Read the relevant statute below:

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