Federal Reserve News Agency: After Powell, can the Fed still maintain its independence?

```

The Fed’s Independence Has Never Been So Fragile!

On March 4, Nick Timiraos, chief economics reporter for The Wall Street Journal—often dubbed the “Fed’s Newsletter”—published an in-depth report focusing on the severe challenges to the Federal Reserve’s independence as Chair Jerome Powell’s term is about to end.

The core issue of the article cuts directly into the most sensitive policy controversy of the moment: after the departure of a Fed chairman whose independence relied on bipartisan trust and personal resolve, can this firewall continue to function? Timiraos’ answer is pessimistic—he believes the Fed’s independence has perhaps never been so fragile.

The article reveals the multi-pronged pressure campaign the Trump administration levied on the Fed, including the use of Justice Department grand jury subpoenas to coerce Powell, launching political attacks using the Fed’s building renovation as a pretext, and even hinting at possible criminal charges. Powell’s response—publicly disclosing the subpoena, recording a direct message on video—temporarily stabilized the situation, but also made clear: The outcome of this contest depends largely on the courage and experience of one individual, rather than the resilience of the institution itself.

The article notes that what’s even more alarming is: with Powell’s term expiring in May, Trump has a full three years to slowly infiltrate the Fed. The internal scenario feared most by Fed insiders is taking shape:

If Trump’s nominee, former Fed governor Warsh, is unable to deliver on rate cuts, the pro-Trump majority on the board could quietly reshape the institution from within—including trying to fire the 12 regional Fed presidents who hold interest-rate power, centralizing monetary policy control among presidential appointees. This has never happened before in Fed history.

The Powell "Showdown"—The Full Story of an Unprecedented Battle

Timiraos says, the story begins with an "unusual email." Late last December, the Fed received two emails from Carlton Davis, an attorney in the Southern District of New York prosecutor’s office. The tone was casual, with no specific queries or mention of an investigation, more reminiscent of an informal chat than an official legal process. The Fed did not respond.

Then, things escalated quickly. On January 9, 2025, the Fed received a formal grand jury subpoena stamped and signed by Davis, targeting the Federal Reserve’s years-long renovation project.

Timiraos points out in the article, on the surface it was a financial audit, but in reality—as Powell later stated in his video—"these are all just excuses". Former Treasury Secretary and former Fed Chair Janet Yellen described it harshly: "Trump’s tactics are completely unscrupulous, weaponizing the Justice Department. This is unprecedented in the United States."

Facing this situation, Powell made an unconventional decision: to go public. No defense attorney would recommend this, but Powell judged that the political manipulation behind this investigation was too obvious. Disclosing it would do more to rally public and bipartisan support. He recorded the video in the Fed studio on a Sunday night and then contacted members of Congress from both parties one by one.

Timiraos states, his judgement was proven correct—the video was published, and just twenty minutes later, Republican Senator Thom Tillis issued a public statement saying he would block any Fed nominee’s confirmation until the investigation was withdrawn.

The True Foundation of Independence: Institutional Moat or Personal Credibility?

The article notes that the Fed’s independence is supported by several institutional "moats": it does not rely on Congressional appropriations, manages its own budget, board members have 14-year terms and enjoy legal protections against arbitrary dismissal. This institutional design was originally intended to keep the Fed steady amid political storms.

However, former Fed economist Claudia Sahm sharply pointed out the weakness of this design: "Whether this institution can stand should not depend on a single person. That is not robust protection."

Timiraos says Powell’s ability to stand firm in this contest depended on the relationships and trust he built over the years with both parties in Congress—appointed by Obama as a governor, nominated by Trump for chair, and reappointed by Biden. Such bipartisan political capital is now virtually unique in Washington. Once this "personal credibility" fades with his departure, whether the institution can stand alone is an open question.

The article says former senior Powell adviser Jon Faust was even blunter, saying he is "very pessimistic that the U.S. can avoid full partisanship in monetary policy during Trump’s remaining term." His logic is clear: Trump has already brought traditionally neutral institutions like the Justice Department and FBI onto a political track; there’s no reason the Fed should be an exception.

