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Chapter 1: What is the investigation into Fed Chair Jerome Powell about?
The Justice Department threatens Fed Chair Jerome Powell with a criminal indictment in what he calls an attack on the central bank's independence. Plus, President Trump molds intervention in Iran as protest deaths rise.
We're looking at it very seriously. The military is looking at it, and we're looking at some very strong options. We'll make a determination.
And the latest from Minnesota, as more federal agents head to the state. It's Monday, January 12th. I'm Luke Vargas for The Wall Street Journal, and here is the AM edition of What's News, the top headlines and business stories moving your world today. U.S.
prosecutors have launched an investigation into Fed Chair Jerome Powell, threatening a criminal indictment over his testimony last year concerning the bank's building renovation project.
Chapter 2: How is the market reacting to Powell's potential indictment?
We report the investigation is being run out of Washington's U.S. Attorney's Office, overseen by close ally of the president, Jeanine Pirro, and concerns the Fed's spending records. Trump last month threatened a lawsuit against Powell, alleging incompetence over the renovation of two historic buildings that's been hit by cost overruns.
In a video posted by the Federal Reserve, Powell denied any wrongdoing and called the renovation project pretext for an attack on the central bank's independence.
The threat of criminal charges is 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 potential criminal prosecution wouldn't affect his ability to serve out his term as Fed chair, which ends May 15th. But that doesn't mean investors will be ignoring these developments, as Journal of Finance editor Alex Frangos is here to discuss. Alex, you've seen Powell's comments. Many have.
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Chapter 3: What are the implications of the Fed's independence for future leaders?
What was your reaction? It was definitely stronger than he usually is. He's a very technocratic, careful guy, you know, tends not to try to make waves in what he says. I mean, Fed chair is like the consummate kind of person who goes before Congress and says nothing for four hours.
So for him to come out and do a video, put it on X, put it out at 730, just as the NFL games are ending, knowing who the audience is, it's a pretty strong statement.
Alex, we've still got a few hours until markets open, but I'm assuming we're seeing a reaction. What are you hearing?
Yeah, so far, negatively. It's not massive so far, but the dollar's definitely weaker. Gold is at a record, went up another 2%.
Chapter 4: What options is President Trump considering in response to the Iran protests?
You're seeing long-term bond yields rise, which is an indication that investors are nervous about the far future, and stock futures are down. So generally, it's a negative reaction. This definitely makes people worried, not just about the short term. Powell's term's up in May. I mean, what's the difference, right? But he would continue to serve on the board as a board member for another two years.
So there's the possibility that gets undone. The big implication is for his successor, whether it's one of the Kevins, Kevin Hassett or Kevin Warsh, who are the top candidates to replace him. They now have to go in thinking, well, I want to be independent. But look what happened to the guy before me.
Chapter 5: How might U.S. intervention affect the protests in Iran?
Exactly.
You're turning our attention to the distant future, which is helpful. But we do have a Fed meeting later this month and two more, assuming Powell serves out his term till May 15th. I mean, how does this change the context heading into those meetings?
Well, he's not fired. They didn't say he's fired and he's not indicted. This was questions from a grand jury. Powell came out fighting, put out the statement saying he's not going anywhere. So there's no indication that this is going to make a change for the meetings upcoming. But over all of this is that there's the Lisa Cook case.
Chapter 6: What is the significance of the criminal investigation for Powell's term?
There's the other Fed member who Trump is trying to fire, whose case is going before the Supreme Court. And that's going to set a very big precedent about... how much the president can, in fact, exert this power to remove a Fed chair or a Fed board member.
And you mentioned earlier the negative market reaction we've seen heading into trading today. That's relevant because President Trump had wavered in the past about whether to dismiss Powell before. He did this in his first term and then again last spring. And then he backed off. We report because of suggestions from his advisors, it would have a negative market impact.
Yeah, and I mean, so far it's very early and we'll see how the day plays out. Sometimes it takes a little while for markets to digest something like this.
Chapter 7: Why are bank stocks reacting negatively to Trump's credit card interest cap proposal?
But yeah, so far it's negative. Trump has set this pattern over the last year and in his second term of coming out strong about something and then backing off when markets get upset. You know, we saw that obviously with tariffs and also with some of the Fed moves. There's also going to be a lot of probably behind the scenes establishment Republicans.
You were going to say, come on, like the guy's leaving in May anyway. Like, why are we doing this? That was Journal Finance Editor Alex Frankos.
We go to Iran now where over 500 people have been killed in two weeks of unrest. According to the Henghaw Human Rights Organization, some protesters were killed by government forces with live ammunition, and the group Human Rights Activists in Iran say a further 10,000 people have been arrested.
Chapter 8: What are the potential consequences of Trump's actions on the economy?
The regime's crackdown on protesters has also gotten the attention of President Trump, who we understand is meeting with advisers tomorrow to consider possible responses. Yesterday, Iran's leadership accused rioters of acting on behalf of the U.S. and Israel and threatened to attack American military bases in the Middle East if the U.S. hits first.
Journal national security reporter Alex Ward says U.S. intervention in Iran could include everything from sanctions to cyber weapons to a military strike or nothing at all.
There is concern that if the U.S. were to attack Iran, it would actually undermine the protests for a couple of reasons. One, it would help the Iranian propaganda that the U.S. is actually behind these protests and that they aren't organic, and Israel potentially too. And then there's the other side of this, which is if the U.S.
does attack, but it doesn't actually have any meaningful effect, then will the protesters be demoralized?
Alex says that even though Trump has been emboldened by recent military successes, including the removal of Venezuelan President Nicolas Maduro, it isn't enough to suggest an imminent strike on Iran.
Trump feels that the U.S. military is just on a hot streak, effectively, and he's feeling pretty good. And so in his mind, military options have a high rate of success. But there's tons of research out there and tons of real-world experience that shows just because you airstrike something doesn't mean you solve the problem.
And so the sort of main strategic question Trump has to ask is, if the U.S. were to bomb Iran, does that lead to a better future for Iran?
Coming up, DHS sends hundreds of additional officers to Minnesota. And President Trump weighs in on which oil companies could get a chance to do business in Venezuela and who might be left on the outside looking in. Those stories and more after the break.
In Minnesota, a federal immigration crackdown is continuing this morning in the Twin Cities as part of what the Department of Homeland Security has described as its largest ever immigration enforcement operation. More than 2,000 federal border and immigration agents are taking part, while officers and police continue to clash with protesters.
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