Jerome Powell’s remarkable advice to his successor speaks volumes about his battle with Trump
Washington
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Federal Reserve Chair Jerome Powell refused to answer three straight questions about politics during his press conference Wednesday. That’s typical for the just-the-facts persona he’s constructed for himself over the years. But near the end of his lengthy question-and-answer session, Powell got reflective and let the cat out of the bag.
When CNN’s Matt Egan asked what words of wisdom Powell would give his successor, who is set to take over when Powell’s term as chair ends in mid-May, the Fed chair paused for a moment, chuckled, and said he had three pieces of advice.
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Stay out of elected politics.
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Be accountable to Congress and work diligently to build relationships with the Fed’s overseers.
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Respect the dedicated professionals who work hard every day to promote the independent mission of the Federal Reserve.
It was a touchingly human and thoughtful response. And it spoke volumes about the legacy Powell plans to leave at the institution he’s served for 14 years – nine as its chair. On Wednesday, he summed it up as his commitment to the “public well being” and staying out of politics.
The Trump administration’s crusade against the Fed has threatened the institution’s independence that Powell holds so dear. He has said the Fed needs to remain independent to maintain its credibility that allows it to serve the public by working to keep unemployment and inflation low.
The stakes are so high that the Fed leader deemed it appropriate to attend the oral arguments in the Supreme Court case of Fed Governor Lisa Cook, who is challenging Trump’s attempt to oust her. For Powell, none of that is political, but rather a fight for the Fed’s independence.
Over the past year, President Donald Trump and his allies have unleashed an unrelenting barrage of attacks against the Fed, claiming it has been too slow to lower borrowing costs. But it hasn’t been just name calling: The administration is actively arguing before the nation’s highest court why Cook, appointed by then-President Joe Biden, must be removed.
Powell’s reflection, though never mentioning Trump or his actions, seemed aimed directly at the president. If passed through a Fedspeak translation engine, it might look something like:
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The Fed cannot become a tool for politicians seeking power to meddle with.
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The Fed is accountable to the people it serves – through Congress, not through the president. And fostering relationships with Congresspeople can pay off when the Fed comes under attack.
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The folks who work at the Fed have the best interests of the American people at heart. Don’t let politics undermine that.
Because of Powell’s career-defining work to maintain the Fed’s independence, Trump’s attacks on the Fed are now backfiring. Instead, they have rallied support for the institution’s political independence, which the president has long sought to undermine.
Trump’s campaign against the Fed took a shocking twist earlier this month, with federal prosecutors investigating part of Powell’s congressional testimony last year that touched on an ongoing renovation of the central bank’s Washington, DC, headquarters.
The Fed chief pushed back against the administration in a stunning video released on January 12, describing the federal probe as a “pretext” to destroy Fed independence and usher in a world where “monetary policy will be directed by political pressure or intimidation.”
On Wednesday after the Fed announced it is holding rates steady, Powell refrained from commenting further on his statement against Trump, but he reiterated that Fed independence has “served the people well.”
As Powell hinted at on Wednesday, several members of Congress — including some Republicans — have come out in support of Powell. But, more broadly, they spoke of how the Fed must operate beyond Powell’s term as chair. Current and former Fed officials are also standing up to Trump’s attempts to undermine the Fed.
“Everybody is in favor of Fed independence,” said Subadra Rajappa, head of research at financial services firm Societe Generale. “I’m not surprised there’s been overwhelming support and that’s exactly the kind of affirmation of Fed independence that markets are looking for.”
Some Republicans in support of Powell and the Fed
Several senators — from both parties — came out in support of Powell and the Fed after the central bank chief’s emergency video statement. That’s key because some of them serve on the Senate Banking Committee, which will consider Trump’s pick to replace Powell.
Republican Sen. Thom Tillis of North Carolina, a committee member, said in a statement he will “oppose the confirmation of any nominee for the Fed — including the upcoming Fed Chair vacancy — until this legal matter is fully resolved.”
He was joined by two other Senate Republicans, who don’t serve on the banking committee: Sens. Lisa Murkowsi of Alaska and Susan Collins of Maine, both of whom said the Fed must remain independent.
Still, other Republicans, even some close Trump allies, aren’t siding with the administration, instead striking a more modest tone in defense of Powell. For example, Sen. John Kennedy of Louisiana, a Republican on the Banking committee, told reporters: “I would be stunned if he had done anything wrong.”
Sen. Kevin Cramer of North Dakota, another Republican committee member, said Powell is “bad” at his job, but added: “I do not believe, however, that he is a criminal.”
A show of support from former policymakers and officials
Fed officials have always supported their ability to set interest rates free of politics by merely pointing to long-standing evidence in academic research that an independent central bank often leads to better economic outcomes.
But some current and former officials have been digging in their heels on why the US central bank must continue to manage rates without considering the president’s demands.
Earlier this month when the Supreme Court heard oral arguments in the landmark case of Fed Governor Lisa Cook, who is suing against Trump’s attempt to oust her from her role as a monetary policymaker over unproven allegations of mortgage fraud, in attendance were Cook, Powell, Fed Governor Michael Barr and former Fed Chair Ben Bernanke.
When asked Wednesday why he attended, Powell said the Fed’s independence was at stake.
“I would say that case is perhaps the most important legal case in the Fed’s 113-year history, and as I thought about it, I thought it might be hard to explain why I didn’t attend,” Powell said.
Current Fed officials have tended to shy away from weighing in on Trump’s attacks, but several have come out in support of Powell in public appearances since, such as Fed presidents John Williams of New York and Alberto Musalem of St. Louis.
Shortly after the Fed chief released his video, a joint statement signed by all living former Fed chairs – Bernanke, Janet Yellen and Alan Greenspan – stated its support for Powell’s defiance of Trump.
The letter – also signed by other former high-ranking government officials, such as former Treasury secretaries Henry Paulson and Robert Rubin – said that the federal probe “is an unprecedented attempt to use prosecutorial attacks to undermine that 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,” they wrote.
“It has no place in the United States whose greatest strength is the rule of law, which is at the foundation of our economic success.”
