Chapter 1: What prompted the criminal investigation into Jerome Powell?
On Sunday night, my colleague Nick Timros was at home, going about his usual routine.
I had been washing the dishes and thinking I was going to be putting my kids to bed.
Always an exciting time in Washington these days. But then, in the middle of Sunday night football, around 7.30 p.m. Eastern, a two-minute video appeared on the Federal Reserve's X account.
This was an extraordinary video.
It featured Fed Chair Jerome Powell in a gray suit in front of an American flag.
Good evening. On Friday, the Department of Justice served the Federal Reserve with grand jury subpoenas, threatening a criminal indictment.
In a stunning move, Powell publicly broke the news that the Federal Reserve was under criminal investigation by the Justice Department, something that's never happened before.
This unprecedented action should be seen in the broader context of the administration's threats and ongoing pressure.
Powell was very direct. He said this action was a political move on the part of the Trump administration, intended to intimidate the Fed into lowering interest rates.
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Chapter 2: How did Powell respond to the investigation's implications?
But the scrutiny over the renovations tracked with a broader critique of Powell's leadership. Some in the White House pointed to the cost overruns as an example of the Fed chair's incompetence. President Trump has also publicly complained that Powell was taking too long to lower interest rates.
People aren't able to buy a house because this guy is a numbskull.
He keeps the rates too high. He's called him a bunch of names, an idiot, a moron. He calls him too late because he thinks the Fed has been too late to cut interest rates.
Too late. I call him too late, pal, because he's always too late.
The Fed hadn't adjusted interest rates since the start of Trump's second term, mainly because it was concerned about the risk of inflation that could be brought on by Trump's tariff policy. Still, Trump repeatedly called for Powell to be ousted, saying he wants to replace him before Powell's term expires in May. This past July, the tension between the two men was on full display.
Powell and Trump, accompanied by members of the press, took a tour of the Federal Reserve construction site.
You had the two men in suits and hard hats, traipsing around these dusty, hot, these plywood walls. It's a very big construction site over there.
The tour was awkward. At one point, Trump claimed that the renovation's price tag had swelled to $3.1 billion.
It went up a little bit, or a lot. So the 2.7 is now 3.1. I'm not aware of that. Yeah, it just came out.
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Chapter 3: What are the details surrounding the Federal Reserve's renovation project?
That's now gonna be a focus, very likely, of the next confirmation hearing.
I feel like you've been asked this question a lot in the last year, Nick, but could this be a step toward the end of independence for the Fed?
Yeah, I think you're looking at more than just the loss of Fed independence. What you're looking at is the White House claiming control of monetary policy. When people talk about Fed independence, well, what Fed independence? It's not in the Constitution. There's no Fed should be a fourth branch of government.
What people are talking about is the existing branches of government agreeing to this relationship that we should not have direct political control over monetary policy because the long run interest of the economy and the short run interest of politicians don't always sync up. And so what's at stake here isn't just the end of kind of this generic Fed independence.
What's at stake is, can this president have much greater control over monetary policy?
That's all for today, Tuesday, January 13th. The Journal is a co-production of Spotify and The Wall Street Journal. Additional reporting in this episode by C. Ryan Barber, Josh Dossey, Sadie German, Meredith McGraw, and Brian Schwartz. Thanks for listening. See you tomorrow.
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