{"id":488501,"date":"2026-05-17T00:48:29","date_gmt":"2026-05-17T00:48:29","guid":{"rendered":"https:\/\/www.europesays.com\/ie\/488501\/"},"modified":"2026-05-17T00:48:29","modified_gmt":"2026-05-17T00:48:29","slug":"donald-trumps-sock-puppet-takes-over-the-federal-reserve-what-happens-next-the-irish-times","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/ie\/488501\/","title":{"rendered":"Donald Trump\u2019s \u2018sock puppet\u2019 takes over the Federal Reserve. What happens next? \u2013 The Irish Times"},"content":{"rendered":"

May 15th has long been a red-letter day in the teeming imagination of Donald Trump<\/a>. Almost as soon as his inauguration was over and done with, he began repeating the date as a totem that would free him from Jerome \u201cJay\u201d Powell. <\/p>\n

The intransigent and unflappable chairman of the Federal Reserve \u2013 the United States<\/a>\u2019 central bank \u2013 has remained impervious to all of the president\u2019s ploys \u2013 the early cajoling, the insistence, the taunts and nicknames and, finally, the legal threats, as Trump became increasingly obsessed with Powell\u2019s refusal to lower interest rates to suit his administration\u2019s economic agenda. The relationship remains icy even as Powell, a Washingtonian blue blood, prepares to take leave of his office.<\/p>\n

January of this year was arguably the most frantic month of activity in an administration that has operated on a hyperactive level. It was easily overlooked, but in those frozen weeks dominated by the street-shootings by Ice officers in Minneapolis, the raid on Venezuela and threats of taking Greenland by force, which so appalled European allies, the US department of justice served the Federal Reserve with grand jury subpoenas. <\/p>\n

The threatened criminal indictments revolved around Powell\u2019s testimony to the Senate\u2019s banking committee in June 2025, when he was grilled about the massive overhaul of the Federal Reserve building on Constitution Avenue, the costs of which are running to $2.5 billion.<\/p>\n

Trump had frequently expressed his incredulity at the figure. On a sweltering afternoon last July, the president and the Fed chairman toured the building together. Both men wore suits and white hard hats as they stood in a room under construction. It was an unintentionally comical sight but there was no laughter. <\/p>\n

Trump sought to inflate the costs with the cameras rolling, hoping to maximise Powell\u2019s discomfort. \u201cIt\u2019s looking like 3.1 billion- it went up a little bit, or a lot,\u201d the president said as Powell, shooting a look of surprise, shook his head. \u201cI\u2019m not aware of that, Mr President,\u201d he replied. Trump produced a folded piece of paper from his breast pocket which Powell examined before handing it back to him dismissively, telling him that he was including, in that price, the cost of the Martin building, a renovation that had been completed five years ago. <\/p>\n

\u201cIt\u2019s part of the overall work,\u201d Trump continued, looking ahead.<\/p>\n

\u201cIt\u2019s not new,\u201d Powell insisted.<\/p>\n

They looked like a pair of cranky ageing house mates squabbling over whose turn it was to take out the bins. But the moment was instructive. Powell (73) has found within himself a reserve of steely hauteur to deal with Trump\u2019s pressures. So, when last January\u2019s subpoenas were issued, he gave an on-camera statement of his own.<\/p>\n

\u201cThis new threat is not about my testimony last June or about the renovations of the Federal Reserve buildings. It is not about the Congress\u2019s oversight rule. The Fed, through testimony and other public disclosures, made every effort to keep Congress informed about the renovation project. Those are pretexts. 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 serving the preferences of the president. <\/p>\n

\u201cThis is about whether the Fed will continue to be able to set interest rates based on evidence in economic conditions or whether, instead, monetary policy will be directed by political pressure or intimidation.\u201d<\/p>\n

The legal threats caused disquiet within the world of finance and on both sides of the aisle in Congress. JP Morgan CEO Jamie Dimon was among those who advocated on his behalf, telling reporters in a quarterly earnings call update that although he didn\u2019t always agree with the Fed\u2019s every decision, he has \u201cenormous respect for Jay Powell, the man\u201d.<\/p>\n

Powell had served under four administrations: as treasury undersecretary in the George Bush White House and on the board of the Federal Reserve in the Obama era before Donald Trump, to his lasting regret, appointed him as chairman in 2019 \u2013 a role he continued to hold through the Biden administration. <\/p>\n

Chosen successor<\/p>\n

The process of nominating Kevin Warsh, Trump\u2019s chosen successor to Powell, was blocked by Republican senator Thom Tillis, who made it clear he would not approve any federal nominee until the charges were dropped. It was, by Republican congressional standards, a bold defiance of the White House. But Tillis will not seek reelection once his term ends in January 2027 and he was free to act according to his principles. <\/p>\n

