Senate GOP defend independence of the Fed after DOJ probe

WASHINGTON — President Donald Trump's feud with Federal Reserve Chairman Jerome Powell has escalated into a Department of Justice investigation, raising alarm bells among some Republicans in the Senate, where Trump will need broad backing from GOP lawmakers to get his choice for the next Fed chairman approved after Powell's term ends in May.

Retiring North Carolina Sen. Thom Tillis, who sits on the narrowly divided Banking Committee that will hold hearings on the next nominee, wrote in a statement he won't approve anyone to fill Powell's seat if Trump or administration officials try to further erode its independence.

"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," Tillis wrote. "It is now the independence and credibility of the Department of Justice that are in question."

Tillis added he plans to "oppose the confirmation of any nominee for the Fed—including the upcoming Fed Chair vacancy—until this legal matter is fully resolved."

Powell fights back in a video

Trump has criticized Powell repeatedly since retaking the Oval Office in January, pressing him to reduce interest rates faster and signaling he wanted to fire him.

Powell said in a video released this weekend that Justice Department officials on Friday "served the Federal Reserve with grand jury subpoenas, threatening a criminal indictment related to my testimony before the Senate Banking Committee last June."

Powell alleged the DOJ investigation is not purely about oversight of the multi-year renovation project at the Fed's offices in Washington, D.C., but "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."

"This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions—or whether instead monetary policy will be directed by political pressure or intimidation," Powell said.

Trump first nominated Powell to be chairman of the Federal Reserve in November 2017 for a four-year term that began in February 2018, writing in a statement that Powell had "demonstrated steady leadership, sound judgment, and policy expertise."

"Mr. Powell will bring to the Federal Reserve a unique background of Government service and business experience," Trump wrote. "He previously served as Under Secretary at the Department of Treasury in the administration of President George H.W. Bush. Mr. Powell also has nearly three decades of business experience."

The Senate voted 84-13 in January 2018 to confirm Powell to the role.

President Joe Biden re-nominated Powell in November 2021 for another four-year term that began in May 2022 after the Senate voted 80-19 to confirm him for a second time.

Tillis leverage on committee

Trump hasn't said publicly whom he will nominate to succeed Powell as Fed chairman, but whoever he picks will need to move past the Senate Banking Committee in order to receive a confirmation vote on the floor and actually take on the role.

The Banking Committee holds 13 Republicans and 11 Democrats, giving Tillis considerable leverage to block any Trump nominee from advancing if all of the Democrats on the panel also vote against reporting that person to the floor.

Massachusetts Democratic Sen. Elizabeth Warren, ranking member on the committee, wrote in a statement that "Trump is abusing the authorities of the Department of Justice like a wannabe dictator so the Fed serves his interests, along with his billionaire friends."

"As Donald Trump prepares to nominate a new Fed Chair, he wants to push Jerome Powell off the Fed Board for good and install another sock puppet to complete his corrupt takeover of America's central bank," Warren wrote. "This Committee and the Senate should not move forward with any Trump nominee for the Fed, including Fed Chair."

Chairman Tim Scott, R-S.C., had not released any public statements about the Department of Justice investigation into Powell as of Monday morning.

Murkowski sees 'attempt at coercion'

Alaska Republican Sen. Lisa Murkowski, who isn't on the committee, released a written statement after speaking with Powell on Monday morning, saying "it's clear the administration's investigation is nothing more than an attempt at coercion."

"If the Department of Justice believes an investigation into Chair Powell is warranted based on project cost overruns—which are not unusual—then Congress needs to investigate the Department of Justice," Murkowski wrote. "The stakes are too high to look the other way: if the Federal Reserve loses its independence, the stability of our markets and the broader economy will suffer. My colleague, Senator Tillis, is right in blocking any Federal Reserve nominees until this is resolved."

Senate Minority Leader Chuck Schumer, D-N.Y., wrote in a statement the Justice Department's actions represent "the kind of bullying that we've all come to expect from Donald Trump and his cronies."

"Anyone who is independent and doesn't just fall in line behind Trump gets investigated," Schumer wrote. "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."

Former Federal Reserve chairmen, Treasury secretaries and White House economic advisers released a written statement that the Fed's "independence and the public's perception of that independence are critical for economic performance, including achieving the goals Congress has set for the Federal Reserve of stable prices, maximum employment, and moderate long-term interest rates."

"The reported criminal inquiry into Federal Reserve Chair Jay Powell is an unprecedented attempt to use prosecutorial attacks to undermine that independence," they wrote. "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. 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."