Tag: Jerome H. Powell

Federal Reserve Challenges Justice Department Subpoenas in Powell Probe
WASHINGTON—The Federal Reserve is waging a behind-closed-doors legal challenge to a pair of subpoenas issued as part of U.S. Attorney Jeanine Pirro’s criminal investigation into Chair Jerome Powell, according to people familiar with the matter.
Pirro, a longtime ally of President Trump, opened the probe to examine whether Powell gave false testimony to Congress last summer about the central bank’s building-renovation project. The move prompted an unprecedented public response from Powell, who in a Jan. 11 video statement said the investigation was a pretext for Trump’s continuing campaign to pressure the Fed to lower interest rates and end the independence of the central bank.

The Fed, in sealed proceedings, is asking a judge to quash the subpoenas, which could reduce or eliminate its obligation to respond. Its specific legal arguments couldn’t immediately be learned. It isn’t uncommon, especially in high-profile investigations, for a subpoena recipient to challenge prosecutors’ demands as being overly broad or seeking information protected by legal privilege.
The fight is taking place out of public view because of secrecy rules that apply to criminal investigations pending before a grand jury.
Pirro was present during a White House event on Jan. 8 where Trump excoriated his U.S. attorneys for not moving fast enough to prosecute his favored targets. The Justice Department sent the Fed a pair of subpoenas the following day. The subpoenas asked the Fed to respond toward the end of January.
Republicans have been looking for an off-ramp to the standoff because it is threatening to delay the confirmation of Kevin Warsh, the former Fed governor Trump has chosen to succeed Powell when his term as chair ends in May.
“There were subpoenas issued. But that doesn’t have to mean that there are charges,” Treasury Secretary Scott Bessent said on CNBC earlier this month. He has also defended the probe, telling CBS in January, “I think that the message is that independence does not mean no accountability.”

Construction on the Marriner S. Eccles Federal Reserve building in Washington (Samuel Corum/Bloomberg)
Sen. Thom Tillis (R., N.C.) has repeatedly said he wouldn’t advance any Fed nomination, including Warsh’s, until the Justice Department probe has ended. With all Democrats on the Senate Banking Committee taking the same stand, the 13-11 GOP majority isn’t enough to push a nominee through without him.
Tillis has said the probe was launched outside of traditional channels and has warned about steps that erode investors’ expectations that the central bank will be given reasonable latitude to set interest rates as economic conditions warrant.
The investigation centers on a few minutes of answers Powell provided to questions at a Senate hearing last summer about cost overruns on renovations of two historic buildings. White House officials last year suggested either Powell made false statements about the project’s costs or the Fed failed to update building records, but the furor quickly faded after Trump toured the project with Powell in July.

U.S. Attorney For Washington, DC Jeanine Pirro at a press conference (Image source: Getty Images/Photo by Win McNamee)
Pirro has defended the probe, saying the subpoenas were issued after her office hadn’t received answers to multiple information requests. The inquiry opened in November. A lawyer in Pirro’s office sent two emails to the Fed in December asking for a meeting about the renovation.
Trump has sounded less concerned about resolving the impasse. Pirro is “going to take it to the end and see,” Trump told reporters at the White House on Feb. 2, where he inflated to $4 billion the cost of the $2.5-billion renovation.
February 26, 2026
The Federal Reserve will reduce its staff by 10% over the next few years
The Federal Reserve will reduce its work force by 10 percent over the next several years to ensure the institution is “right-sized and able” to carry out its duties to foster a healthy economy.
Jerome H. Powell, the chair of the central bank, announced the plan on Friday in an internal note to staff members reviewed by The New York Times. Certain employees will be eligible to participate in a voluntary deferred resignation program that is aimed at giving those close to retirement the option of an earlier exit. That offer will apply only to people at the Washington-based Board of Governors.
Cuts are expected to be made across the entire Federal Reserve System, including the 12 regional banks. Roughly 2,400 people will be affected.
“I have directed the leadership of the Federal Reserve, here at the board and across the system, to find incremental ways to consolidate functions where appropriate, modernize some business practices and ensure that we are right-sized and able to meet our statutory mission,” Mr. Powell said in the memo.
