James' World 2

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On Sunday evening, news broke that the Trump administration was targeting Jerome Powell — the Federal Reserve chair, whom President Trump has been raging about for months — with a highly dubious criminal investigation into supposed financial improprieties. Usually reserved in his public statements, Mr. Powell posted a video bluntly calling the allegations a dishonest attempt at revenge for the Fed’s refusal to simply follow the president’s wishes.

The episode is a shocking violation of the central bank’s historical independence, one that puts the United States in league with authoritarian nations careening toward financial ruin.

On Monday, markets reacted with something along the lines of “meh”: The dollar and stock prices edged down, while gold prices and interest rates rose.

Mr. Trump’s attack on the Fed is a breathtaking departure from precedent, a dangerous and scary power grab, but it’s already backfiring. If anything, this latest episode has weakened his ability to bend the institution to his will, at least in the short run. It definitely increases the chance that Mr. Powell, whose term as chair ends in May, but whose appointment as a board member does not, will remain at the Fed longer than he might otherwise have. It will also raise the hurdle for whoever Mr. Trump nominates as the next Fed chair. And it will make other members of that body a lot less likely to go along with the president’s agenda.

Mr. Trump’s attempt to tighten control of the central bank has many international precedents, all of them depressing. In 2010, Argentina’s president, Cristina Fernández de Kirchner, pressured the head of her country’s central bank to heed her orders. When he refused, she accused him of abuse of authority and dereliction of duty and forced him to defend his decisions in court. Economic disaster ensued.

President Recep Tayyip Erdogan of Turkey has, like Mr. Trump, long been obsessed with low interest rates, and he once accused those who defend high rates of committing treason. He fired multiple central bank governors and initiated at least one criminal investigation. Duly intimidated, the central bank did what he wanted, helping to drive inflation as high as 85 percent.

Despite Mr. Trump’s efforts, the United States is not Argentina or Turkey.

Part of the reason is Jay Powell. In 2019, I was sitting just a few feet away from Mr. Powell at the Fed’s Jackson Hole conference when Mr. Trump tweeted, “who is our bigger enemy, Jay Powell or Chairman Xi?” While quaint by the standards of today’s White House, at the time it felt like an outrageous provocation. Mr. Powell did not take the bait.

As recently as November 2024, Mr. Powell was saying as little as possible, replying simply “no” when asked whether he would resign if requested to do so by Mr. Trump. That restraint is what made the video he released on Sunday night so powerful. This is not a man looking to become a resistance hero.

When Mr. Powell’s term as chair ends in May, he could stay on as a governor — and one of 12 voters on monetary policy — through January 2028. With threats intensifying, the case for his continued presence as a quiet but firm defender of Fed independence grows only stronger.

Mr. Trump has made it harder for his nominee as the next Fed chair to be confirmed. Almost immediately after news of the criminal investigation broke, Senator Thom Tillis, a Republican member of the Banking Committee, issued a striking statement: “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 added, “I will oppose the confirmation of any nominee for the Fed — including the upcoming Fed chair vacancy — until this legal matter is fully resolved.” Another Republican senator, Lisa Murkowski, endorsed that view, as did several Democrats.

In 2024, Scott Bessent — now the Treasury secretary — floated the idea of confirming a “shadow Fed chair” well before the end of Mr. Powell’s term, to prematurely turn him into a lame duck. Today, we do not have a shadow chair, and the confirmation of a real one looks further away than ever. The Federal Open Market Committee, which sets monetary policy, could even choose to extend Mr. Powell’s tenure as chair until a successor is confirmed.

Further complicating matters, Mr. Trump’s attack on the Fed ensures that when a successor is eventually confirmed, he or she will have to do more to demonstrate independence, or else be remembered as the person who surrendered it. The Fed’s 11 other monetary-policy voters have increasingly been voting their own views. That is likely to accelerate if they feel that the new chair is just trying to please the president, rather than working in the best interests of the economy.

Mr. Trump’s overt assault on the Fed’s independence creates an inhospitable backdrop for the Supreme Court, which is preparing to hear a case next week involving the president’s attempted dismissal of a Federal Reserve governor. The justices will now be even more acutely aware of what is at stake.

Many political questions — the just distribution of wealth, the appropriate scope of regulation, who gets to live in this country — are fundamentally about values. Since we don’t all agree on those values, we have elections to sort out which should prevail. The work of the Fed is different. It’s not about navigating opposing values; it’s about achieving goals we pretty much all agree on, like lower inflation, higher employment, and a more stable economy.

That’s why it makes sense to let the Fed proceed outside the realm of politics and why it makes sense that presidents sometimes re-up the term of a chair who was appointed by a member of the opposing party (as Mr. Biden did with Mr. Powell, who Mr. Trump appointed chair during his first term as president). The Fed is neither omniscient nor omnipotent, but there is broad agreement that it performs better on all of these dimensions when it operates independently than when a president personally calls the shots.

Moreover, we have a relatively rapid feedback mechanism to measure the success of economic policy: Markets and business leaders react in real time, in a way they do not on issues like immigration enforcement and whether to invade Greenland.

The Fed is likely to win this battle. The broader war will probably continue as long as Mr. Trump remains president. One possible consequence is that the Fed becomes a victim of its own success, with people mistaking the markets’ mild initial response for proof that independence is no big deal. In reality, that calm reflects confidence in the defenses that were rapidly deployed: senators from both parties, former economic officials, the politically neutral judgment of markets themselves and ultimately the wisdom of the public.

The greater risk is time. Independence will not be lost overnight, but at least every two years, the president can nominate a new governor for the Fed. With sustained effort over six to eight years, an administration could gradually transform the institution. That would require patience from Mr. Trump and complacency from everyone else. So far, at least, on this issue, we are seeing neither.

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Stephen Voss/Redux

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