The Trump administration's move to criminally investigate the chair of the Federal Reserve could blow up in President Donald Trump's face in a big way, Senate Majority Leader John Thune (R-SD) indicated on Monday.
Specifically, Thune told Semafor's Burgess Everett, the legal threat against Jerome Powell could make it "challenging" to confirm any additional nominees Trump would make to the Fed, because it adds extra difficulty in establishing that such nominees could make monetary policy decisions independent of White House influence.
"We want to make sure that there is a good continuity, and that the central bank maintains its independence," Thune said. "I want to see them operate in an independent way, free of politics."
The Fed has long observed strict policy independence to ensure politicians cannot pressure or threaten the central bank to manipulate monetary policy in ways that benefit their finances or election prospects, which could harm the overall economy or trigger runaway inflation by eroding investor trust in U.S. currency.
The investigation stems from allegations, first made by Trump's Federal Housing Finance Agency director Bill Pulte, that Powell lied to Congress about the scope and cost of a $2.5 billion renovation at the Federal Reserve building in Washington, D.C. Pulte has similarly made accusations that various other critics of the president have committed mortgage fraud, prompting accusations he is abusing his office to fabricate charges against Trump's enemies.
Powell, who was himself appointed by Trump in his first term, has categorically denied there was any effort to mislead Congress about the office renovation. He has further taken the extraordinary step of publicly accusing the Trump administration of using the Justice Department to intimidate the Fed into additional interest rate cuts.
“I have deep respect for the rule of law and for accountability in our democracy. No one — certainly not the chair of the Federal Reserve — is above the law,” Powell stated in a newly released video. “But this unprecedented action should be seen in the broader context of the administration’s threats and ongoing pressure.”
The attack on the Fed has already created sharp fault lines in the Republican Party. Sen. Thom Tillis (R-NC), who sits on the Senate Banking Committee, has already vowed to block any Fed nominee, including Powell's replacement, "until this legal matter is fully resolved." And even Trump's own Secretary of the Treasury, Scott Bessent, has reportedly warned the president that prosecuting Powell could destabilize financial markets.
