On Sunday, Federal Reserve Chair Jerome Powell confirmed for the first time that the Department of Justice (DoJ) has subpoenaed him. This action is only one portion of a larger investigation relating to his false testimony to the Senate in June. This inquiry comes as his first term is expiring this May. Its focus is on conflict of interest allegations around renovations to the Fed’s headquarters. That question has launched a new round of polarizing political theater — focused largely among Republican state lawmakers. Former President Donald Trump has publicly attacked Powell’s performance and demanded that his successor be prepared to lower interest rates on day one.
Powell’s purported independence has been brought into question. Lawmakers Thom Tillis, Frank Lucas, and Mike Lawler have objected stridently. They raise questions as to whether the president’s actions are warranted. As a result of their discontent, Tillis announced that he would block all Federal Reserve nominations—including Powell’s eventual successor—until that legal issue is settled.
On Friday, the DoJ subpoenaed the Federal Reserve directly, increasing the pressure on Powell’s leadership even further. The investigation has led to accusations that the Trump administration is attempting to undermine the independence of the Federal Reserve, a sentiment echoed by Tillis who remarked, “If there were any remaining doubt whether advisers within the Trump Administration are actively pushing to end the independence of the Federal Reserve, there should now be none.”
In an interview with Politico, Trump remarked on Powell’s tenure at the Fed, stating, “I don’t know anything about it, but he’s certainly not very good at the Fed, and he’s not very good at building buildings.” He went on to argue that accountability for Powell should come from the emergence of excessive high interest rates—not from other outside inquiries.
Powell has instead claimed the subpoenas are the beginning of a larger pressure campaign. He attributed this push to the administration’s DIShR intention to exert influence over the Fed’s monetary policy. He articulated that “the threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President.”
Republican Senate Lisa Murkowski from Alaska blasted the investigation, claiming it’s an example of what she calls an effort to coerce. She stated, “it’s clear the administration’s investigation is nothing more than an attempt at coercion.”
In the face of these challenges, Powell doubled down on his plan to secede on good corporate governance. He stated, “No one – certainly not the chair of the Federal Reserve – is above the law,” adding that this unprecedented action should be viewed within the context of ongoing administration pressures.
Warmer still are conversations about Powell’s future. Trump’s remarks on his would-be successor mark an important chapter for U.S. monetary policy — most likely an ominous one. He announced he would judge any nominee on their willingness to start slashing rates at once. That means political considerations are likely to weigh heavily on Powell’s replacement.
While the investigation proceeds, Powell’s term is set to expire soon. We shall soon find out how these political dynamics impact the Federal Reserve and other economic policies.