Trump’s investigation of Powell is also a warning to the next Fed Chair
The investigation reflects the lengths to which the president will go to control the central bank.
The criminal investigation into Federal Reserve Chair Jerome Powell isn’t ultimately about the Fed’s headquarters, or Powell, or even interest rates. It’s about power. President Trump intends to take control of the central bank, no matter what the law or the courts say.
In that sense, the investigation is also a message to whoever succeeds Powell, likely either Trump adviser Kevin Hassett or former Fed governor Kevin Warsh. Both claim they will be independent. But if either sets interest rates contrary to Trump’s desires, they can expect the same treatment as Powell. That’s a powerful incentive to stay in line.
Since returning to power a year ago, Trump has steadily obliterated the lines that once separated the president from other sources of federal authority. He fired Democratic members of agencies such as the Federal Trade Commission contrary to law, sacked career officials in justice, defense and law enforcement deemed insufficiently loyal, and trampled on Congress’ authority over spending and revenue.
The Fed was an exception. Because politicians always want lower interest rates, which can lead to inflation, the Fed, by law and tradition, operates independently from the president and Congress. Presidents have pressured the Fed anyway, but usually behind closed doors, while publicly claiming to respect its independence.
Not Trump. He insists he should have some say over interest rates, and many in his administration consider independence antithetical to the president’s supreme authority over the executive branch.
Though Trump appointed Powell in his first term, he grew disenchanted last year at Powell’s refusal to cut interest rates more, often because of tariffs’ contribution to inflation. The Supreme Court signaled it wouldn’t allow Trump to fire Powell or any of the other six governors without cause.
Undeterred, Trump has simply sought to engineer a cause. In August he tried to fire governor Lisa Cook for alleged mortgage application misrepresentations. Cook denied the allegations and has remained on the Fed while awaiting the Supreme Court to rule on the legality of Trump’s action.
Trump made it clear his goal was to replace Cook with a loyalist in order to get control of the seven-member board of governors, who, along with five of 12 reserve bank presidents, vote on interest rates. “Once we have a majority, housing is gonna swing and it’s gonna be great," he said at the time.
This latest attack looks similar in design and intent. “Trump wants not just lower rates, but control of the board," Mark Spindel, a Fed historian, said Sunday. Treasury Secretary Scott “Bessent and Trump want their hands on the institution" to make more sweeping changes, such as to how the Fed supervises banks or uses its balance sheet to intervene in markets, he said.
Bill Pulte, director of the Federal Housing Finance Agency and one of Trump’s most partisan officials, kicked off the campaign attacking Powell for cost overruns on renovations to the Fed’s headquarters. The DOJ is scrutinizing Powell’s testimony to Congress on the project.
Powell said this is a pretext for his refusal to bend to Trump’s wishes. Trump denied that to NBC News Sunday. Still, it is hard to explain the ferocity with which the administration has attacked Powell any other way.
Federal projects, including Trump’s, routinely go over budget, without comparable recriminations. The price tag on Trump’s White House ballroom has already doubled, to up to $400 million from $200 million (albeit to be paid by private donors). He said before his first term that a border wall would cost $8 billion to $12 billion and Mexico would pay. Mexico didn’t pay, and more than $60 billion has now been earmarked for the project.
Legislators often complain that witnesses lie or mislead. Yet that seldom results in prosecution—especially of the administration’s own appointees.
To secure conviction, prosecutors must prove a falsehood was made “knowingly and willfully" and be “materially" false, fictitious or fraudulent.
Two former allies of Trump were accused of lying to Congress during his first term. Last year Trump pressured the Justice Department to indict former Federal Bureau of Investigation director James Comey, a Trump adversary, for lying to Congress. A federal judge dismissed the charges, ruling that the prosecutor Trump chose to bring the cases was unlawfully appointed.
It is unclear whether Powell will ultimately be indicted, much less convicted. Powell’s statement Sunday signaled he is refusing to be cowed, which means, for now, interest-rate policy shouldn’t change.
That Trump officials are going after Powell without awaiting the Supreme Court’s decision on Cook’s removal reflects their determination to break the Fed’s independence. They may succeed, even if they fail in court. The message to all Fed officials is that defying Trump is an invitation to have their backgrounds and public statements investigated for a pretext for removal. Given that, who would wish to serve? Presumably, only someone ready to deliver what Trump wants.
Write to Greg Ip at greg.ip@wsj.com
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