Trump Decides Not to Fire Powell Despite the Criminal Investigation

The Two Kevins in the Running

Trump suggested that he was inclined to appoint either former Fed Governor Kevin Warsh or National Economic Council Director Kevin Hassett to replace Powell. He also stated that he had ruled out U.S. Treasury Secretary Scott Bessent for the position because Bessent wants to stay where he is. “Both Kevins are very good,” Trump said. “You have other good people as well, but I’ll be making an announcement in the coming weeks.” These comments indicate that the president is already considering Powell’s successor, even though his official term does not expire for several months.

Kevin Warsh, a former member of the Fed’s Board of Governors from 2006 to 2011, is considered a hawk on monetary policy and has been critical of the Fed’s accommodative policies in the past. Kevin Hassett, for his part, served as chairman of the Council of Economic Advisers under Trump during his first term and is known for his conservative economic views. Both men are seen as more amenable to Trump’s preferences on interest rates than Powell, which could explain the president’s interest in them.

“The Two Kevins”… it sounds like the title of a bad comedy movie, but in reality, this is what could shape the future of the global economy for years to come. Trump is essentially looking for yes-men who will agree to everything he proposes. This isn’t a criticism; it’s an observation. He wants people who will understand that their role is to do what he wants, not what the economy dictates. It’s like a CEO replacing all his top executives with loyal but incompetent relatives. It might seem funny from the outside, but when we’re talking about the U.S. Federal Reserve, it’s actually pretty terrifying. And these appointments “in the coming weeks” are putting enormous pressure on Powell.

The Crucial Importance of Confirmation

Some key members of Trump’s Republican Party in the Senate—which must confirm his choice to succeed Powell—have joined foreign economic officials, investors, and former U.S. officials from both parties in criticizing this move as a politicization of sensitive policymaking. The Trump administration has asserted that it has a duty to investigate any potential wrongdoing. However, this position is increasingly being challenged, even within the president’s own party.

Senator Thom Tillis of North Carolina, who serves on the Banking Committee—which oversees Fed nominations—said he would oppose any future nominations to the central bank, including any replacement for Powell, until this legal matter is fully resolved. If there was ever any doubt as to whether advisers within the Trump administration are actively seeking to undermine the Federal Reserve’s independence, there should be none now, Tillis said. Now it is the independence and credibility of the Department of Justice that are in question. This bipartisan criticism could significantly complicate Trump’s plans to appoint a compliant successor.

When even Republicans start saying, “Stop, that’s enough,” you know you’ve gone too far. Tillis isn’t exactly a militant progressive—he’s a conservative senator. And even he thinks this is going too far. That’s telling, isn’t it? Trump has achieved the rare feat of uniting Democrats and Republicans against him on this issue. The Fed’s independence is sacred, even to many conservatives who normally hate regulation. It’s as if he were trying to scrape the varnish off a precious antique. People may not like the antique, but they know it’s valuable. And Tillis is right: it’s the credibility of the Department of Justice that’s at stake here, not just that of the Fed.

Trump’s Repeated Demands

Trump has exerted intense public pressure on Powell—whom he appointed as Fed chair during his first term—not to cut key interest rates as quickly or as deeply as the Republican president would prefer. With the November midterm elections approaching, voters say the cost of living is a key issue, and they rate Trump’s handling of the matter poorly. This political dynamic partly explains why the president is so eager to see the Fed cut rates, despite the inflationary risks that this could entail.

Trump has dismissed the criticism, including that from lawmakers whose support he will need to confirm his nominee to succeed Powell. “I don’t care,” he said. “They should be loyal. That’s what I’m saying.” He has also dismissed the widely held view among analysts, investors, and economic policymakers around the world that the erosion of central bank independence could undermine the value of the U.S. dollar and trigger inflation. “I don’t care,” he repeated. This repeated display of contempt for experts’ warnings is characteristic of the Trumpian approach to economic governance.

“They should be loyal”… that phrase makes my blood run cold. Trump doesn’t understand the difference between loyalty to an individual and loyalty to institutions and the Constitution. For him, everything is personal. It’s all about “with me or against me.” It’s a mafia-style view of governance. Powell isn’t there to be loyal to Trump; he’s there to be loyal to the U.S. economy and the citizens who depend on it. And that “I don’t care” repeated twice… it’s like a kid covering his ears and singing “la la la” so he doesn’t have to hear the adults telling him not to play with fire. Except that this fire is inflation and global economic instability.