In late April, Jeanine Pirro, the attorney general announced that the case would be dropped.<\/p>\n

\u201cThey have made it very clear that the current investigation is completely and fully ended,\u201d Tillis said in greenlighting the pathway for Warsh\u2019s nomination. <\/p>\n

But that wasn\u2019t quite true. Earlier this month, Pirro suggested the department of justice might be interested in resurrecting the charges at a future date. That vague insinuation of a future threat prompted Powell to deliver another defiant stance against Trump in his final press conference as Federal Reserve chairman. <\/p>\n

Predictably, he said that the Fed would hold interest rates at 3.5-3.75 per cent \u2013 for the third successive time. But he also confirmed his intention to use his option to remain on the board of the Fed as a governor, a position he can hold until January 2028, even after he relinquishes his role as chairman. The decision was highly unusual \u2013 the last chairman to do so was Marriner Eccles, in 1948. <\/p>\n

Treasury secretary Scott Bessent criticised the decision as a \u201cviolation of all Federal Reserve norms\u201d. Trump, feigning indifference, took to social media to declare that \u201cJerome \u2018Too Late\u2019 Powell wants to stay at the Fed because he can\u2019t get a job anywhere else \u2013 nobody wants him\u201d.<\/p>\n

Powell himself made it clear he is staying on because he fears for the integrity and independence of an institution he has steered for 14 years.<\/p>\n

\u201cI will leave when I think it is appropriate to do so,\u201d he said.<\/p>\n

\u201cI\u2019m literally staying because of the actions that have been taken. I had long planned to be retiring and the things that have happened in the past three months have left me no choice but to stay and see them through for at least that long. <\/p>\n

\u201cMy concern is really about the series of legal attacks on the Fed. This has nothing to do with verbal criticism by elected officials. But these legal actions by the administration are unprecedented in our 113-year history and there are ongoing threats of additional actions. I worry that these attacks are battering the institution.\u201d<\/p>\n

The idea that Powell stuck around because he couldn\u2019t \u201cget a job anywhere else\u201d is amusing. His net worth, estimated at anything between $20 million and $50 million, renders his Fed salary of $250,000 an irrelevance. <\/p>\n

Powell rose from the mid-century Washingtonian gilded class, following his father into law through the hallowed corridors \u2013 Georgetown Prep; Princeton; Georgetown Law, followed by a steady ascent through investment banking as that financial sector ballooned in wealth and influence through the 1980s and 1990s. <\/p>\n

Through it all, Powell has remained distantly cordial and almost unknown. He is a Republican who lives in Chevy Chase, the affluent Maryland suburb north of Washington DC and, like many baby boomer era collegiate Americans, he has retained an unshakeable devotion to the Grateful Dead. His world could not have been more different from the bare-knuckle game of New York construction through which Trump carved his reputation and name. And it is easy to discern, in that clip where they inspect the Fed building under renovation, the financier\u2019s hauteur and indifference to the self-styled construction guy turned political phenomenon.<\/p>\n

Tenure<\/p>\n

Opinion as to the merits of Powell\u2019s terms as Fed chairman are split broadly, and bitterly, along partisan lines. Although his tenure was defined by the lowest employment rate of any previous chairman since 1978, it was also characterised by the third-highest rate of inflation. <\/p>\n

The chief criticism levelled against him was that he reacted sluggishly \u2013 or over cautiously \u2013 in taking measures against the supersonic rates of inflation as the US economy bounced back from the Covid-era cold storage. Throughout 2021, Powell insisted that the rapid rates of inflation were caused by temporary supply issues, which would level out. Despite loudening warnings that the Fed needed to intervene, Powell\u2019s board declined to raise the federal funds rate from zero until March of 2022. <\/p>\n

Inflation became the key election issue in 2024, arguably dooming the feeble Biden\/Harris ticket irrespective of its calamitous shortcomings. A sufficient number of pinched voters listened to Trump\u2019s promise to bring prices down to complete his stunning renaissance as a second-term president. Unfortunately for them, and him, he has not been able to do so \u2013 hence his impatience with Powell for not lowering borrowing costs. <\/p>\n

The task of the Fed has been further complicated by having to factor in the wild unpredictability on the Trump administration\u2019s tariff war with the rest of the world and, more recently, the on-again, off-again war with Iran.<\/p>\n

However, Powell\u2019s role in overseeing that post-pandemic surge in the national level of inflation has not been easy to shake off. The full consequences of those turbocharged years have yet to be fully ascertained but it is already clear that the startling rise in housing and rent costs have upended the lives and inherited expectations of several generations of Americans.<\/p>\n

