Every former chair of the Federal Reserve joined a bipartisan group of former treasury secretaries and top economic officials on Monday to issue a rare public rebuke of the Trump administration’s criminal inquiry into Fed Chair Jerome H. Powell, warning that the move threatens the central bank’s independence and the rule of law.
The admonishment landed just as markets were digesting news of the inquiry and assessing whether the dispute could spill beyond Washington and into the broader economy.
The U.S. stock market wobbled in early trading, and the value of the dollar slipped slightly Monday morning, early signs of potential unease among traders. Gold, which often spikes in times of uncertainty, also hit record highs. At its peak, spot gold advanced to over $4,600 an ounce, according to LSEG data reported by CNBC.
In a joint statement, former Fed officials said the Department of Justice inquiry represents an unprecedented intrusion into the Fed by the executive branch, with potentially far-reaching consequences for the economy and global confidence in U.S. institutions.
“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,” wrote the officials, including former Fed chairs Ben S. Bernanke and Alan Greenspan and former treasury secretaries Robert E. Rubin and Timothy F. Geithner. “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.”
And in a sign that the probe could backfire against Trump and harm his broader economic agenda, at least three key Senate Republicans spoke out against the matter. In a post on X, Thom Tillis (R-North Carolina) said he would oppose any nomination for Powell’s successor until the legal matter is resolved. “If there were any remaining doubt whether advisers within the Trump Administration are actively pushing to end the independence of the Federal Reserve, there should now be none,” he said.
Tillis’s concerns were significant because he holds an effective veto on the Senate Banking Committee, where Republicans have a narrow edge. His concerns were echoed to varying degrees by Sen. Lisa Murkowski (R-Alaska) and Kevin Cramer (R-North Dakota).
The probe is tied to the central bank’s renovation of its headquarters along the National Mall. In a statement released Sunday, Powell accused administration officials of using the threat of prosecution to push the Fed into lowering interest rates.
The prospect of an intensified feud between the Trump administration and the Fed, whose independence is based on federal law and on norms largely abided by most recent presidents, appeared to inject unwelcome uncertainty for traders.
The Dow Jones Industrial Average dropped about 400 points at the opening bell but was regaining its losses as of 10 a.m. In the morning’s early hours, the 10-year Treasury yield was up by over two basis points at 4.195 percent while the 30-year note was up more than three basis points.
“The markets are clearly taking a very, very dim view,” said Michael Brown, a London-based market analyst at Pepperstone, pointing to the dollar’s weakness and latest Treasury yields and describing the probe into Powell as “one of if not the most significant threats that we’ve seen since Trump retook office last January against the Fed’s policy independence.”
Officials at Trump’s Justice Department have targeted several of the president’s perceived foes since last year, although the efforts so far have proved largely unsuccessful in the courts. Criminal investigations or charges have been brought against New York Attorney General Letitia James (D), Sen. Adam Schiff (D-California) and former FBI director James B. Comey, who like Powell, was investigated for making allegedly false statements to Congress.
The inquiry follows public demands by Trump for the bank to cut interest rates sharply and open contemplation that he might fire Powell, whom he nominated during his first term in 2017. Last month, Trump said he might sue him for “gross incompetence.”
In a video statement posted to its website Sunday, the Federal Reserve confirmed it had received subpoenas relating to Powell’s Senate testimony about renovations to its headquarters. In response, Powell accused the administration of using criminal proceedings to pressure the central bank to lower interest rates, a challenge to its independence.
“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,” Powell said in a video and statement posted to the central bank’s website Sunday.
In an interview with NBC News on Sunday Night, Trump denied having any knowledge of the criminal probe. “No. I wouldn’t even think of doing it that way. What should pressure him is the fact that rates are far too high. That’s the only pressure he’s got,” he said.
In response to the probe, Democrats accused administration officials of weaponizing the Justice Department to undercut the central bank’s independence.
Sen. Elizabeth Warren (Massachusetts), the top Democrat on the Senate Budget Committee, accused Trump of trying to remove Powell and install another “sock puppet to complete his corrupt takeover of America’s central bank.”
The top Democrat on the House Budget Committee, Rep. Brendan Boyle of Pennsylvania, warned Trump’s move would “weaken our economy and destabilize markets.”
Senate Minority Leader Charles E. Schumer (D-New York) accused Trump of “bullying” Powell.
“Anyone who is independent and doesn’t just fall in line behind Trump gets investigated,” Schumer said in a statement. “Jay Powell and the Fed aren’t the reason Trump’s economy and his poll numbers are in the toilet. If he’s looking for the person who caused that he should look in the mirror.”
Amy B Wang contributed to this report.
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