The Fed earlier imposed a hiring freeze on permanent workers as part of its efforts to align with the Trump administration’s decree that no federal position vacant at the time could be filled or new positions created. It also took steps to distance itself from diversity issues as well as those related to climate change — initiatives that President Trump has opposed.
The Fed is a politically independent institution, meaning it is not legally obligated to carry out orders by the executive branch. That buffer from the White House is being legally challenged by the Department of Justice, which has sought more sway over independent agencies.
The announcement on Friday mirrors an effort by the Fed during the Clinton administration to cull its work force, which Mr. Powell cited in his note. At that time, there were “governmentwide efforts to improve efficiency,” as is the case “now,” Mr. Powell said.
Yet at a congressional hearing in February, Mr. Powell pushed back on the idea that the Fed had too many employees. “Overworked, maybe, not overstaffed,” he said.
Mr. Trump is pursuing a similar goal, although much more aggressively than past administrations have. The newly formed Department of Government Efficiency, led by the billionaire entrepreneur Elon Musk, has taken to gutting the federal work force, including shuttering agencies wholesale. Tens of thousands of government employees have since left their jobs.
The Fed’s decision is not tied to the ongoing initiative by DOGE, although some members of the central bank’s staff were contacted this year via email by Mr. Musk’s group, according to people familiar with the matter.
“The Federal Reserve is a careful and responsible steward of public resources,” Mr. Powell said in his note on Friday.
May 16, 2025
Trump Aims to Remove Powell from the Fed, with Kevin Warsh Ready to Step In
President Donald Trump on Thursday again made clear his disdain for Federal Reserve Chair Jerome Powell, going so far as to say the central banker’s “termination can’t come fast enough” and saying in an Oval Office event that Powell will “be out of there real fast” if he wants.
While many experts say the president does not in fact have the power to fire the Fed chief due to policy differences, Trump has made clear he’s willing to break with norms and precedent, even in the face of potentially monumental repercussions.
Regardless, the leading contender to lead the US central bank under Trump, whether at the end of Powell’s term in May 2026 or earlier, reportedly appears to be Kevin Warsh, a former Fed governor who previously was under consideration to be Trump’s Treasury secretary for the president’s second term and was a candidate for the top job at the Fed during Trump’s first term.
The Budgets previously reported that Warsh was again on Trump’s shortlist to become Fed chair this time around, once Powell’s time is up. In fact, Trump’s selection of Scott Bessent to lead the Treasury Department was seen by many as a way to leave Warsh open for an eventual appointment as Fed chair.
Treasury Secretary Scott Bessent told Bloomberg earlier this week that the administration will start interviewing candidates for Powell’s successor “sometime in the fall.” And with speculation swirling over whether Trump will try to oust Powell before his term ends, Bessent said that “monetary policy is a jewel box that’s got to be preserved.”
But who is the man who might soon lead one of the world’s most powerful financial institutions?
The man who could be the next Fed chair
Warsh, 55, was a vice president and executive director at Morgan Stanley in the company’s mergers and acquisitions division before serving as a special assistant to then-President George Bush for economic policy and as executive secretary at the National Economic Council.
Like Powell, Warsh does not have a graduate degree in economics. He graduated from Harvard Law School in 1995.
Bush appointed Warsh to the Fed’s Board of Governors in 2006, where he served during the height of the Great Recession as chief liaison to Wall Street.
In that role, he helped coordinate the sale of Bear Sterns to JPMorgan Chase. But he also allowed Lehman Brothers to go under in 2008, a watershed moment for global financial markets. Warsh resigned from the Fed in 2011 after publicly voicing his opposition to the central bank’s plan to buy $600 billion worth of bonds to inject more money into the economy.
More recently, Warsh advised Trump’s transition team on economic policy after the November election. In a January opinion piece in The Wall Street Journal, he joined Trump in criticizing the Fed for letting inflation rise sharply during and after the pandemic.
