Former Fed Chairs Condemn Criminal Investigation into Jerome Powell
Three former heads of the U.S. central bank have vocally criticized the criminal investigation into current Fed Chair Jerome Powell, asserting that it threatens the independence of the Federal Reserve. The distinguished group—including Janet Yellen, Ben Bernanke, and Alan Greenspan—alongside 10 other notable former officials, came together to express their concerns.
– Key Statements from Former Officials:
– This is how monetary policy is made in emerging markets with weak institutions, leading to negative consequences for inflation and overall economic function.
– Such actions have no place in the United States, where the rule of law serves as the foundation of our economic success.
The investigation, conducted by the Department of Justice (DoJ), follows a year marked by ongoing criticism from U.S. President Donald Trump towards Powell. Trump’s comments included disparaging remarks, labeling Powell a “major loser” and “numbskull,” while also expressing dissatisfaction with the Fed’s interest rate policies.
– Juxtaposition of the Administration and the Fed:
– Trump claimed he was unaware of the investigation when asked by reporters.
– Powell revealed the investigation in an unscheduled video statement, explaining that it followed his testimony concerning renovations at the Federal Reserve’s buildings. Powell described the inquiry as unprecedented, suggesting it is rooted in Trump’s frustration over the Fed’s decision to maintain higher interest rates.
In 2025, the Fed adjusted its key lending rate three times, lowering it to a range of 3.50% to 3.75%, the lowest in three years. However, Trump maintains that these adjustments were not substantial enough.
– Context of White House Comments:
– When questioned about the Fed’s independence by Fox News, White House spokeswoman Karoline Leavitt responded by deferring to the Justice Department, stating, Jerome Powell has proved he’s no good at his job.
– Meanwhile, Powell contended that the investigation must be viewed in light of the overarching pressure from the administration.
Trump has long advocated for aggressive interest rate cuts, asserting that these moves could alleviate government borrowing burdens and facilitate easier access to mortgages for Americans. After several months of critiques on social media and public forums, the possibility of Powell’s termination was floated but ultimately dismissed, with analysts warning of significant market instability if such a scenario were to unfold.
– Reactions from Economists:
– Yellen, who previously led the Fed during Trump’s first term, labeled the investigation as extremely chilling, asserting, The odds that Powell would have lied are zero. They are pursuing him because they want his seat and want him gone.
– Yellen cautioned investors about the troubling implications of the situation, stating, You have a president that says the Fed should be cutting rates to lower rate payments on the federal debt… It is the road to a banana republic.
As discussions surrounding the criminal investigation unfold, Trump is expected to announce a replacement for Powell, whose tenure as Fed chair concludes in May. However, the investigation and its repercussions may complicate this transition.
– Political and Market Reactions:
– Republican Senator Thom Tillis declared his intent to oppose any nomination for Powell’s successor until the investigation is resolved.
– Initial market responses were notably subdued, with the S&P 500 showing minimal movement, a stark contrast to last year’s volatile reactions to perceived threats against the Fed’s independence.
Despite overall market stability, financial stocks experienced a dip as investors began to consider the implications of a potential 10% cap on credit card interest rates. Analysts fear that market reactions could amplify should Trump succeed in exerting influence over Fed policy.
Some Republican lawmakers have expressed concern that the Justice Department’s investigation can distract the Fed from its core responsibilities. Representative French Hill emphasized that the inquiry could undermine this and future administrations’ ability to make sound monetary policy decisions, while Senator Kevin Cramer acknowledged his criticism of Powell but affirmed, I do not believe, however, he is a criminal.
In conclusion, the collective denunciation from former Fed chairs underscores the seriousness of the allegations against the investigation of Jerome Powell. As this situation develops, the integrity of the Federal Reserve and its ability to function independently remains a critical focus for economists and lawmakers alike.