According to a statement from Federal Reserve Chair Jerome Powell, the attacks on the Federal Reserve from Donald Trump have escalated to an “unprecedented” level, with grand jury subpoenas related to Powell’s testimony about the Federal Reserve renovations.
Powell had been called in front of the Senate Banking Committee to explain the renovations that the Federal Reserve has been working on for the last several years.
Powell’s statement makes clear his belief that, “This new threat is not about my testimony last June or about the renovation of the Federal Reserve buildings. It is not about Congress’s oversight role; the Fed through testimony and other public disclosures made every effort to keep Congress informed about the renovation project.
“Those are 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 continues to note that this pressure campaign is actually about “whether the Fed will be able to continue to set interest rates based on evidence and economic conditions — or whether monetary policy will be directed by political pressure or intimidation.”
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Trump has claimed that he’s unaware of these subpoenas.
Federal Reserve independence is the longstanding idea that the best way for it to achieve its dual mandate of currency stability and employment was for it to be able to make its policy decisions free from the influence of the executive.
Powell was originally nominated to this position by Trump during his first term, and Powell, and Federal Reserve independence from the executive more broadly, have been loudly attacked by Trump during his second term.
Indeed, Trump has extorted the Federal Reserve to lower its interest rates and declared his nominee to be a “numbskull” and “too stupid.” He also claimed that he could remove Powell for “fraud.”
Additionally, Trump, who’s had many cognitive tests performed by his doctors recently, has claimed that he’s “surprised” that Powell was appointed and further claimed that he was surprised “frankly, that Biden put him in.”
Trump is the one who originally nominated Powell, not Biden, though Biden did re-nominate Powell and received broad bipartisan support for this nomination.
The president has also repeatedly stated that he has the right to remove Federal Reserve governors and the chair under his powers as president, despite there previously being broad consensus that this would be a dangerous infringement on Federal Reserve independence.
Furthermore, William Pulte, the head of the Federal Housing Finance Agency (FHFA), has previously pressed for Powell to be investigated by Congress.
Trump has also started trying to dictate financial regulations and monetary policy by edict, ordering Fannie Mae and Freddie Mac to purchase mortgage bonds in an attempt to drive down mortgage rates.
He’s also claimed that he’ll cap credit card interest rates at 10% by January 20, and has lied by claiming that this edict, which hasn’t been passed by Congress, has the force of law.
This assault on Federal Reserve independence threatens the safety and stability of the dollar and the United States Treasuries market, where investors rely on Federal Reserve independence for their trust in these assets.
Loss of Federal Reserve independence may threaten the dollar’s status as the world reserve currency and have globe-spanning financial repercussions.
Adding to the inexplicability of this assault is the fact that Powell’s term as chair was scheduled to conclude in May, and Trump would have another opportunity to nominate a successor through normal methods at that point.
