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Theatrical Showdown: Fed Chair Jerome Powell vs. the Trump Administration
In an extraordinary move, Federal Reserve Chairman Jerome Powell has taken a bold stand against what he perceives as an attack from the Trump administration, declaring an unprecedented confrontation.
On Sunday evening, Powell released a rare video statement, accusing the Trump administration of exerting undue pressure on the Federal Reserve through the Justice Department. According to Powell, the Fed received subpoenas for a grand jury last Friday and faced threats of criminal charges concerning renovations at its Washington, D.C., headquarters and his testimony to a Senate committee the previous year. Powell suggested these legal maneuvers were mere “pretexts,” with the actual objective being to compromise the Fed’s independence.
In a historic meeting on July 24, 2025, President Donald Trump and Federal Reserve Chair Jerome Powell toured the Fed’s renovation project in Washington, D.C. (Photo by Chip Somodevilla/Getty Images)
The allegations are grave, with Powell accusing the Trump administration of attempting not only to undermine the Federal Reserve’s autonomy but also to misuse the Justice Department for this purpose. He made this claim through a sharply-worded two-minute video released just before Asian markets opened, ensuring the message would reverberate globally and limit the White House’s ability to manage its impact quietly.
Despite the dramatic delivery, the markets remained largely unfazed. Futures indicated a minor dip, with the Dow Jones Industrial Average and the S&P 500 expected to fall by only half a percentage point, and the Nasdaq Composite by slightly more. By midday Monday, even these modest declines had reversed, with major indexes turning positive. Investors appeared unfazed by the alleged threat to the Fed’s independence, as evidenced by the S&P 500 closing at a new all-time high on Monday.
The Rush to Judgement Against Trump
The pundits and legacy media immediately assumed the veracity of Powell’s accusations, convicting Trump of attempting to seize control of monetary policy without even a moment’s hesitation. Verdict first, evidence later—the typical response to any charge levied against President Trump. The market, however, may have sussed out that Powell’s allegations do not make much sense. Even if Trump were tempted to use lawfare to force Powell out of office, what would be the point? Powell’s chairmanship will expire in five months. He has just three more Federal Open Market Committee (FOMC) meetings as chair. Why hound a guy out of an office when he is already marching toward the exit?
It is true that Powell could stay on as governor until 2028. But harassing him with a Department of Justice investigation seems more likely to encourage Powell to stick around than to leave. Powell now views this as a personal battle over his integrity and as an assault on the independence of the Fed. If he was not planning on remaining on the Fed board before, he probably is now.
Using the Justice Department to pursue a vendetta against Powell would also risk alienating the other members of the FOMC, many of whom personally like Powell and have served under him for years. Even if the investigation were to somehow force Powell from the Fed—perhaps because an indictment would give grounds for the president to remove him—the next chair would be faced with a monetary policy committee that would likely feel duty-bound to demonstrate their independence by refusing to cooperate with the administration’s economic policies.
And then there is the matter of the Senate. Trump needs the Senate to confirm his nominee to succeed Powell. There’s no provision in the Federal Reserve Act for the president to appoint an acting chairman; so if Trump’s nominee is not confirmed, the position will remain vacant. Under the Federal Reserve Act, in the case of an “absence” of a chair, the leadership of the Fed falls to the vice chair. That position is held by Phillip Jefferson, a Biden appointee who came to the Fed after a long career in academia. Engineering an early departure of Powell just to put Jefferson in charge seems like it would be a pyrrhic victory.
Federal Reserve Vice Chair Philip Jefferson (left) and Chairman Jerome Powell attend the Federal Reserve Board open meeting in Washington, DC, on Oct. 24, 2025. (Al Drago/Bloomberg via Getty Images)
Some have suggested that the Fed board could vote to keep Powell as chair until a replacement is confirmed. When Powell’s first term as chairman expired in February 2022, during Biden’s presidency, he was elected by the board of the Fed to serve as to act as chairman pro tempore until he was eventually confirmed in May. And this has happened a number of times in the past, when there was a lapse between the expiration of a chair’s term and the confirmation of a new one. So, there is precedent for this.
But back in 2022, Biden had already announced he would reappoint Powell, so keeping him in place while his formal chairmanship lapsed for a few months was not controversial. Trying to keep Powell in place this time would no doubt lead to litigation and further embroil the Fed in a political fight with the Trump White House. The Federal Reserve Act only authorizes a chairman pro tempore when both the chairman and the vice chairman are absent.
