Former Fed chairs, Treasury secretaries defend Jerome Powell amid Trump DOJ's criminal probe

• The former officials warn that prosecutorial attacks on the Fed chair undermine the central bank's independence, which is critical for achieving stable prices, maximum employment, and moderate long-term interest rates
• The statement characterizes the criminal inquiry as resembling monetary policy practices in emerging markets with weak institutions, stating it 'has no place in the United States'
• The bipartisan group includes former officials who served under both Republican and Democratic administrations, along with several former chairs of the Council of Economic Advisers

Summary: Former Fed Officials Defend Powell Amid DOJ Criminal Probe

A coalition of prominent former Federal Reserve chairs and Treasury secretaries has issued a joint statement defending current Fed Chair Jerome Powell following revelations that the Trump administration's Department of Justice is threatening criminal indictment against him. The controversy stems from Powell's testimony regarding the Fed's renovations.

Key Figures Involved:

The defense group includes former Fed chairs Ben Bernanke, Alan Greenspan, and Janet Yellen, along with former Treasury secretaries Timothy Geithner and Henry Paulson, and several former Council of Economic Advisers chairs from both Republican and Democratic administrations.

Main Issue:

The former officials characterized the DOJ's criminal inquiry as "an unprecedented attempt to use prosecutorial attacks" to undermine Federal Reserve independence. They emphasized that Fed independence is "critical for economic performance" and essential to achieving Congress-mandated goals of stable prices, maximum employment, and moderate long-term interest rates.

Market Implications:

The statement drew a stark comparison, warning that such prosecutorial pressure represents governance practices typical of "emerging markets with weak institutions" that result in "highly negative consequences for inflation and economic functioning." The officials stressed this approach "has no place in the United States," where rule of law underpins economic success.

Additional Context:

The controversy coincides with President Trump's calls for a 10% cap on credit card interest rates, suggesting broader tension between the administration and monetary policy authorities. The unified defense from bipartisan former officials underscores concerns about potential politicization of the Federal Reserve and threats to central bank independence.