Every living former Federal Reserve chair and a bipartisan group of former Treasury secretaries issued a joint statement Monday condemning the Trump administration's criminal investigation into Fed Chair Jerome Powell as an unprecedented attempt to use prosecutorial attacks to undermine the independence of the Federal Reserve. The extraordinary rebuke came after Powell revealed that the Justice Department had served subpoenas to the central bank with the threat of criminal indictment.
The signatories defending Powell include former Fed Chairs Ben Bernanke, Janet Yellen, and Alan Greenspan, along with former Treasury Secretaries Henry Paulson, Timothy Geithner, Robert Rubin, and Jacob Lew. In their statement, the former officials likened the attack on Fed independence to tactics typically seen in emerging markets, warning that such actions could have severe consequences for the United States economy and its standing in global financial markets.
Powell disclosed Sunday that the Department of Justice subpoenaed the Federal Reserve on Friday regarding his congressional testimony about a 2.5 billion dollar renovation of the central bank's headquarters. The Fed chair stated that the investigation was the result of the Fed setting interest rates based on its best assessment of what will serve the public rather than following the preferences of President Donald Trump, who has repeatedly demanded lower interest rates.
The criminal probe reportedly originated after housing regulator Bill Pulte met with President Trump at Mar-a-Lago and presented what resembled a wanted poster featuring Powell. The move has irked even Treasury Secretary Scott Bessent, who told associates he is unhappy with the decision to prosecute Powell, expressing concern that it will damage financial markets and investor confidence in American institutions.
Republican lawmakers have joined Democrats in criticizing the investigation, with Senator Thom Tillis of North Carolina announcing he would oppose any Trump nominee to replace Powell and any Fed board nominee until the legal matter is fully resolved. Senator Lisa Murkowski stated that after speaking with Chair Powell, it was clear the administration's investigation is nothing more than an attempt at coercion, calling for Congress to investigate the Department of Justice.
Powell responded to the investigation by asserting he has deep respect for the rule of law and accountability in democracy while noting that no one, certainly not the chair of the Federal Reserve, is above the law. However, he emphasized that this unprecedented action should be seen in the broader context of the administration's ongoing threats and pressure on the central bank to lower interest rates against the judgment of monetary policy experts.
President Trump denied having any knowledge of the Justice Department investigation, telling reporters he does not know anything about it while adding that Powell is certainly not very good at the Fed and not very good at building buildings. Financial analysts warn that the probe could trigger market instability and undermine global confidence in the dollar if investors perceive that the Federal Reserve's independence is being compromised for political purposes.
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