Former Fed Chiefs Decry 'Unprecedented' Powell Probe

Every living former head of the Federal Reserve has publicly condemned a criminal investigation into current Chair Jerome Powell, describing the move by the Trump administration's Department of Justice as an "unprecedented" assault on the central bank's independence.

Figure 1: Federal Reserve Chair Jerome Powell (left) faces a criminal investigation initiated by the Department of Justice under the Trump administration (right), sparking a debate over central bank independence.

A Stark Warning on Central Bank Independence

In a blunt joint statement, former Fed chairs Alan Greenspan, Ben Bernanke, and Janet Yellen, along with ten other senior officials, warned that such political pressure on monetary policy is a hallmark of unstable economies.

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

The former officials argued that this approach mirrors tactics used in emerging markets with weak institutions, which often leads to "highly negative consequences for inflation and the functioning of their economies more broadly." They concluded that such an action "has no place in the United States," whose economic success is built on the rule of law.

Details of the Justice Department's Investigation

The controversy escalated late Sunday after it was revealed that the Department of Justice had served the Federal Reserve with grand jury subpoenas on Friday.

The investigation reportedly threatens a criminal indictment related to Powell's testimony before the Senate banking committee in June of last year. The testimony in question concerned renovations at the Fed's historic office buildings located in Washington D.C.

Powell Frames Probe as Retaliation Over Rates

In his response, Chair Jerome Powell suggested the investigation was a direct result of the central bank's interest rate policy. He argued that he was being threatened with criminal charges because the Fed had set rates "based on our best assessment of what will serve the public, rather than following the preferences of the president."