Trump’s harassment of Fed Reserve chairman meets with resistance from Congress

The vicious campaign of harassment waged by U.S. President Donald Trump against Federal Reserve Chairman Jerome Powell represents one of the most significant attempts at political interference in the institution’s history. But Trump’s offensive to undermine the Fed’s autonomy now faces resistance from Congress, which threatens to become the last bulwark against the White House’s assault on the Federal Reserve.

Powell announced Sunday night that he is the subject of a criminal investigation by the Federal Attorney’s Office. Officials from the Justice Department are investigating whether he lied during his testimony before the Senate Banking Committee last summer, where he explained the costly renovations to the institution’s headquarters in Washington.

Powell, however, attributed the prosecution’s stance to his resistance to interference from the U.S. president, who is demanding more aggressive interest rate cuts. The New York economist was undeterred by the latest attack from Trump, who appointed him in 2018. In a video posted on social media, he asserted: “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.”

Support from Greenspan, Bernanke and Yellen

Hours later, a dozen of the most prestigious economists in the United States — three former Fed chairs, several former Treasury secretaries, and other former White House economic advisors from administrations of both parties — published a letter of support for Powell. “The reported criminal inquiry into Federal Reserve Chair Jay Powell is an unprecedented attempt to use prosecutorial attacks to undermine [the Fed’s] independence,” the statement reads. It was signed by, among others, Alan Greenspan, Ben Bernanke, and Janet Yellen, Powell’s three predecessors at the helm of the Federal Reserve. “It has no place in the United States whose greatest strength is the rule of law, which is at the foundation of our economic success,” they warned.

The battle over the Federal Reserve’s independence is Trump’s latest attempt to test the limits of presidential power. However, he has faced internal opposition: following the release of Powell’s video, several Democratic and Republican members of Congress accused the Justice Department of launching the criminal investigation as a means of intimidating him.

Senator Thom Tillis, a key Republican on the Banking Committee, said he would oppose any Trump nominee to head the Federal Reserve until the matter is resolved. “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,” Tillis said. “It is now the independence and credibility of the Department of Justice that are in question.”

Insults and threats

The judicial investigation is the latest chapter in a long series of grievances by Trump against Powell, whom he has harassed, insulted, and belittled in public. He has called him “stupid,” “not very bright,” and “the guy who’s always late.” He has demanded Powell’s resignation, and when Powell ignored him, Trump threatened to fire him. He hasn’t done so because his advisors in the White House warned him that he could face serious legal problems regarding the Fed’s autonomy. As such, since last summer, Trump has dedicated himself to harassing Powell with hurtful comments and frequent mockery.

Powell’s term ends in May but he is considering emulating Marimer S. Eccles, the governor after whom the building at the center of the controversy is named. Eccles led the Fed from 1934 to 1948, but he went down in history because, after his term, he remained a member of the board of governors, standing up to President Harry S. Truman’s attempts at interference. That resistance helped lay the groundwork for the institution’s autonomy. The White House wants to prevent Powell from doing the same. Although his term as chairman ends in May, he could remain on the board of governors until 2028, which would complicate Trump’s strategy of controlling a majority of the 12 members of the Federal Open Market Committee (FOMC), the Federal Reserve body that votes on interest rates.

The White House has also initiated legal proceedings against Lisa Cook, one of the governors and a member of the FOMC who has most strongly resisted Trump’s push to accelerate interest rate cuts. The Trump administration accused her, without presenting any evidence, of wrongdoing in obtaining a mortgage on preferential terms. After seeing the courts rule against them, they took the case to the Supreme Court, which will have to decide on Cook’s situation this month. If Trump succeeds in removing Powell and Cook, he would gain a majority on the FOMC and could decide interest rates at will.

Trump has already placed several people on the board of governors. Stephen Miran, the former chairman of the White House Council of Economic Advisers, is one of the dissenting voices at Fed meetings calling for deeper interest rate cuts. The Republican also appointed other members during his first term, but he still lacks a majority to influence the Fed.

Decisive vote at the Capitol

It’s common for presidents to pressure the Fed in some way to lower interest rates to stimulate the economy and improve their record before elections. Trump faces crucial midterm elections at the end of this year, where his power could be curtailed. He has already warned publicly that if he loses, the Democrats will “look for an excuse to impeach him.”

But the Federal Reserve may find an unexpected ally in the Senate in the face of Trump’s attempts to undermine its autonomy. The Capitol must vote on the nomination of Powell’s successor at the Fed. The vote will not be easy for Trump. Democratic representatives have already warned that they will oppose any interference, and Tillis’s vote on the Senate Banking Committee appears to be crucial. The Republican’s opposition would block any Federal Reserve nomination in the Senate Banking Committee, which is split 13-11 between the two parties. Furthermore, Senate rules stipulate that 60 votes are needed to overrule a committee decision.

Tillis’s stance — he has already announced he will not seek reelection to the Senate — comes as the first cracks begin to appear in the monolithic Republican bloc on Capitol Hill. Last week, five Republicans in the Senate voted with Democrats to prohibit the president from authorizing further military action in Venezuela. Trump also suffered a setback in the House of Representatives when several Republican members voted to extend Biden-era healthcare subsidies.

“Trump wants to nominate a new Fed Chair AND push Powell off the Board for good to complete his corrupt takeover of our central bank,” wrote Elizabeth Warren, a Democratic senator on the Senate Banking Committee, on X. “He is abusing the law like a wannabe dictator so the Fed serves him and his billionaire friends. The Senate must not move ANY Trump Fed nominee.”

Senate Minority Leader Chuck Schumer pointed out that undermining the Fed’s independence threatens the economy. “Anyone who is independent and does not align with Trump will be investigated,” he emphasized.

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