The Successor’s Dilemma: Can Warsh Hold the Line?

Timiraos believes that Trump’s choice of Warsh to succeed Powell is itself a highly charged signal. Fifteen years ago, during his tenure at the Fed, Warsh was seen as a firm defender of institutional independence; but in recent years, he has openly validated Trump’s criticism of the Fed, saying "Frankly, I certainly understand his frustration." Former colleagues struggle to reconcile this shift; some believe it’s purely a move for a job.

The issue is, Warsh takes over a structural dilemma: on the one hand, he must show enough loyalty to get the appointment; on the other hand, once in office, the market, Congress, and colleagues will require him to demonstrate independence—yet that very independence is what Trump cannot tolerate. Claudia Sahm calls this situation "pre-compromised."

The article notes that Trump, the day after announcing his nomination, even "joked" at an Alfalfa Club dinner in front of everyone that if rates didn’t come down, he’d sue Warsh. The punchline of this joke was based on Powell actually facing a legal threat at the time—the irony is self-evident, and the warning clear. Powell’s only advice: "Don’t get drawn into partisan politics. Don’t do it."

The Most Dangerous Scenario: Undermining the Fed from Within

Timiraos states that if the Powell era was defined by external pressure, the real risk after Powell’s departure is now more from internal infiltration. Currently, Trump has appointed 3 of the 7 Fed board members, and is now trying to remove another, Lisa Cook—accused of "mortgage fraud"—whom Cook denies any wrongdoing, with the case still in the Supreme Court.

If Cook is removed and Powell’s seat is filled by Trump, Trump’s appointees will hold a majority on the board. At that point, the scenario most feared by insiders may come true.

The central issue of concern among insiders is: Once a board majority aligns with the president, they might attempt to dismiss the 12 regional Fed presidents who have interest-rate authority. This has never happened before in the Fed’s history. If it does, rate policy would be de facto controlled by presidential appointees and the independence of monetary policy would merely be nominal. This would be akin to quietly transforming an independently operated central bank into an arm of the president’s economic policy—not by changing any laws, but simply by replacing the people over time.

Chronic Erosion Is More Dangerous Than Open Conflict

Timiraos proposes an important judgement: The loss of the Fed’s independence doesn’t necessarily require a dramatic break, such as the president outright firing the chair, or Congress rewriting the Federal Reserve Act.

The real threat is usually silent—"a president demanding rate cuts, a chair who can’t say no, and a few lawmakers willing to step in."

Historically, President Johnson reportedly cornered the Fed chair and questioned his patriotism; Nixon, too, pressured the Fed, causing later inflation. But using criminal investigations as direct threats is a different, unprecedented level of overreach.

The deeper consequence is: once markets and the public come to expect "the Fed chair is just a political appointee and executor," each subsequent president will be motivated to treat the Fed the same way. Once that expectation is set, it’s hard to reverse—just like once you break a window, unless you fix it, the next window is even easier to break.

After Powell, Who Will Guard This Line?

The in-depth report ultimately points to an issue that’s more fundamental than the path of rates: can the monetary policy of a democracy remain independent amid persistent political pressure?

Powell’s departure takes away more than a chair—it removes the moat of trust he built between the two parties over eight years. His successor, Warsh, will have to operate in a more narrow and dangerous space, constantly facing three-way pressure from the president, the market, and colleagues.

At the same time, Trump has a full three years left to gradually fill the board with his appointees, potentially fully realizing his unspoken but clear aim: to make Fed rate decisions subject to the political calendar.

As former senior Powell adviser Jon Faust says, he’s no longer surprised by Trump’s next move—"I think he’ll push this to the extreme." Where is that "extreme"? Perhaps only the next Fed chair, under genuine pressure, will reveal the answer.

Risk Warning and DisclaimerThe market has risks; investment should be cautious. This article does not constitute personal investment advice and does not consider the particular investment goals, financial situation, or needs of any individual user. Users should consider whether any opinions, views, or conclusions in this article fit their specific situation. Investment is at your own risk. ```