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Former Fed leaders unite against Justice Department investigation
Three former chairs of the U.S. Federal Reserve, alongside 10 other high-profile ex-officials, publicly denounced a criminal investigation into current Fed Chair Jerome Powell on Monday, calling it an attempt to erode the central bank's autonomy.
Allegations and political context
The Department of Justice (DoJ) probe, revealed by Powell in an unscheduled video statement on Sunday, centers on his testimony before a Senate committee last year regarding renovations to Federal Reserve buildings. Powell labeled the investigation "unprecedented" and suggested it stemmed from President Donald Trump's frustration over the Fed's reluctance to cut interest rates more aggressively.
"This is not about my testimony or building renovations," Powell stated. "Those are pretexts."
Criticism from former officials
In a joint statement, former Fed chairs Janet Yellen, Ben Bernanke, and Alan Greenspan warned that the probe mirrors tactics used in "emerging markets with weak institutions," where political interference in monetary policy has historically fueled inflation and economic instability.
"It has no place in the United States, whose greatest strength is the rule of law, the foundation of our economic success."
Joint statement by former Fed officials
Yellen, who preceded Powell as Fed chair, told CNBC the investigation was "extremely chilling" and accused the administration of targeting Powell to force his resignation. "The odds that he would have lied are zero," she said, adding that investors should view the development with concern.
Trump's pressure campaign
Trump has spent the past year publicly attacking Powell, calling him a "major loser" and "numbskull" while demanding steeper interest rate cuts to reduce government borrowing costs and ease consumer lending. The Fed lowered its benchmark rate three times in the second half of 2025, bringing it to a range of 3.50% to 3.75%-its lowest level in three years-but Trump argued the cuts were insufficient.
When asked about the Fed's independence on Monday, White House spokeswoman Karoline Leavitt deferred to the DoJ but added, "Jerome Powell has proved he's no good at his job."
Market and political reactions
U.S. stock markets showed little immediate reaction, with the S&P 500 trading flat in early afternoon. However, financial stocks declined as investors weighed the potential impact of a proposed 10% cap on credit card interest rates. Analysts cautioned that prolonged political interference could unsettle markets.
Danni Hewson, head of financial analysis at AJ Bell, noted global markets remained "remarkably resilient" but warned that Trump's efforts to influence Fed policy could trigger volatility.
Republican lawmakers offered mixed responses. Senator Thom Tillis vowed to block any Trump nominee to replace Powell, whose term ends in May, until the investigation is resolved. Representative French Hill, chair of the House Financial Services Committee, called the probe an "unnecessary distraction" that could "undermine sound monetary policy."
Senator Kevin Cramer, while critical of Powell, stated, "I do not believe he is a criminal. I hope this investigation can be put to rest."
Implications for Fed leadership
Trump is expected to announce Powell's replacement within days. The ongoing investigation and bipartisan backlash could complicate the confirmation process, with some lawmakers demanding clarity before considering new nominees.
