Chair Powell presents the Monetary Policy Report on February 12, 2020. Photo by All living former leaders of the U.S. Federal Reserve lined up on Monday to attack the Justice Department’s criminal probe into Jay Powell, calling it petty and embarrassing and warning that it makes the United States look like an emerging market with weak institutions.
Thirteen of the most influential economists in the country signed a public letter accusing the Trump administration of crossing a line that should never be crossed.
Powell pushed back a day earlier. He said the investigation is being used as cover to punish him for interest rate decisions that did not match Donald Trump’s demands.
Trump, now the 47th president after winning the 2024 election, has spent months pressing the central bank to cut borrowing costs far faster. Powell said the threat of criminal charges comes from setting rates based on what officials believe serves the public, not the president’s wishes.
Former central bank leaders and economists attack the Justice Department probe
The Fed has cut rates at each of its last three meetings. Those moves brought borrowing costs down to a range of 3.5 percent to 3.75 percent, the lowest level in three years.
Trump has said that it is nowhere near enough. He has publicly argued rates should sit at 1 percent and has repeatedly insulted Powell, calling him a moron and a numbskull for not moving quicker.
The Justice Department probe raised the stakes. It could end with a criminal indictment of Powell. Economists said that the possibility alone is enough to shake confidence in the system.
In their Monday letter, the signatories wrote that the independence of the Fed and how the public sees that independence are critical for economic performance. They said this includes meeting Congress’s goals of stable prices, maximum employment, and moderate long‑term interest rates.
The letter warned that using prosecutors to influence monetary policy is common in emerging markets with weak institutions. It said those systems often suffer from high inflation and broken economies. The signatories added that this approach has no place in the United States, where the rule of law is meant to be the foundation of economic strength.
Trump denied knowing anything about the investigation. The White House said he is expected to name a replacement for Powell in the coming weeks, ahead of Powell’s term ending in May. The letter carried weight because of who signed it.
Ben S. Bernanke served two terms leading the Fed and later chaired the Council of Economic Advisers under George W. Bush. Jared Bernstein led the Council of Economic Advisers under Joe Biden. Jason Furman held the same role under Barack Obama. Timothy F. Geithner served as Treasury secretary and once ran the New York Fed.
Alan Greenspan signed on after five terms as chair, spanning four presidents. Glenn Hubbard, Jacob J. Lew, N. Gregory Mankiw and Henry M. Paulson also joined. Academic voices included Kenneth Rogoff and Christina Romer. Former Treasury Secretary Robert E. Rubin signed as well.
So did Janet Yellen, who has held more top economic jobs than almost anyone alive, including chair and vice chair of the Fed and head of the San Francisco Fed. Together, the group said the message was simple. Criminal pressure has no role in rate setting.
