The investigation concerns Powell’s testimony to Congress last year about the Fed’s renovation of its headquarters — a project that, like most others of its kind, has cost a lot more and is taking longer to complete than first estimated. From the outset, analysts saw the probe as a way to press the Fed to cut interest rates faster or make Powell step aside as chair so that the White House could appoint his successor ahead of schedule. The new prospect of criminal prosecution is unprecedented and vastly raises the stakes. Instead of folding, Powell is rightly digging in his heels.
The White House’s latest escalation of pressure on the Federal Reserve is a new and dangerous overreach. For the country’s sake — and, by the way, to avoid the collapse in popular support that would likely follow a severe financial-market backlash — the administration needs to think again.
Up to now, Fed Chair Jerome Powell hasn’t responded to White House efforts to sway the central bank’s decisions. But after the Justice Department served subpoenas threatening a criminal prosecution, Powell cast aside dignified silence and issued a video statement: “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.”
