Former Federal Reserve chairs Janet Yellen, Ben Bernanke, and Alan Greenspan have joined other former officials in condemning a criminal investigation into current Fed chair Jerome Powell, labeling it an unprecedented assault on the central bank’s independence. The Justice Department’s probe, disclosed by Powell in a Sunday statement, threatens an indictment over his testimony regarding renovations to Fed buildings, but Powell and critics argue it is a pretext for political pressure to influence monetary policy.
The investigation stems from a long-running conflict between Powell and President Donald Trump, who has repeatedly demanded sharper interest rate cuts to reduce government borrowing costs and stimulate the economy. Trump has publicly attacked Powell, calling him names and previously floating the idea of firing him, though he claims no knowledge of the criminal probe. The Justice Department, led by Trump ally Jeanine Pirro, served subpoenas on Friday, citing cost overruns in the renovation project as the basis for the investigation.
In response, Powell asserted that the threat is not about the renovations or his testimony but about whether the Fed can set interest rates based on economic evidence rather than political intimidation. He emphasized that the central bank has acted independently, lowering rates three times in late 2025 to a range of 3.50% to 3.75%, but Trump has continued to press for more aggressive cuts.
The condemnation statement, signed by 13 former senior officials including the ex-Fed chairs, warns that such prosecutorial attacks mimic practices in emerging markets with weak institutions, leading to negative consequences like inflation and economic dysfunction. They stressed that this has no place in the United States, where the rule of law underpins economic success. Economists echoed these concerns, cautioning that Trump’s attempts to influence the Fed could trigger 1970s-style inflation and global financial backlash, drawing parallels to past political interference.
Political reactions have been mixed, with some Republicans expressing discomfort. Senator Thom Tillis of North Carolina said he would oppose any Fed nominee until the legal matter is resolved, while Senator Kevin Cramer criticized the investigation but did not believe Powell is a criminal. White House spokeswoman Karoline Leavitt deferred to the Justice Department, questioning Powell’s competence but leaving his criminal status to the probe.
Market response on Monday was relatively calm, with major indices like the S&P 500 holding steady, though financial stocks saw some decline. Analysts noted that while initial reactions were muted, prolonged uncertainty or success in influencing Fed policy could destabilize markets. The resilience was attributed to investors’ belief in the Fed’s institutional strength, but concerns persist about the precedent being set.
Looking ahead, Powell’s term as chair ends in May, and Trump is expected to nominate a successor, with Kevin Hassett, director of the National Economic Council, seen as a frontrunner. The investigation and the backlash could complicate the confirmation process, potentially delaying appointments and heightening political tensions. The situation underscores a critical moment for U.S. monetary policy, with implications for economic stability and the integrity of independent institutions.
