- Trump-appointed prosecutor targets Powell for charges.
- Republicans push back against the investigation.
- Trump seeks lower rates before midterms.
In a Monday X post, Alaska Senator Lisa Murkowski criticized the Department of Justice investigation, claiming to have spoken with Powell about the news that the Department of Justice had sent subpoenas to the central bank, indicating that prosecutors are looking into the board chair’s testimony regarding a long-running renovation project that Trump and his allies claim was mishandled under his direction.
The senator stated that she felt it was “clear” that the investigation “is nothing more than an attempt at coercion” after speaking with Powell.
“If the Department of Justice believes an investigation into Chair Powell is warranted based on project cost overruns—which are not unusual—then Congress needs to investigate the Department of Justice,”
Murkowski said.
“The stakes are too high to look the other way: if the Federal Reserve loses its independence, the stability of our markets and the broader economy will suffer.”
Less than a day after her GOP colleague, Senator Thom Tillis of North Carolina, released a scathing speech criticizing the Trump administration, the senator from Alaska denounced the stunning investigation into Powell.
“It is now the independence and credibility of the Department of Justice that are in question,”
Tillis added.
Senator Elizabeth Warren of Massachusetts, the ranking Democrat on the Banking committee, also denounced the Powell investigation as an instance of Trump “weaponizing the Department of Justice right out in plain view” in order to “take over the Fed as quickly as possible so that he can make political decisions that he thinks will help him rolling into the 2026 election.”
After prosecutors served the central bank with grand jury subpoenas requesting Powell’s testimony from last June before the Senate Banking Committee regarding the Fed headquarters renovation, the DOJ investigation which is overseen by Trump ally and former Fox News host Jeanine Pirro came to light over the weekend.
Trump informed reporters on Air Force Speaking to reporters in July, he called the $60 million in cost overruns “really disgraceful” and claimed to have been uninformed of the probe until being questioned about it late on Sunday. He has seized upon the building product as a possible justification for Powell’s termination. The Fed has blamed inflation and the necessity for costly asbestos abatement work that was not anticipated for the additional costs on what has grown to be a $2.5 billion project.
Kevin Hassett of the National Economic Council, one of Trump’s closest allies and a front-runner to succeed Powell as Fed chair, told CNBC on Monday that the investigation was entirely typical and similar to the work done by watchdogs.
“It’s part of government to have people look at you …and check that what you’re doing is completely on the up and up. And I think that it’s part of government here and at the Fed as well,”
he said.
The announcement of the Powell investigation is only the most recent in a year-long attempt by Trump to intimidate and browbeat the central bank’s board into boosting the U.S. economy by sharply lowering the interest rates that were raised over several years during the Biden administration in an effort to curb uncontrollably high post-pandemic inflation.
Trump has vocally attacked Powell for months, calling him “too late” and worse, and he has often threatened to fire him due to the disastrous headquarters refurbishment.
Another Fed board member, Lisa Cook, a Biden appointment, was allegedly fired by Trump on the grounds that Federal Housing Finance Administration head Bill Pulte had accused her of mortgage fraud.
In the end, Nixon benefited in the short term from his historic 1972 landslide victory over Democratic nominee George McGovern in 49 of 50 states. However, by the end of the decade, the artificial stimulation he had supported caused crushing “stagflation,” a combination of low growth and high inflation, which would only be subdued in the mid-1980s after then-chair Paul Volckler caused the central bank to raise rates to 20 percent.
Economists, who have pointed out that political meddling in central banks always results in catastrophe, are frightened by Trump’s imitation attempt to subjugate the Fed and his attacks on Powell decades later.
Additionally, they stated that Trump’s goal of giving the president authority over interest rates has “no place in the United States whose greatest strength is the rule of law, which is at the foundation of our economic success.”
Trump’s fight against the Fed’s independence is “pointlessly destructive,” “a bad path to walk down,” and “not going to lead to anything useful either for the American people or for President Trump’s agenda,” according to Justin Wolfers, a professor of economics at the University of Michigan and an outside adviser to former president Joe Biden’s 2020 campaign.
Wolfers cited Turkey as an example, pointing out that previous “populist strongmen” who have taken over their nations’ monetary policies have seen similarly catastrophic outcomes.
“Well, he tried that policy. and what happened was inflation in Turkey went from very normal rates up to over 80%. and it’s now back down to something around the mid 30s. It’s a terrible, terrible outcome,”
he said.
What legal protections keep the Fed independent from the president?
The Federal Reserve maintains independence from presidential control primarily through the Federal Reserve Act of 1913, which structures the central bank with legal safeguards against direct superintendent hindrance.
Fed governors, including Chair Jerome Powell, serve 14- time terms and can only be removed by the chairman” for cause” interpreted as inefficiency, neglect of duty, or misbehavior in office, not policy dissension. The Supreme Court’s 1935 Humphrey’s Executor ruling upheld Congress’s authority to limit presidential junking power for independent agencies, distinguishing the Fed from Cabinet officers serving at- will.
The Fed finances operations through interest on securities rather than congressional appropriations, separating it from budget influence. Congress assigns a statutory binary accreditation outside employment and stable prices( 2 affectation target) with biannual oversight evidence needed but no directive authority over rate opinions.