LARRY KUDLOW: Don't Make a Martyr Out of Jay Powell

• Republican senators like Thom Tillis refuse to confirm a new Fed chairman until criminal subpoenas against Powell are withdrawn, creating a confirmation impasse
• The Fed building renovation is estimated to run at least $700 billion over budget, which became subject to grand jury subpoenas and investigation
• Markets showed resilience despite the controversy, with the S&P and Dow hitting all-time highs and the 10-year Treasury auction performing well at 4.17 percent

Summary

Key Issue: Fox Business host Larry Kudlow addresses the controversy surrounding Federal Reserve Chairman Jay Powell amid a criminal probe related to a $2.5 billion Fed headquarters renovation cost overrun, estimated at $700 billion over budget.

Main Arguments

• Kudlow criticizes Powell as "a terrible Fed chairman" who consistently missed inflation targets, presiding over the worst price increases in 40 years
• Accuses Powell of political bias, including raising rates during Trump's first-term tax cut boom and lowering them before the Harris election
• Notes ethics concerns among Fed officials, including allegations of insider trading and mortgage fraud
• Despite criticism, Kudlow argues Powell is not a criminal and that the indictment is counterproductive

Political/Market Implications

• Key Republican senators, including Thom Tillis, refuse to confirm a new Fed chairman until Powell's subpoenas are withdrawn, creating a political stalemate
• Trump distanced himself from the indictment in an NBC interview, stating he knew nothing about it
• Concerns about Fed independence appear overblown, as markets showed no negative reaction

Market Performance

• S&P and Dow hit all-time highs
• 10-year Treasury auction performed well at 4.17%, below the when-issued 4.18%
• Economy growing at 5%+ with potential to reach 6-7%
• 2.4 million household jobs created in 2024
• Productivity growth exceeding 4%
• Record corporate profits and improving real wages

Conclusion: Markets remain focused on strong economic fundamentals rather than the Powell controversy.