Warsh currently serves as a distinguished economics fellow at the Hoover Institution, a conservative think tank; and is a visiting scholar at Stanford University’s Graduate School of Business.
Additionally, he is a member of the nonpartisan Congressional Budget Office’s panel of advisers. He is married to billionaire Jane Lauder, granddaughter of Estée Lauder, the late cosmetics industry mogul.
His views on economic events and the Fed
In his Wall Street Journal op-ed, Warsh wrote that high inflation rates over the past few years arose from “a government that spent too much and a central bank that printed too much.” However, most mainstream economists attribute inflation’s eruption in 2021 mostly to pandemic-induced shocks to demand and supply.
Warsh wrote that “the Fed should steer clear of political prognostications, not just in word but in deed,” pointing to minutes from a Fed meeting last year indicating officials believed Trump’s proposed policies could fuel inflation.
In an interview with Fox Business ahead of the Fed’s latest policy meeting last month, Warsh said the turmoil sparked by Trump’s tariff war indicates an economy that “is transitioning.”
“The president inherited a fiscal and economic and regulatory mess, and it’s going to take a little digging out to be on a stronger platform for growth,” he said. “Rome wasn’t built in a day, so this will take some time.”
When asked about the likelihood of Trump’s tariffs stoking inflation, Warsh said that “inflation is a choice, and the Fed has made a lot of bad choices over these last several years.”
“The president has to take matters into this own hands and try to kill inflation by reducing government spending,” he said.
April 19, 2025
Concerns of a Financial Panic Dampen Trump’s Decision to Fire Powell
President Trump this week revived a longstanding threat against Jerome H. Powell when he accused the Federal Reserve chair of “playing politics” and moving too slowly to lower interest rates. But privately, according to people close to Mr. Trump, the president has for months been aware that trying to oust Mr. Powell could inject more volatility into jittery financial markets.
Investors are already uneasy after a period of tumult due to a blitz of tariffs announced by the administration this month. Undermining the political independence of the Fed, which is seen as critical across Wall Street, could risk a much more significant financial panic.
“If I want him out, he’ll be out of there real fast, believe me,” Mr. Trump told reporters in the Oval Office of the White House on Thursday when asked about Mr. Powell. The warning came on the heels of an early morning social media post in which Mr. Trump said, “Powell’s termination cannot come fast enough!”
Mr. Trump’s advisers have repeatedly told him that firing Mr. Powell is both legally and financially fraught — and that the uncertainty could cause a significant downturn in financial markets. Mr. Trump, at least for the moment, has seemed persuaded, the people said.
For months, Mr. Trump has privately fretted about the prospect of a Great Depression-scale event’s happening on his watch — a scenario he shorthands in conversations as “1929.” But the events of the past two weeks so alarmed some of Mr. Trump’s closest advisers, including his Treasury secretary, Scott Bessent, that Mr. Trump himself seems to have absorbed how close they came to a financial meltdown.
Mr. Trump’s decision at the beginning of the month to announce historic tariffs on nearly all of the country’s trading partners and aggressively escalate his global trade war sent financial markets into a tailspin. Stocks plummeted, and an alarming sell-off in U.S. government bonds and the dollar fanned fears that the country was starting to lose its vaunted status as the safest corner in the financial system.
After the scope of Mr. Trump’s tariffs became clear, Mr. Powell cautioned that the policies would lead to both higher inflation and slower growth. His comments suggested that the bar would be high for the Fed to lower rates, after a series of cuts last year.
Mr. Trump soon reversed course and paused many of his tariffs for 90 days, citing a “queasy” bond market. But that reprieve ended swiftly as Mr. Trump raised tariffs on Chinese imports to at least 145 percent even as he exempted an array of the most widely used consumer electronics and heralded imminent trade deals with other countries. The whiplash has kept financial markets on edge and has done little to alleviate Mr. Powell’s concerns about the economic outlook.
At an event at the Economic Club of Chicago on Wednesday, Mr. Powell made clear that it was the Fed’s “obligation” to ensure that “a one-time increase in the price level does not become an ongoing inflation problem” even as he reiterated his warnings about the prospects of slower growth. He also stressed that the Fed could afford to be patient on taking further action on interest rates until it had more clarity about the outlook.
