The Fed Chairman’s Theatrical Martyrdom
Jerome Powell has determined he’s underneath assault from the Trump administration and has issued a declaration of battle.
The Fed chairman on Sunday night time took the unprecedented motion of releasing a video accusing the Trump administration of utilizing the Justice Division to place stress on the central financial institution. He mentioned that the Consumed Friday had obtained subpoenas for a grand jury and been threatened with felony expenses associated to the renovations of the Fed’s headquarters in Washington, DC, and his associated testimony to a Senate panel final yr. However these inquiries had been merely “pretexts,” Powell claimed. The true purpose was the subversion of Fed independence.
President Donald Trump speaks with Federal Reserve Chair Jerome Powell as they tour the Federal Reserve’s renovation venture on July 24, 2025, in Washington, DC. (Chip Somodevilla/Getty Pictures)
It’s an explosive cost. Powell is accusing the Trump administration of not solely trying to undermine the independence of the Fed but additionally of misusing the Justice Division to perform this goal. And it was delivered in a extremely provocative manner: a two-minute video assertion launched previous to the open of Asian markets. It will be laborious to design one thing higher geared toward disrupting monetary markets, though we can not know if this was Powell’s purpose. On the very least, Powell selected a time and format that ensured the message hit international markets instantly and left the White Home no quiet strategy to comprise it.
If inflicting a sell-off was the intention, nevertheless, it failed. Futures instructed the Dow Jones Industrial Common and the S&P 500 would possibly drop by simply half a proportion level and the Nasdaq Composite by a bit extra. No signal of a crash. By noon Monday, even these small strikes had been erased, and the most important indexes had flipped inexperienced. Traders refused to panic over the alleged risk to the independence of the Federal Reserve. The S&P closed at a contemporary all-time excessive on Monday.
The Rush to Judgement In opposition to Trump
The pundits and legacy media instantly assumed the veracity of Powell’s accusations, convicting Trump of trying to grab management of financial coverage with out even a second’s hesitation. Verdict first, proof later—the everyday response to any cost levied towards President Trump. The market, nevertheless, could have sussed out that Powell’s allegations don’t make a lot sense. Even when Trump had been tempted to make use of lawfare to pressure Powell out of workplace, what could be the purpose? Powell’s chairmanship will expire in 5 months. He has simply three extra Federal Open Market Committee (FOMC) conferences as chair. Why hound a man out of an workplace when he’s already marching towards the exit?
It’s true that Powell may keep on as governor till 2028. However harassing him with a Division of Justice investigation appears extra more likely to encourage Powell to stay round than to depart. Powell now views this as a private battle over his integrity and as an assault on the independence of the Fed. If he was not planning on remaining on the Fed board earlier than, he most likely is now.
Utilizing the Justice Division to pursue a vendetta towards Powell would additionally danger alienating the opposite members of the FOMC, lots of whom personally like Powell and have served underneath him for years. Even when the investigation had been to in some way pressure Powell from the Fed—maybe as a result of an indictment would give grounds for the president to take away him—the subsequent chair could be confronted with a financial coverage committee that might probably really feel duty-bound to display their independence by refusing to cooperate with the administration’s financial insurance policies.
After which there may be the matter of the Senate. Trump wants the Senate to verify his nominee to succeed Powell. There’s no provision within the Federal Reserve Act for the president to nominate an performing chairman; so if Trump’s nominee just isn’t confirmed, the place will stay vacant. Below the Federal Reserve Act, within the case of an “absence” of a chair, the management of the Fed falls to the vice chair. That place is held by Phillip Jefferson, a Biden appointee who got here to the Fed after a protracted profession in academia. Engineering an early departure of Powell simply to place Jefferson in cost looks like it could be a pyrrhic victory.
Federal Reserve Vice Chair Philip Jefferson (left) and Chairman Jerome Powell attend the Federal Reserve Board open assembly in Washington, DC, on Oct. 24, 2025. (Al Drago/Bloomberg through Getty Pictures)
Some have instructed that the Fed board may vote to maintain Powell as chair till a substitute is confirmed. When Powell’s first time period as chairman expired in February 2022, throughout Biden’s presidency, he was elected by the board of the Fed to function to behave as chairman professional tempore till he was finally confirmed in Might. And this has occurred a lot of occasions previously, when there was a lapse between the expiration of a chair’s time period and the affirmation of a brand new one. So, there may be precedent for this.
However again in 2022, Biden had already introduced he would reappoint Powell, so conserving him in place whereas his formal chairmanship lapsed for a number of months was not controversial. Attempting to maintain Powell in place this time would little doubt result in litigation and additional embroil the Fed in a political struggle with the Trump White Home. The Federal Reserve Act solely authorizes a boss professional tempore when each the chairman and the vice chairman are absent.
The issue of an prolonged emptiness on the Fed just isn’t a theoretical danger. Senator Thom Tillis (R-NC) instantly reacted to Powell’s video on Sunday by declaring that he would block any nominee till the investigation is resolved. Senator Lisa Murkowski (R-AK) additionally mentioned she would block Trump’s nominations till the investigation into Powell is resolved, going as far as to say it’s “clear the administration’s investigation is nothing greater than an try at coercion.”
At the very least on a proper degree, that is the constitutional and statutory function of the Senate. Not like different statutes, the Federal Reserve Act doesn’t outline with any particularity what constitutes trigger for removing of a Fed governor, and it gives no safety in any respect for the chairman from removing. The constraint on removing is basically the necessity to fulfill the Senate {that a} removing was correct with the intention to have new nominees confirmed.
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