WASHINGTON (AP) — The Justice Department’s threaten criminal charges Federal Reserve Chairman Jerome Powell is setting up a tense showdown between the White House and the U.S. central bank, with Powell saying the subpoenas he received Friday are aimed at forcing them to comply with President Donald Trump’s orders.
The subpoena applies to the cost of renovating the Fed building. Head office covered in marble But they are more fundamentally talking about the fate of the Fed’s independence, how power is distributed within the federal government, and how that will affect the U.S. economy.
Two Republican senators have already expressed dissatisfaction with the subpoenas and the Fed’s potential loss of political independence. Former Fed chair and leading economists gather on Monday letter It outlines the risks that the Trump administration’s actions pose to the broader economy and could ultimately shape ordinary people’s ability to obtain jobs, mortgages, and car loans.
President Trump has spent the past year trying to pressure Powell to lower the Fed’s benchmark interest rate, a move that reflects a fundamental break on whether inflation still poses any risk to the U.S. economy.
Mr. Powell argues that inflation is still rising due to President Trump’s tariffs and that he is acting cautiously, while Mr. Trump says that inflation is no longer a concern and that interest rates should be significantly lowered.
Chairman Powell revealed the subpoena in a video Sunday night, saying, “I have performed my job without political fear or favor, focusing solely on our responsibility to stabilize prices and maximize employment.” “Public service sometimes requires us to remain resolute in the face of threats.”
Powell’s term ends in May, but the White House’s latest attack may reflect concerns that Powell may choose to remain on the Fed’s board until the end of another term as governor in January 2028. If Mr. Powell takes that step, the Trump administration would be denied the opportunity to fill new seats on the board.
Kevin Hassett, director of the White House’s National Economic Council and a leading candidate to become Fed chair, was asked by reporters on Monday whether Powell intended to remain on the Fed’s board, and he said he was unaware of Powell’s plans.
“I haven’t talked to Jay about it,” Hassett said.
Stock markets fell Monday night in response to Chairman Powell’s statement that the Justice Department had served a subpoena on the Fed in connection with his June testimony regarding the $2.5 billion renovation of the central bank building.
Powell said the subpoena was a “pretext” to force the Fed to cut key short-term interest rates, abandoning the cautious approach it has taken since President Trump began attacking him last year for not cutting rates deep enough.
Republican Sen. Kevin Cramer of North Dakota, a frequent critic of Powell, said Monday that he does not believe the Fed chair is a “criminal” and “hopes this criminal investigation is concluded quickly,” according to CNBC.
A bipartisan group of former Fed chairs and top economists said Monday that the White House’s legal action is an “unprecedented attempt to use prosecutorial attacks to undermine the central bank’s independence.”
“This practice of monetary policy in emerging markets with weak institutions has very negative effects on inflation and broader economic functioning,” the statement said. “This law has no place in America, where our greatest strength is the rule of law, the foundation of our economic success.”
The statement was signed by former Federal Reserve Chairman Ben Bernanke, Janet Yellen, former Treasury Secretary Alan Greenspan, as well as Henry Paulson and former Treasury Secretary Robert Rubin.
Still, the movement has been building for some time, with Mr. Trump relentlessly criticizing and belittling Mr. Powell and trying to blame him for some of the president’s own dissatisfaction with the economy following his own tariff announcements.
President Trump appeared to foretell the shocking news of the subpoena at a December 29 press conference. The president called the renovation costs “the highest construction price per square foot in the history of the world” and said his administration would “probably” sue Powell for “gross incompetence.”
“He’s a completely incompetent man,” Trump said. “But we’re probably going to file a lawsuit against him.”
