White House Weaponizes Justice Department to Pressure Fed Independence

Key Quotes

"On Friday, the Department of Justice served the Federal Reserve with grand jury subpoenas threatening a criminal indictment related to..."

Fed Chair Jerome Powell publicly announced the Justice Department's investigation into the Federal Reserve. This quote highlights the unprecedented nature of a criminal indictment threat against the central bank. Powell's statement indicates a significant escalation in the conflict between the administration and the Fed.

"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."

Jerome Powell directly links the criminal investigation to the Fed's independent decision-making on interest rates. This quote asserts that the investigation is a retaliatory measure for the Fed not aligning its monetary policy with the president's desires. Powell argues that the Fed's mandate is to serve the public interest, not political preferences.

"Some of those are just flatly misleading. The idea of elevators, you know, we, it's the same elevator it's been there since the building was built. So this is, that's a mischaracterization and some of those are no longer in the plans."

Jerome Powell, in testimony before the Senate Banking Committee, refutes specific claims about the Federal Reserve's headquarters renovation. This quote demonstrates Powell's defense against accusations of mismanagement and misleading information regarding construction costs. He directly addresses and dismisses certain public reports as inaccurate.

"It went up a little bit or a lot. Yeah, so the 2.7 is now 3.1. I'm not aware of that. Yeah, it just came out. Yeah, I, I haven't heard that from anybody at the Fed."

During a joint tour of the construction site, President Trump states a figure for renovation costs, which Fed Chair Jerome Powell then corrects. This quote illustrates a public disagreement between the President and the Fed Chair regarding financial details of the renovation. Powell's response indicates a lack of awareness of the updated figure Trump presented.

"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."

Jerome Powell explicitly states his belief that the criminal investigation is not genuinely about the building renovations or congressional oversight. This quote reveals Powell's conviction that the investigation is a cover for a political motive. He argues that the Fed has been transparent with Congress, suggesting the stated reasons are merely pretexts.

"Yeah, I think you're looking at more than just the loss of Fed independence. What you're looking at is the White House claiming control of monetary policy. When people talk about Fed independence, well, what is Fed independence? It's not in the Constitution. There's no Fed that should be a fourth branch of government. What people are talking about is the existing branches of government agreeing to this relationship that we should not have direct political control over monetary policy because the long-run interests of the economy and the short-run interests of politicians don't always sync up."

Nick Timiraos explains that the current situation extends beyond typical discussions of Fed independence. This quote clarifies that the core issue is the White House seeking direct control over monetary policy. Timiraos argues that the established norm of Fed independence is an agreement among branches of government to insulate policy from short-term political needs.