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News that Donald Trump’s justice department has launched an investigation of Jerome Powell, chair of the Federal Reserve, is the latest example of the president’s governing philosophy: do what I want, or I will crush you. The desire to make Powell’s life miserable is also a warning sign to anyone who thinks that they have an independent source of authority.
What is happening to Powell is a test, not just for him and the Fed, but for any other person or institution that dares to stand up to the president.
If I were a supreme court justice contemplating ruling against the president in cases pending before the court involving tariffs, birthright citizenship, or the president’s authority to fire a member of the Federal Reserve board of governors, cases where there is a real probability he might lose, I’d surely be taking notice.
Powell’s “crime”? He didn’t follow orders.
As the Washington Post reports, “President Donald Trump, who originally nominated Powell to serve as Fed chair during his first term in 2017, has spent much of his second term attacking and threatening to fire the Fed chief for not slashing interest rates to juice the economy.”
The investigation into Powell’s alleged lies to Congress in testimony about the renovation of the Federal Reserve building has a familiar ring to it. Lying to Congress was the pretext the administration used to indict former FBI director James Comey.
For someone who has such a complicated relationship with the truth to go after others for purportedly lying would be comical if it weren’t so dangerous.
Powell is right to say: “The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President.”
Former Fed chairs Janet Yellen, Ben Bernanke and Alan Greenspan, along with others who served in prominent government positions in previous administrations, agreed with Powell. “This is how monetary policy is made in emerging markets with weak institutions,” they said, “with highly negative consequences for inflation and the functioning of their economies more broadly”.
“The Federal Reserve’s independence and the public’s perception of that independence,” they said, “are critical for economic performance … The reported criminal inquiry into Federal Reserve Chair Jay Powell is an unprecedented attempt to use prosecutorial attacks to undermine that independence.”
They were joined by the Republican senator Thom Tillis. Tillis, a member of the Senate Banking Committee, which is responsible for confirming nominees to the Fed, branded the justice department’s actions a “huge mistake”.
I agree that the justice department’s investigation of Powell is, and will be, destabilizing to the bond and investment markets, as well as to the overall economy. However, more is in play than Powell’s fate or that of the Fed.
After all, Powell’s term as chair expires in May, and President Trump is already lining up a successor. Why not let the Fed chair go quietly?
Because the audience for the news that Powell is under investigation is not just the Fed. And the Trump administration is willing to endure economic instability to reach that audience.
One key part of that audience is the justices of the United States supreme court.
While the court has ruled in Trump’s favor 90% of the time, that may not be enough to satisfy the president.
It is surely not an accident that news about Powell came down in the run-up to decisions about the president’s authority to impose tariffs and oral argument in the case of Lisa Cook, a member of the Fed board of governors, whom Trump wants to remove. The administration alleges that she committed mortgage fraud prior to her confirmation by the Senate.
The accusation against Cook repeats allegations made against Trump enemies, like New York state attorney general Letitia James and Democratic senator Adam Schiff, both of whom also face mortgage fraud claims (all deny wrongdoing).
The Trump administration contends that Cook’s “conduct creates an intolerable appearance of impropriety in financial matters”. It says that the president’s right to fire her “for cause” covers “reasons related to an officer’s conduct, ability, fitness, or competence–reasons beyond mere policy disagreement. The president’s removal of Cook for her material misrepresentation (and, at minimum, gross negligence) in financial transactions easily qualifies.”
It also argues that “when, as here, the president provides a cause, courts may not review his factual findings or his application of the for-cause standard to the facts or otherwise second-guess his judgment.”
There you have it: no one, not even the judiciary, should second-guess Donald Trump’s judgment.
In Trump’s America, what he wants he must get, not 90% or 95%, but 100% of the time. That’s why he proudly displays his “Trump was right about everything” hat.
And recall that the court had already indicated a certain solicitude for the Fed’s independence. Last May, while reversing a lower court decision that the president did not have the authority to remove members of the National Labor Relations Board and the Merit Systems Protection Board, two independent agencies, the court went out of its way to suggest that its decision might not apply to the Federal Reserve.
“The Federal Reserve,” it said, “is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States.” As the Scotus blog’s Adam White explains, unlike the NLRB or the MSPB, “The First and Second Banks, like the modern Fed, were created by Congress to be insulated from the president’s removal power, because they were banks, not law enforcement agencies.” The Federal Reserve board’s “main power is to control the nation’s money supply, which it does through the Federal Reserve Banks”.
Such legal niceties mean nothing to the president. What matters, it seems, is that the court suggested it might say that there is a limit to the president’s power. As Andrew Sullivan noted last summer, Trump “cannot tolerate any system where he does not have total control”.
“Resist, and he’ll ruin you,” Sullivan says.
By investigating Powell, the administration is showing that there is more than one way to carry out the president’s will. If they don’t do his bidding, supreme court justices, just like Fed chairs, could be fair game for Trump’s weaponized justice department.
That may very well be the take-home message that the president, who is intent on, as Sullivan observes, “one-man rule”, wants to send. In light of the news about Powell, it is more important than ever that the supreme court and all the rest of us show that we will not give in to the president’s efforts to end the American Republic.
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Austin Sarat, William Nelson Cromwell professor of jurisprudence and political science at Amherst College, is the author or editor of more than 100 books, including Gruesome Spectacles: Botched Executions and America’s Death Penalty