Those comments, coupled with the fact that the European Central Bank was readying to lower interest rates on Thursday, appeared to set off Mr. Trump’s tirade against Mr. Powell.
President Donald Trump delivers remarks after signing an executive order on reciprocal tariffs in the Oval Office at the White House in Washington, DC, on February 13. (Andrew Harnik/Getty Images)
Even before the recent bond market turmoil, it seemed to advisers that Mr. Trump was leery about firing Mr. Powell. Mr. Trump regularly complains about how “terrible” Mr. Powell is and that he believes the Fed chair is deliberately keeping interest rates high to hurt him, for political reasons, an adviser said, but the president has not seemed serious about replacing him imminently.
Last week, Mr. Bessent, who described the Fed’s independence as a “jewel box that’s got to be preserved,” said the White House would begin interviewing candidates this fall to replace Mr. Powell. Mr. Trump had nominated Mr. Powell in his first presidential term, and President Joseph R. Biden Jr. renominated him. Mr. Powell’s term as chair officially ends May 2026, although his term as a governor runs through 2028, suggesting that he could stay on the Fed’s Board of Governors if he wanted to. Mr. Trump will first be able to fill a vacancy in January, when the term expires for Adriana Kugler, a sitting governor.
The president has already appointed Michelle Bowman, a current governor, to be the next vice chair for supervision in charge of regulating Wall Street. That position became available in February after Michael Barr, who stayed on as a governor, stepped down from the position to avoid a protracted legal battle with Mr. Trump that he worried would hurt the central bank.
Kevin Warsh, a former Fed governor with close ties to Mr. Bessent, is seen as a leading contender to serve as the next chair. During the transition, Mr. Trump was interested in the idea of making Mr. Warsh, whom he had considered for Fed chair in his first term, his Treasury secretary. The president also considered installing him as Fed chair to replace Mr. Powell before the end of his term, according to people briefed on his thinking. At the time, Mr. Trump inquired about his legal rights to fire Mr. Powell, and what the broader effects of such a move would be.
Mr. Powell has been emphatic that the law does not permit a president to remove the chair of the central bank nor meddle directly with the institution. The Federal Reserve Act says members of the Fed’s seven-strong Board of Governors can be removed only “for cause,” which is interpreted as serious misconduct and other violations.
When asked by reporters on Friday about the possibility of firing Mr. Powell, Kevin Hassett, the director of the National Economic Council, said, “The president and his team will continue to study that matter.” Later in the day, Mr. Trump again pushed the Fed chair to lower rates but didn’t discuss his future.
The Fed’s independence from the White House has historically been seen as crucial to the stability of the economy and the global financial system. Congress granted the central bank this status to ensure it could make policy decisions related to the economy and the banking system free from political interference.
The fear is that Mr. Trump will seek to erode that protection. Already, he has issued an executive order that seeks to exert authority over how the Fed oversees Wall Street. Monetary policy decisions were exempted, but the expansive nature of the order has raised questions about how long that separation will last.
Mr. Trump has also fired officials at the Federal Trade Commission, the Merit Systems Protection Board and the National Labor Relations Board, removals that have prompted legal challenges that the Supreme Court is set to hear.
What the Trump administration is arguing is that the precedent — which stems from a 1935 ruling commonly referred to as Humphrey’s Executor — infringes on the president’s executive power. The ruling’s proponents argue that it insulates independent agencies from undue political influence.
This month, Chief Justice John G. Roberts Jr. temporarily authorized Mr. Trump’s dismissals while the challenges move forward in court. The chief justice, acting on his own, issued an “administrative stay,” an interim measure intended to give the justices some time while the full Supreme Court considers the matter.
Mr. Powell said on Wednesday that he did not expect the court’s decision to apply to the Fed, but that it was something the central bank was “monitoring carefully.” The Fed’s independence is a “matter of law” and “very widely understood and supported in Washington and in Congress, where it really matters,” he added.
April 19, 2025