Federal Reserve Chair Jerome Powell’s decision to stay on the central bank’s board as a governor once his term as chair expires on May 15 is a great example of how President Donald Trump’s authoritarian pressure tactics can backfire.
Although Powell’s term as chair is ending, his tenure as one of the seven governors on the board doesn’t expire until 2028. Typically, Fed chairs step down from the board altogether after their term as chair ends — the The Wall Street Journal notes that “every chair for the past 75 years has left the central bank at the end of his or her leadership term.” Powell said that he had expected to follow that tradition, but that he’s breaking the norm because of the Justice Department’s bogus criminal investigation of him, meant to press him to lower interest rates.
Powell is showing that the Federal Reserve can withstand immense political pressure.
“I’m literally staying because of the actions that have been taken,” Powell said at a news conference Wednesday when he was asked whether his decision would be seen as a political act. “I have long planned to be retiring.”
Powell said his hand was forced because the DOJ’s probe into cost overruns tied to the Fed’s renovation of its headquarters was such a transparent bid to strong-arm him into compliance with Trump’s demands.
In March, U.S. District Judge James Boasberg blocked subpoenas issued in that criminal investigation because, he said, there was “essentially zero evidence” to suspect Powell of a crime. “There is abundant evidence that the subpoenas’ dominant (if not sole) purpose is to harass and pressure Powell either to yield to the President or to resign and make way for a Fed Chair who will,” Boasberg wrote in that ruling.
Last week the Justice Department indicated that it is dropping its investigation into Powell but said that it could restart the probe, and White House press secretary Karoline Leavitt said the investigation was “not necessarily dropped” but instead was “just being moved over to the inspector general.” Powell said he’s waiting until the investigation is “well and truly over, with finality and transparency.”
In his news conference, Powell said, “I worry that these attacks are battering the institution and putting at risk the thing that really matters to the public, which is the ability to conduct monetary policy without taking into consideration political factors.”
Powell is concerned with protecting the credibility of the Fed. As my colleague Hayes Brown observed in a recent column, Powell knows that what’s at stake is the entire reputation of the central bank:
Elected officials are always focused on the next campaign cycle, but central banks are meant to have a longer-range vision of the economy and monetary policy. It’s only through their independence that banks are able to credibly say that their focus is on stabilizing inflation, versus making short-term gains to please their political patrons.
By staying on, Powell is showing that the Federal Reserve can withstand immense political pressure. He’s also denying Trump the ability to appoint a new governor, and he could act as a counterweight if Kevin Warsh, the likely next chair, takes actions to please the president. Trump had a minor meltdown Wednesday in response to the news that Powell was staying on, saying on Truth Social, “Powell wants to stay at the Fed because he can’t get a job anywhere else — Nobody wants him.”
Powell’s decision to break this norm only happened because Trump defied norms in the first place, by trying to intimidate him. It speaks to how authoritarian pressure tactics can be counterproductive when they’re deployed against people who show resilience in the face of threats and put the public welfare before themselves. Such a concept might be alien to Trump, but that kind of character trait has been at the heart of resistance to despots throughout human history.
Warsh, Trump’s pick for the new Fed chair, displayed a red flag at his Senate hearing last week when he refused to straightforwardly say whether Trump lost the 2020 election. His refusal to say Trump lost suggested that he may be the kind of chair who succumbs to pressure from the president. But Powell has demonstrated why he shouldn’t.
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