Federal Reserve Chair Jerome Powell is swinging back at President Trump’s administration after the Department of Justice launched a criminal indictment over the central bank’s extensive renovations of its Washington, D.C. headquarters.
The nation’s top central banker dismissed the threat of criminal charges and subpoenas about the construction project as mere “pretexts” to force him to do Trump’s bidding and dramatically lower interest rates.
“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,” Powell said in a rare, hastily arranged video public statement Sunday night. “This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions — or whether instead monetary policy will be directed by political pressure or intimidation.”
Trump denied ordering the probe of Powell and the Fed or even being aware of the steps taken by prosecutors.
“I wouldn’t even think of doing it that way,” Trump told reporters late Sunday as he headed back to the White House from his Florida resort home.
Markets reacted somewhat to the news Monday, with the Dow falling more than 400 points after the opening bell while the S&P fell only slightly and the Nasdaq Composite remained relatively flat. Investors revere the independence of the Fed which they believe enhances the stability of the U.S. economy and markets.
Senate Democratic Minority Leader Chuck Schumer slammed the move.
“This is the kind of bullying that we’ve all come to expect from Donald Trump and his cronies,” Schumer said in a statement. “Anyone who is independent and doesn’t just fall in line behind Trump gets investigated,” he said.
Republican Sen. Thom Tillis (R-North Carolina) vowed to block any Trump appointments to the Fed board until the probe is dropped.
The unprecedented investigation centers on Powell’s testimony before the Senate Banking Committee in June, the Fed chair said, regarding the Fed’s $2.5 billion renovation of two office buildings. Trump has criticized the renovations as excessive and wasteful while Powell calls them needed improvements to the century-old headquarters.
The renewed attacks on the Fed and Powell’s counterpunches amount to a new skirmish in the battle between Trump and the chair he appointed in 2017. It raises fresh fears that the Fed’s independence from day-to-day politics will be compromised, which could undermine global investors’ confidence in U.S. Treasury bonds and other assets.
Powell’s term as chair ends in May, and Trump administration officials have signaled that he could name a potential replacement soon. Trump has also sought to fire Fed governor Lisa Cook, a Powell ally, in an unprecedented step. Cook has sued to keep her job and courts have ruled she can remain in her seat while the case plays out. The Supreme Court will hear arguments in that case Jan. 21.
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