Former Fed chiefs, lawmakers slam US probe into Jerome Powell
Sign up now: Get ST's newsletters delivered to your inbox
US President Donald Trump and Federal Reserve Chair Jerome Powell speak during a tour of the Federal Reserve Board building, which is currently undergoing renovations, in Washington DC.
PHOTO: REUTERS
Follow topic:
WASHINGTON - Former Federal Reserve chiefs sharply criticised on Jan 12 a US criminal probe into current chair Jerome Powell, calling it an “unprecedented attempt” to undermine the central bank’s independence.
Two Republican senators joined in rebuking the Trump administration and questioned the credibility of the Justice Department in targeting Mr Powell, whom the US president has long sought to replace in a push for lower interest rates.
On Jan 11, Mr Powell revealed that the Fed received grand jury subpoenas
The issue at hand was a US$2.5 billion (S$3.2 billion) renovation of the Fed’s headquarters. In 2025, President Donald Trump floated the possibility of firing Mr Powell over cost overruns for the historic buildings’ facelift.
On Jan 12, ex-Fed chiefs Ben Bernanke, Alan Greenspan and Janet Yellen joined other former economic leaders in slamming the Department of Justice’s probe.
In a joint statement, they called it “an unprecedented attempt to use prosecutorial attacks” to undermine the Fed’s independence.
“This is how monetary policy is made in emerging markets with weak institutions, with highly negative consequences for inflation and the functioning of their economies more broadly,” the statement added.
“It has no place in the United States.”
In an extraordinary statement on Jan 11, Mr Powell himself rebuked the administration, dismissing the building renovation and his testimony before Congress as “pretexts.”
“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,” he said.
He vowed to carry out his duties “without political fear or favour.”
Separately, New York Fed president John Williams said that historic precedent of political influence on monetary policy typically leads to “unfortunate” outcomes like inflation.
Stocks hit records
Despite worries spurred by the probe, US stock indices closed at records.
“The fact that market measures of inflation expectations have remained calm indicates that markets are brushing off the investigation as having little, if any, impact on Fed independence,” said Mr Bernard Yaros, lead US economist at Oxford Economics.
The independent Fed has a dual mandate to keep prices stable and unemployment low. Its main tool is setting a benchmark interest rate that influences the price of US Treasury bonds and borrowing costs.
Mr Trump has regularly slammed Mr Powell, calling him a “numbskull” and “moron” for the Fed’s policy decisions and not cutting borrowing costs more sharply.
On Jan 12, White House spokeswoman Karoline Leavitt told Fox News that Mr Powell “has proven he’s not very good at his job.”
“As to whether he’s a criminal, that’s an answer the Department of Justice is going to have to find,” she said.
Republican pushback
The Justice Department probe has drawn criticism from both sides of the political aisle.
Republican Thom Tillis, who sits on the Senate Banking Committee, vowed on Jan 11 to oppose the confirmation of any Fed nominee, including for the next Fed chief, until the legal matter is “fully resolved.”
“It is now the independence and credibility of the Department of Justice that are in question,” he said.
Another Republican senator, Ms Lisa Murkowski of Alaska, supported Mr Tillis’ move, calling the investigation “nothing more than an attempt at coercion”.
Top Senate Democrat Chuck Schumer earlier dubbed the probe an assault on the Fed’s independence.
Mr David Wessel, a senior fellow at Washington think tank the Brookings Institution warned of serious consequences if the Fed came under Mr Trump’s control.
Elected politicians could be inclined to set interest rates low to boost the economy ahead of elections, whereas an independent Fed is seen as shaping policy in the best interests of managing inflation and maximising employment.
If Mr Trump succeeds in influencing the Fed, the US economy could see “more inflation, and the willingness of global investors to lend money to the Treasury will diminish somewhat,” Mr Wessel told AFP.
Mr Powell was nominated by Mr Trump as Fed chair during his first presidency. His term as chair ends in May, but he could stay on the Fed’s board until 2028.
In 2025, Mr Trump separately attempted to fire Fed Governor Lisa Cook
