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The Trump administration’s criminal investigation into Federal Reserve Chair Jerome Powell is backfiring in the halls of Congress — likely one reason why investors still have yet to panic.
No less than a half-dozen GOP senators publicly criticized the Department of Justice for investigating Powell over Hill testimony last year about the Fed headquarters’ renovation. Those ranks include Republicans who already wanted Powell to step down early, like North Dakota Sen. Kevin Cramer.
Cramer thinks Powell’s done a bad job atop the central bank, including by misleading Congress about the ballooning Fed project costs. But even he can’t endorse a criminal probe of Powell: “If we were to do an indictment on everybody that’s elusive in front of Congress, we’d have to build a couple new penitentiaries,” Cramer told a pair of reporters on Monday evening.
Sen. Thom Tillis, R-N.C., said minutes after Powell confirmed the investigation that he would stop any future Fed nominees on the Banking Committee; he confirmed Monday night it would take disposition of any criminal probe for him to change his mind.
If Tillis joins with all Democrats, then the Senate Banking Committee wouldn’t be able to advance a Powell successor to the floor, requiring 60 votes to finish confirming the nominee under the current Senate rules. In effect, as long as Tillis stands firm, he could make it impossible for Trump to move future Federal Reserve picks.
“The president and I both need to figure out who it was that thought this was a great idea,” Tillis said. “I don’t think it would make any sense to move on personnel until this is settled. He either clears his name and that goes one direction, or he doesn’t and that goes a different direction.”
Senate Majority Leader John Thune acknowledged Tillis’ stance makes future confirmations more “challenging.” Cramer agreed confirmations would be much more difficult “when there’s this sort of chaos going on.”
Tillis, Cramer and Sen. John Kennedy, R-La., all serve on the committee that confirms Federal Reserve nominees. Kennedy said he’d be “stunned” if Powell had done anything wrong and predicted litigation between the Fed and the administration will raise interest rates: “We need this like a hole in the head.”
Sen. David McCormick, another committee Republican, joined them in a critical statement. The Pennsylvanian said he aligns with Trump in displeasure with Powell’s slow pace of interest rate cuts and that “I think the Federal Reserve renovation may well have wasted taxpayer dollars, but the proper place to fix this is through Congressional oversight. I do not think Chairman Powell is guilty of criminal activity.”
As Republicans lined up to distance themselves from the subpoenas to the Fed, markets barely moved in response to the threat to Powell. Sen. Chris Van Hollen, D-Md., said investors recognize the case is a “farce.”
Van Hollen said he hopes judges sanction the Trump administration over it: “This is so frivolous.”
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Privately, GOP lawmakers expressed confusion over why the administration would pursue a criminal investigation when Powell was already set to step down as chair in a few months. Treasury Secretary Scott Bessent said recently that he expects Trump to name a successor as soon as this month.
“Powell is out in May; we’re just talking about a few months here,” one senior House Republican told Semafor. “This just seems ill-timed.”
“We’re the ones that pound the table about the weaponization of government,” the GOP lawmaker added.
As Powell — one of Capitol Hill’s most adroit navigators — made his rounds, Republicans on both sides of the Capitol panned the investigation. Sens. Lisa Murkowski, R-Alaska, and Susan Collins, R-Maine, said they both spoke to the chair, with Murkowski praising Tillis’ stance and Collins calling Powell a “man of integrity.”
“One can’t help but wonder that [the investigation has] more to do with the chairman’s resistance to pressure from the White House when it comes to interest rates than it does his testimony,” Collins said on Monday evening.
In an unusually direct statement, House Financial Services Chair French Hill, R-Ark., warned that federal prosecutors’ inquiry “could undermine this and future Administrations’ ability to make sound monetary policy decisions.”
Thune said “the Fed’s independence in shaping monetary policy in the country is something that we need to ensure proceeds without political interference.”
“I don’t want anything to interfere with the independence of the Fed. I support the independence of the Fed,” said Senate Judiciary Chair Chuck Grassley, R-Iowa.
Senate Banking Chair Tim Scott, R-S.C., declined to comment, as did Sen. Mike Rounds, R-S.D., and other rank-and-file GOP senators.
It’s unclear what might happen if lawmakers cannot confirm a replacement for Powell before his term as chair ends this year. One possibility that’s been floated: Trump selects an acting chair from existing board members.
There’s also some precedent for Powell to remain at the helm as chair pro tempore, as he did before senators confirmed him to a second term.
Either way, lawmakers predicted the federal probe would spur Powell to serve out the rest of his term as governor, which doesn’t end until January 2028: “Talk about shooting yourself in the foot,” Van Hollen said.
Burgess and Eleanor’s View
The speed and strength of Republicans’ pushback Monday is a true testament to Powell’s ability to cultivate goodwill with lawmakers — and the very real risk the investigation poses to markets.
It’s also the latest sign of a trend we noticed last week: The blank check that lawmakers in Trump’s party was willing to hand him in 2025 is no longer valid.
Room for Disagreement
As investors watched closely, even Republicans who hesitated to condemn the probe were careful to extol the virtues of an independent central bank. But Cramer wasn’t among them.
“The whole independence thing is the most overblown term in all of this. The Fed chairman is appointed by a president who is elected. They’re confirmed by a Senate that’s elected. Philosophy matters, or who would care? A computer could do it,” Cramer said.
“We don’t appoint computers,” he added dryly. “Not yet, anyway.”
Notable
- Treasury Secretary Scott Bessent told Trump the probe is making a “mess,” according to Axios.
- Federal Housing Finance Agency Director Bill Pulte was a driving force behind the Trump administration’s decision, Bloomberg reports.