Bessent says Fed lacks accountability and has lost public trust

WASHINGTON - Treasury Secretary Scott Bessent said Wednesday that the Federal Reserve needs more accountability after failing the American public by allowing inflation to soar in recent years.

The comments, made during a House Financial Services Committee hearing, come after President Donald Trump said he would nominate Kevin M. Warsh to be the next chair of the Federal Reserve after a year of public griping about the central bank's interest rate policies.

Bessent said that while he respected the Fed's independence, he believed it had lost credibility under its current leadership as a result of rising prices and a costly renovation of its headquarters. The Trump administration recently opened a rare criminal investigation into the central bank's chair, Jerome Powell, over his handling of the renovation.

"The independence of the Fed is based on its trust of the American people," Bessent said. "The Federal Reserve lost the trust of the American people when it allowed the greatest inflation in 49 years to ravage - ravage - the working people of this country."

The Treasury secretary also lamented that the central bank, whose structure was established in the Federal Reserve Act of 1913, is not funded through congressional appropriations, suggesting that it runs on "magic money" that it prints itself. The Fed is primarily funded by fees paid by financial institutions and interest earned on U.S. government securities that it holds.

Bessent demurred Wednesday when asked if Trump had the authority to fire a Fed governor or chair, explaining that he is "not a lawyer." The treasury secretary did say that he believes Trump has the right to express his views about monetary policy.