The Impact on Financial Markets

The renewed attacks on the Fed’s independence—and Powell’s unequivocal defense—have reignited what seemed to be a dormant battle between Trump and the chairman he appointed in 2017. The subpoenas are renewing fears that the Fed’s independence from day-to-day policy is being compromised, which could undermine global investors’ confidence in U.S. Treasury securities. “We expect the dollar, bonds, and stocks to all fall in Monday’s trading,” wrote Krishna Guha, an analyst at investment bank Evercore ISI, in a note to clients.

The initial market reaction, however, was muted, with S&P 500 futures falling less than 1% after the pre-market session opened. “We are stunned by this deeply troubling development that came out of nowhere after a period in which tensions between Trump and the Fed seemed to be contained,” Guha added. This relative market stability could be explained by investors’ skepticism about Trump’s actual ability to fire Powell before his term expires in May, or by the hope that institutional safeguards will ultimately prevail.

It’s fascinating to see how the markets are reacting. They’re like a wild animal that senses danger but doesn’t yet know whether to flee or fight. Investors are betting that Trump can’t really destroy the Fed—that there are too many institutional safeguards. It’s a risky bet. It’s like betting that a hurricane will change course at the last minute. And Guha, who’s “stunned”… that makes me laugh. How can anyone be stunned after years of Trump? He’s doing exactly what he’s always done: testing the limits, breaking the rules, seeing what he can get away with. And so far, it’s worked out pretty well for him. Why would he stop now?

The Lisa Cook Case

During his year in office, Trump has tested the limits of presidential power. Trump attempted to fire another Fed official, Governor Lisa Cook, who challenged her dismissal in a legal case that will be heard by the Supreme Court next week. This parallel case shows that the attack on Powell is not occurring in a vacuum, but is part of a broader effort by the Trump administration to assert control over the Federal Reserve and other independent institutions.

The Cook case is particularly significant because it represents a direct test of presidential authority over Fed members, whose terms are designed to protect them from precisely this kind of political pressure. If the Supreme Court were to rule in Trump’s favor in this case, it could pave the way for similar dismissals of other Fed members, including Powell himself. The outcome of this case will therefore have major implications for the future independence of the U.S. central bank.

The Cook case is the canary in the coal mine. If Trump manages to get her fired without consequences, then Powell is truly in danger. It’s like a chess game where Trump is sacrificing pawns to reach the king. And the fact that the Supreme Court has to hear this case shows just how broken the norms have become. Normally, presidents don’t even try to fire Fed members. It’s just not done. It’s like trying to fire a federal judge because you don’t like their rulings. This is a massive test for the separation of powers, and I’m genuinely worried about the outcome.

The Trumpian View of the Economy

A president should have a say in Fed policy, Trump told Reuters. “I’ve made a lot of money in business, so I think I have a better understanding of this than ‘too late’ Jerome Powell.” This remark reveals Trump’s fundamentally flawed view of the Fed’s role and the economy in general. He sees monetary policy as an extension of his own business expertise, rather than as a complex discipline requiring technical expertise and political independence.

This view of the economy as a business that the president can manage as he pleases is deeply troubling to economic experts. The Fed is not a real estate company that Trump can run by executive order. Its decisions affect billions of people around the world, and the Fed’s independence was designed precisely to prevent politicians from manipulating monetary policy for short-term political gain—as Trump’s comments on the midterm elections clearly suggest.

“Too late,” Jerome Powell… that ridiculous nickname speaks volumes about Trump. He sees everything in terms of business timing, as if monetary policy were a matter of delivering a project before a deadline. He doesn’t understand that “too late” in economic terms means triggering inflation that destroys the livelihoods of ordinary people. And that “I’ve made a lot of money in business”… that’s the argument of a rich man who thinks his money makes him smart about everything. But the economy isn’t real estate. You can’t just build a skyscraper and sell it when you’re dealing with interest rates. It’s terrifying to see a president with such a simplistic view of such a complex system.