That legacy contributed to Powell earning the label from the Heritage Foundation, the architects of the Project 2025 manifesto, to headline one of its papers, Problematic Powell: What To Do With the Worst Fed Chair In History.<\/p>\n

There is a wealth of studies available on what the Fed should or should not have done five years ago. John Cochrane, the prominent Stanford professor at the Hoover Institution, has argued that the inflationary damage was caused by the scale of the government Covid-related support schemes. <\/p>\n

\u201cThe government essentially sent people $5 trillion with no plans to pay the money back,\u201d he said. \u201cPeople tried to spend it, driving up prices. <\/p>\n

\u201cThe Fed eventually raising interest rates made inflation come down a bit faster than it would have otherwise, but it was going to go away on its own anyway. There is no magic momentum to inflation. Stop pushing, and it stops.\u201d<\/p>\n

`Sock puppet\u2019<\/p>\n

Now, as Powell takes his leave, the spotlight turns to Warsh, recently described by economist and former New York Times columnist Paul Krugman as Donald Trump\u2019s \u201csock puppet\u201d. <\/p>\n

In his testimony before the Senate banking committee, Warsh told Louisiana Republican John Kennedy that \u201cthe president never asked me to predetermine, fix, decide on any interest rate decisions in any of our discussions nor would I ever agree to do so\u201d. But Trump didn\u2019t have to. He had already told the world he would be disappointed if Warsh didn\u2019t lower rates at the first opportunity. <\/p>\n

More worryingly for those who fear whether Warsh has the spine \u2013 or will \u2013 to withstand pressure from the White House, he told senator Elizabeth Warren that \u201cthe Federal Reserve in recent years has wandered outside of its remit, wandered into other lanes. That\u2019s not something I\u2019m prepared to do.\u201d<\/p>\n

A Wall Street veteran who served as a Fed governor from 2006 to 2011, Warsh has already hinted at changes to the Fed\u2019s massive portfolio of government bonds and mortgage-backed securities, what data it uses to assess the economic backdrop and how officials communicate about future policy changes.<\/p>\n

Powell has suggested that by remaining on the board, he can offer guidance and advice to the younger man. Warsh takes up the role having amassed a personal portfolio of assets valued at between $135 and $220 million but he inherits a board that is unlikely to immediately submit to Trump\u2019s wish when he chairs his first meeting in June. Of the seven voting governors (including Powell) and four regional Fed presidents, the vote was 8-4 to hold rates steady in April.<\/p>\n

Adding to Warsh\u2019s challenges is that the case for rate reductions has become much weaker since the onset of the Iran war. Rising energy prices have pushed inflation sharply higher and fanned fears of a more persistent problem if the conflict does not end soon. <\/p>\n

Meanwhile, the assessments on Powell\u2019s legacy come thick and fast this week. His eight years in charge were nothing like as notoriously dramatic as Paul Volcker\u2019s brutal mechanisms to smash high inflation (1979-87) nor cinematically dramatic as Ben Bernanke\u2019s (2006-08) nor boom-y and loose as Alan Greenspan\u2019s (1987-2006). But in an era when the self-appointed masters of the information technology universe cravenly succumbed to Trump\u2019s demands for fealty, and when pillar institutions in education, media and the legal profession have, in many cases, buckled under pressure, Powell\u2019s lonely stand has been viewed by many as quietly magnificent. <\/p>\n

In the end, his contribution to this turbulent period in US democracy will be remembered not so much for his economic steerage as for his backbone and unbending principle. The cynics doubt that Kevin Warsh will find the same stony independence. Jay Powell would be the first to say he deserves to be given the chance and he knows that his influence, from now on, will be limited.<\/p>\n

\u201cI\u2019m not looking to be, you know, a high-profile dissident or anything like that,\u201d he said in April. \u201cThere\u2019s only ever one chair.\u201d \u2013 Additional reporting: New York Times<\/p>\n","protected":false},"excerpt":{"rendered":"May 15th has long been a red-letter day in the teeming imagination of Donald Trump. Almost as soon…\n","protected":false},"author":2,"featured_media":488502,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[73],"tags":[79,356,18,182,19,17,5129,87781,384],"class_list":["post-488501","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-business","tag-donald-trump","tag-eire","tag-federal-reserve","tag-ie","tag-ireland","tag-jerome-powell","tag-kevin-warsh","tag-united-states"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@ie\/116587168386727327","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/488501","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/comments?post=488501"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/488501\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media\/488502"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media?parent=488501"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/categories?post=488501"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/tags?post=488501"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}