Good friends don’t just tell you what you want to hear. They tell you what you need to hear to avoid making irredeemable mistakes and losing the things you treasure most.
In that context, Federal Reserve Chairman Jerome Powell is one of the best friends that President Donald Trump has ever had. Powell warned publicly that a federal criminal investigation into his testimony before the Senate Banking Committee last year is merely an attempt by the administration to intimidate him. Trump wants the Federal Reserve to lower interest rates to accelerate the economy.
In a brief video statement released Sunday, Powell said: “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. … I have carried out my duties without political fear or favor, focused solely on our mandate of price stability and maximum employment. Public service sometimes requires standing firm in the face of threats.”
If Powell acquiesced to Trump’s demands, it would undercut the Federal Reserve’s independence, its reputation of making decisions based on economic data alone. Most experts argue that forcing the benchmark interest rate lower than data require would promote higher inflation, which hurts average Americans.
More important, bowing to political pressure would undermine the system’s trustworthiness. It would concern investors and harm the nation’s economy, the same economy that has made Trump a wealthy man, a status he seems to enjoy.
The Department of Justice subpoenaed the Federal Reserve late last week, seeking information about Powell’s testimony on the cost of renovating the bank’s Washington, D.C., headquarters. The project’s costs jumped from $1.9 billion to $2.5 billion over multiple years. Powell explained the growing cost during his testimony last June, and asked the bank’s inspector general to review the renovations.
But the threatened criminal investigation will cost far more than any inflated plumbing contract ever could.
It is another skirmish in a war in which Trump tried to fire Federal Reserve board member Lisa Cook over allegations of mortgage fraud. It further tarnishes the credibility of the Department of Justice, confirming how relentlessly Trump is using its powers to attack his perceived enemies. It has compelled economic experts and even some Republican senators to defend the Fed’s independence and criticize Trump’s war on it.
Every living former Federal Reserve chief, several former economic advisers and treasury secretaries, and retired Texas Sen. Phil Gramm, a conservative stalwart, signed a statement affirming the importance of an independent federal reserve system. GOP Sen. Thom Tillis of North Carolina denounced the criminal investigation, and several others publicly expressed doubts about it.
Each of these public officials is trying to save Trump from his worst instincts, from continuing his campaign against Powell, whose term as chairman ends in May. Our Texas senators should join the effort to save Trump from himself.
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