A Break from His Usual Reserve

On Sunday, Powell broke with what had until now been a restrained approach to Trump’s criticism and personal insults, most of which he had ignored. Instead, the Fed chair released a video statement in which he unequivocally characterized the threat of criminal prosecution as mere pretexts to undermine the Fed’s independence in setting interest rates. “The question is whether the Fed will be able to continue setting interest rates based on evidence and economic conditions—or whether, instead, monetary policy will be driven by political pressure or intimidation,” Powell said.

This statement marks a radical departure from the Fed’s underlying response to Trump this year. The central bank has attempted to appease the administration by scaling back certain policies—such as efforts to account for the impact of climate change on the banking system—which the administration clearly opposes. Powell has decided that appeasement is no longer working and that the time has come to take a firm public stand to defend the independence of the institution he leads.

I can’t help but admire Powell’s courage here. For months, he played the diplomatic game, trying not to rile Trump. But he realized it was pointless. Trump doesn’t respect appeasement; he sees it as weakness. Powell’s video… that’s the moment he stops letting himself be walked all over. He’s essentially saying, “I know what you’re doing, and I’m not going to tolerate it.” It’s a moment of truth. And the fact that he specifically mentions “intimidation”… that’s powerful. He’s calling a spade a spade. Trump must hate that. He hates it when someone refuses to be intimidated.

The Institutional Implications

Powell’s decision to speak out publicly in such a direct manner has implications that go far beyond his personal conflict with Trump. It sets a potentially significant precedent for how future chairs of the Fed and other independent institutions might respond to attempts at political interference. By taking such a clear stand, Powell is sending the message that institutional independence is worth defending publicly, even at the cost of open conflict with the executive branch.

However, this strategy carries risks. If Trump decides to ignore this warning and continues his attacks, the Fed could find itself in an even more vulnerable position. Powell is banking on the fact that public pressure and market reactions will ultimately force Trump to back down. It’s a bold gamble that could either significantly strengthen the Fed’s independence or leave it weaker than ever.

It’s the classic dilemma of the oppressed: stay silent and hope it blows over, or speak up and risk something worse. Powell has chosen to speak up. I respect that. But it’s a huge gamble. If Trump decides to crush him, there aren’t many recourses. The Fed is supposed to be independent, but if the president decides to attack it in every possible way, what can they do? Powell is banking on the markets putting pressure on Trump. And perhaps that’s his only hope. Because, obviously, Congress doesn’t seem willing to intervene in any meaningful way. It’s a showdown, and I fear Powell doesn’t have as much ammunition as he thinks he does.

Global Concerns

Foreign economic officials have joined in criticizing the Trump administration’s approach as a politicization of sensitive policymaking. This international concern is understandable given the central role that the U.S. dollar and U.S. monetary policy play in the global economy. If the Fed’s independence is compromised, it could have repercussions for the economies of all countries, not just the U.S. economy.

Central banks around the world are closely monitoring developments in Washington, as the Fed often serves as a model and leader in monetary policy. Any erosion of its independence could encourage other governments to exert similar pressure on their own central banks, which could destabilize the international financial system. This is why so many international voices are speaking out in defense of the Fed’s independence, even though they are generally reluctant to criticize the United States directly.

The whole world is holding its breath. It’s as if we’re witnessing a slow-motion catastrophe that we know will affect us all but that we can’t stop. Foreign economic officials are too polite to say, “Stop destroying the global economy,” but you can sense the concern in their statements. The U.S. dollar is the heart of the global financial system. If Trump starts meddling with the Fed for political reasons, it’s like injecting poison into the bloodstream of the global economy. And the worst part is that he probably doesn’t even realize it. He thinks it’s just his business, something between him and Powell. He doesn’t understand that every Fed decision has repercussions in Tokyo, London, Paris—everywhere.

Confidence in the U.S. Dollar

The Fed’s independence is a crucial element of the confidence that international investors have in the U.S. dollar. If this independence is perceived as compromised, investors could start looking for alternatives, which could undermine the dollar’s value and increase borrowing costs for the U.S. government. This could have serious consequences for the U.S. economy, which relies heavily on the government’s ability to borrow at low rates to finance its operations.

