\n<\/p>\n
The US Department of Justice has opened a criminal investigation into the Federal Reserve chair, Jerome Powell, as Donald Trump\u2019s White House escalates its campaign against the central bank\u2019s independence.<\/p>\n
This is just the latest development in a long string of White House attacks against the Fed. Here\u2019s what we know about what\u2019s going on.<\/p>\n
As chair of the Fed, Powell has been the public face of the central bank since 2018. Trump initially appointed him for a four-year term, and then Biden reappointed him in 2022. His term as chair will end in May.<\/p>\n
Powell alone does not set interest rates. He is part of the Federal Open Market Committee (FOMC), the 12-member board that votes eight times a year on any changes to interest rates. Though Powell is just one vote out of 12, he has enormous sway as the most influential voice on the state of the US economy.<\/p>\n
The justice department said the investigation is over potential \u201cabuse of taxpayer dollars\u201d, but it\u2019s been pretty quiet on any specific details. Much of what we know so far comes from Powell\u2019s video.<\/p>\n
The investigation is an escalation of attacks the White House has made before over renovations of the Fed\u2019s Washington DC headquarters. Trump over the summer reproached Powell about the project, and its cost of $2.5bn, instead of the $1.9bn that had originally been budgeted in 2019.<\/p>\n
Trump accused Powell of overseeing a lavish renovation, like a VIP dining room and a garden terrace. \u201cIt\u2019s possible there\u2019s fraud involved with the $2.5bn,\u201d the president claimed at the time.<\/p>\n
The justice department has served the Fed with grand jury subpoenas and threatened a criminal indictment, according to Powell, related to testimony he gave in front of the Senate banking committee in June. <\/p>\n
The testimony in question is from a regularly scheduled, semiannual update the Fed chair gives to the Senate banking committee on the state of the economy in June.<\/p>\n
In brief comments, which amounted to less than two minutes out of a two-hour session fielding questions from senators on the economy, Powell had said the renovations were needed for safety purposes on buildings that hadn\u2019t undergone major renovations since the 1930s.<\/p>\n
\u201cThere\u2019s no VIP dining room, there\u2019s no new marble,\u201d he told senators. \u201cWe took down the old marble, we\u2019re putting it back up. There are no special elevators, there\u2019s just the old elevators.\u201d<\/p>\n
Powell hit back on Sunday with a remarkable defense of the Fed\u2019s independence, and explicitly laid out the White House\u2019s unprecedented campaign to lower interest rates. The investigation amounts to an \u201cunprecedented action [that] should be seen in the broader context of the administration\u2019s threats and ongoing pressure\u201d, he declared.<\/p>\n
\u201cThis new threat is not about my testimony last June or about the renovation of the Federal Reserve buildings. It is not about Congress\u2019s oversight role; the Fed through testimony and other public disclosures made every effort to keep Congress informed about the renovation project. Those are pretexts,\u201d said Powell. \u201cThe 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.\u201d<\/p>\n
Powell affirmed his commitment to public service and \u201cstanding firm in the face of threats\u201d.<\/p>\n
It\u2019s the first time that Powell, who spent much of the last year declining to publicly address Trump\u2019s criticism, has so directly responded to the White House\u2019s aggression. The president has often publicly mocked the Fed chair in social media posts for being a \u201cvery stupid person\u201d, and accused him of damaging the US economy.<\/p>\n
A statement signed by every living former Fed chair condemned the investigation, and warned that similar political attacks on independent central banks have led to unstable economies and higher costs of living.<\/p>\n
\u201cIt has no place in the United States whose greatest strength is the rule of law, which is at the foundation of our economic success,\u201d the statement said.<\/p>\n
The move also rattled a few Republican senators, whose support Trump will need to get his Fed chair nominee approved, before Powell\u2019s term ends in May.<\/p>\n
Thom Tillis, a Republican senator from North Carolina, said he will oppose whoever Trump nominates to replace Powell as Fed chair \u201cuntil this legal matter is fully resolved\u201d. The Alaska senator Lisa Murkowski called the investigation \u201ccoercion\u201d and warned that the economy would suffer if the Fed loses its independence.<\/p>\n
Economists have also sounded the alarm, warning that Trump\u2019s attempts to influence the Fed could risk plunging the US into a period of 1970s-style inflation, and trigger a global backlash in financial markets.<\/p>\n
Trump has long wanted the Fed to lower interest rates, claiming that cutting rates would save \u201c$1tn a year\u201d and spur economic activity.<\/p>\n
Powell, and many of his colleagues at the Fed, take a more cautious approach. Fed economists often refer to the central bank\u2019s \u201cdual mandate\u201d: mitigating price increases, while keeping unemployment low. Cutting rates too quickly risks higher inflation in the long term, but rates that are too high can stagnate the labor market.<\/p>\n
These complexities appear to matter little to the White House, which has relentlessly pushed for significantly lower rates since Trump re-entered office.<\/p>\n
Last spring, Trump privately told advisers that he wanted to fire Powell. He backtracked when markets responded poorly to the news, but he hasn\u2019t let up on his pressure campaign.<\/p>\n
After Trump spent weeks trying to cause a stir around the Fed\u2019s renovations, the White House instead went on to fire the Fed governor Lisa Cook, a voting member of the rate-setting FOMC who was appointed by Joe Biden. The supreme court temporarily reinstated Cook and will hear arguments over her firing next week.<\/p>\n
The Federal Reserve\u2019s independence was a key part of its structure when it was created by Congress in 1913. Economists have long studied the importance of having a central bank that is unswayed by politics. Markets depend on the central bank to be a steady presence in the economy, making decisions based on economic data, instead of the whims of politicians.<\/p>\n
The only say the president and Congress have on the Fed is who gets to sit on its board, with terms lasting 14 years. And while the president can fire other leaders within the executive branch, removing someone from the Fed\u2019s board has to be \u201cfor cause\u201d \u2013 an argument at the heart of the upcoming supreme court trial on Cook\u2019s firing.<\/p>\n
In his statement, Powell implied the White House is waging an existential fight against the Fed. \u201cThis is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions \u2013 or whether instead monetary policy will be directed by political pressure or intimidation,\u201d he said.<\/p>\n","protected":false},"excerpt":{"rendered":"
The US Department of Justice has opened a criminal investigation into the Federal Reserve chair, Jerome Powell, as Donald Trump\u2019s White House escalates its campaign against the central bank\u2019s independence. This is just the latest development in a long string of White House attacks against the Fed. Here\u2019s what we know about what\u2019s going on.<\/p>\n","protected":false},"author":1,"featured_media":41414,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[49],"tags":[2431,200,4437,319,7474,4438,2282,4439,517,71],"class_list":{"0":"post-41413","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-chair","9":"tag-department","10":"tag-fed","11":"tag-federal","12":"tag-investigating","13":"tag-jerome","14":"tag-justice","15":"tag-powell","16":"tag-reserve","17":"tag-trumps"},"_links":{"self":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/41413","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=41413"}],"version-history":[{"count":0,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/41413\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/media\/41414"}],"wp:attachment":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=41413"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=41413"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=41413"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}