The problem of an extended vacancy at the Fed is not a theoretical risk. Senator Thom Tillis (R-NC) immediately reacted to Powell’s video on Sunday by declaring that he would block any nominee until the investigation is resolved. Senator Lisa Murkowski (R-AK) also said she would block Trump’s nominations until the investigation into Powell is resolved, going so far as to say it is “clear the administration’s investigation is nothing more than an attempt at coercion.”
At least on a formal level, this is the constitutional and statutory role of the Senate. Unlike other statutes, the Federal Reserve Act doesn’t define with any particularity what constitutes cause for removal of a Fed governor, and it provides no protection at all for the chairman from removal. The constraint on removal is really the need to satisfy the Senate that a removal was proper in order to have new nominees confirmed.
Note, however, that the Senate’s ability to keep the Fed chairmanship vacant may be limited in practice. A 1978 Office of Legal Counsel (OLC) memo argued that the statutory provision making the vice chair preside in the chair’s temporary “absence” does not clearly cover a permanent vacancy arising from the expiration of a chair’s term—and that relying on implied vice-chair succession would be of doubtful legality. OLC instead concluded that, because there is no explicit succession mechanism for a vacant chairmanship, the President may designate a sitting governor as acting chair until the Senate confirms a nominee. If that’s right, a blockade by Tillis and Murkowski could increase Trump’s room to maneuver, though any acting chair’s practical power would still hinge on whether the rest of the Board and the FOMC cooperate.
Trump himself denies that he had anything to do with the investigation. In an interview with NBC News on Sunday night, Trump said he didn’t even know about the subpoenas and that any criminal investigation was not be related to his disagreements with Powell over interest rates. And Powell’s Fed did finally start cutting rates in September, moving in the direction Trump had been urging all year. Moving against him now—after he has complied with Trump’s demands for cuts and when he has just a few more meetings to preside over—would have been a strategic mistake.
Is Powell a ‘Turbulent Priest?’
So what’s going on? There are two possibilities. First, this might be a case of over-enthusiastic supporters of Trump—perhaps including people in his administration—pushing the Justice Department to pursue Powell. A Bloomberg report citing anonymous sources claimed that Federal Housing Finance Agency head Bill Pulte was the “driving force” behind the decision to subpoena Powell. Pulte has acted as a kind of watchdog over the Fed in the past, bringing to light allegations of mortgage fraud against Fed Governor Lisa Cook and even submitting the matter as a criminal referral to the Justice Department.
This inevitably brings to mind the infamous assassination of Thomas Becket, the Archbishop of Canterbury, after he fell out with King Henry II over the respective powers of the church and the crown. A frustrated Henry asked, “Will no one rid me of this turbulent priest?” Four knights supposedly took this as an implicit order and murdered Becket in his cathedral. The murder caused a massive scandal across Christian Europe. Becket was quickly canonized as a martyr, and Henry had to do public penance. The king claimed he never intended for Becket to be killed and was just venting his frustration.
Shakespeare’s Richard II tells a similar story. The play opens with the aftermath of the mysterious death of Thomas of Woodstock, the Duke of Gloucester. King Richard II had it out for Gloucester, a powerful noble who opposed Richard’s policies. But Richard never explicitly ordered the murder. Instead, he appears to have expressed his wishes in a way that may have led his supporters to kill the duke. For Richard, this sets off a chain of events that ends with his losing the crown and his life.
Perhaps what we have here is a repetition of these cautionary tales about subordinates who mistake the expressed frustrations of their leader as an order to take action.
The other possibility is one that has been almost wholly ignored: the Department of Justice may have substantial reasons to believe that Powell has committed a crime, perhaps perjuring himself in his Senate testimony. What is being treated as a political vendetta may in reality be the operation of the machinery of justice. Declaring Powell a modern martyr, a Becket or Gloucester of our time, seems premature in the absence of evidence.
Powell’s statement amounted to a kind of self-canonization and a condemnation of the Trump administration for the heresy of breaching central bank independence. The rest of us, however, need not take Powell’s statements as Gospel. Certainly, financial markets on Monday did not appear to believe Trump was threatening the independence of the Fed.