The possibility of a loss of confidence in the dollar is particularly concerning given the size of current and future U.S. budget deficits. If international investors begin to doubt the United States’ ability to maintain a consistent and independent monetary policy, they may demand higher yields to hold U.S. Treasury securities, which would significantly increase the U.S. government’s borrowing costs.

The U.S. dollar is the world’s reserve currency for one reason: trust. That trust has been built on decades of responsible and independent monetary policy. And Trump is undermining all of that with his political whims. It’s as if he were taking a hammer and starting to pound on the foundation of a skyscraper just because he doesn’t like the color of the balcony. International investors aren’t stupid. They see what’s happening. And if they start to lose confidence in the dollar, it will be a disaster for the United States—not just for Wall Street, but for ordinary Americans whose loans, savings, and jobs depend on that confidence.

Historical Precedents

There are historical precedents of U.S. presidents attempting to influence the Fed, but never with this intensity or using these methods. President Richard Nixon pressured Fed Chairman Arthur Burns to keep interest rates low ahead of his 1972 reelection, a decision that contributed to the runaway inflation of the 1970s. More recently, President Barack Obama appointed Janet Yellen to lead the Fed, but he respected the institution’s independence and never publicly criticized it.

The difference between these presidents’ approaches and Trump’s is striking. Whereas other presidents have understood the importance of maintaining at least the appearance of the Fed’s independence, Trump seems determined to break this norm. This difference could have significant historical consequences, as central bank independence has become a widely accepted international standard deemed essential to economic stability.

Trump isn’t interested in history. He isn’t interested in the lessons of the past. He sees only what he wants right now, in the present moment. Nixon and Burns… we know how that ended: inflation, economic chaos. But Trump doesn’t care about the long-term consequences. He cares about winning now, about getting what he wants now. And this difference from Obama… it’s like night and day. Obama might not have agreed with Yellen, but he would never have publicly humiliated her, and he would never have launched a criminal investigation against her. It’s a matter of respect for institutions, and Trump has no respect for anything that limits his power.

The Risks of Political Interference

Political interference in monetary policy has led to economic disasters in many countries around the world. Examples such as Venezuela, Zimbabwe, and Turkey show what can happen when politicians take control of central banks and force them to pursue inflationary policies for political reasons. These countries have all suffered from hyperinflation, currency crises, and severe economic collapses.

Of course, the United States has stronger institutions and a more diversified economy than these countries, but the basic economic principles remain the same. If the Fed loses its independence and becomes a tool of political policy, the consequences could be serious, even if they might not be as extreme as in the most catastrophic cases seen in other countries. That is why so many economists across the political spectrum are concerned about Trump’s actions.

People think, “It can’t happen here,” in the United States. That the U.S. economy is too strong, too solid to be ruined by political stupidity. But look at history. Major economies don’t collapse all at once; they erode slowly. It’s like coastal erosion. One wave at a time. And Trump is a constant storm. He keeps pounding away at the same defenses over and over. Venezuela, Turkey… people there also thought it wouldn’t happen to them. But when you start using the central bank as a political tool, you’re on a slippery slope. And once you start sliding, it’s hard to stop.

A Moment of Truth

The coming weeks will be crucial for the future of the U.S. Federal Reserve’s independence. Trump has said he will announce his choice to replace Powell in the coming weeks, and the Cook case will be heard by the Supreme Court next week. These events will determine whether the institutional safeguards that have protected the Fed for decades will hold firm or whether they will yield to pressure from a president determined to expand his power.

Powell currently finds himself in a precarious position, supported by financial markets, international economists, and even some members of his own party, but facing a president who has shown a willingness to break institutional norms. His fate—and that of the Fed’s independence—remains uncertain. Americans and the entire world are watching with anxiety to see how this battle will play out.

I’m truly worried. Not just for Powell, but for what this represents. We’re witnessing a pivotal moment in American economic history—perhaps even global history. Trump is testing every limit, every safeguard, every norm that has been built up over decades to protect the economy from political whims. And so far, he’s largely prevailed. Powell is holding his ground—for now. But for how long? And if he falls, what will fall with him? The Fed’s independence isn’t just a technical economic issue. It’s a matter of democracy, of limits on power, of protecting ordinary citizens from the impulsive decisions of their leaders. If it falls, it’s going to be painful.