RPT-BREAKINGVIEWS-Trump’s imperial Fed push meets its Waterloo

By Gabriel Rubin

WASHINGTON, Jan 12 (Reuters Breakingviews) - Jerome Powell, a devotee of the Grateful Dead, knows it costs a lot to win and even more to lose. One day after the passing of guitarist Bob Weir, the Federal Reserve head put this ethos into practice. In an extraordinary Sunday-night video statement, he revealed that he is subject to a criminal investigation, bluntly describing the move as a “pretext” to influence monetary policy on the part of the White House. With just months left as chair and the Supreme Court and Congress for now buttressing central-bank independence, Powell has chosen the right moment to make a stand.

President Donald Trump’s fitful war to control the Fed began to focus months ago on renovations at the central bank’s Washington, D.C., headquarters. When Powell took Trump on a tour of the site, hardhats on, he deftly handled an on-camera grilling about purported cost overruns. The move to investigate Powell criminally over the matter is a shocking escalation. It is also ham-fisted: Trump’s own comments that he wants to remove Powell because of disagreements over monetary policy lay bare the ruse.

Powell has, until now, refrained from full-throated push-back. He has built up immense capital over the past four decades among Republicans and Democrats, having been nominated first by Democratic President Barack Obama, then Trump, then Joe Biden to Fed jobs. Just as importantly, Supreme Court rulings have insulated the central bank from the White House’s worst excesses, while Powell’s strong shepherding of pandemic emergency lending programs in 2020 and subsequent equanimity have bolstered his credibility and alliances on Capitol Hill. Sure enough, Republican Senator Thom Tillis, a pivotal vote on the Senate Banking Committee, quickly vowed to block all of Trump’s Fed nominees until the criminal investigation ends.

Conversely, the president has chosen a particularly inopportune moment to attack. Powell’s chairmanship ends in May, meaning a battle over his replacement would happen soon. The Supreme Court will hear arguments over the attempted firing of another Fed governor, Lisa Cook, next week. A lower court has already ruled that Trump cannot reshape the bank’s board by fiat.

Powell, too, can counter-attack. While his time left as chair is ending, his term as governor runs through 2028, allowing him to maintain hold of one of only seven posts atop the Fed. Trump still has the immense powers of the state behind him, which he could choose to abuse further. Short of an even more breathtaking provocation, though, the White House’s policy war may have reached its crucial losing battle.

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CONTEXT NEWS

Federal prosecutors have opened a criminal investigation into Federal Reserve Chair Jerome Powell over costly renovations at the central bank’s Washington headquarters.

Powell, in a video statement released January 11, called the investigation a “pretext” to pressure him to lower interest rates. Republican Senator Thom Tillis said he would not vote to confirm any of the administration’s central bank nominees until the investigation ends.

The United States Supreme Court will hear arguments on January 21 over the legality of President Trump’s attempted firing of Fed governor Lisa Cook.