SCOTT DETROW, HOST:
The Trump administration is backing down from a norm-busting challenge it made to the independence of the Federal Reserve. Today, the Justice Department said it would drop its criminal probe into fed chair Jerome Powell. That should clear the path for President Trump to replace Powell with Kevin Warsh, who Trump has nominated to be the next fed chair. NPR’s Maria Aspan joins us now.
Hey, Maria.
MARIA ASPAN, BYLINE: Hey there.
DETROW: What exactly did the administration do today and why?
ASPAN: So, this morning, U.S. Attorney General Jeanine Pirro posted on X that she has directed her office to close the investigation into the Federal Reserve. The DOJ launched this criminal investigation into both the Fed and Chair Jerome Powell earlier this year. It was supposedly about the Fed spending too much money as it renovates its headquarters, but it was widely seen as an escalation in President Trump’s ongoing efforts to pressure the Fed and specifically to pressure Powell to lower interest rates.
DETROW: Right. This is something that raised a lot of concerns about political pressure and a weaponized Justice Department. Give us more of the backstory on this.
ASPAN: So Trump wants lower rates to boost the economy. Lower rates make it cheaper for consumers and businesses to borrow money. But the Fed generally needs to keep rates high when it’s trying to keep inflation under control, like it is right now. So Trump has been pressuring the Fed and Powell to lower rates since he got back into office, and it’s gotten kind of ugly. He’s called Powell names. He’s threatened to fire him. And then this year, he – or his administration – launched this criminal investigation. And that finally pushed Powell to snap back. He is generally a very calm, no-drama central banker, but he’s taken a stand for the Fed as nonpolitical and independent. Here’s the video statement he recorded in January about the DOJ criminal probe.
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JEROME POWELL: This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions or whether instead, monetary policy will be directed by political pressure or intimidation.
ASPAN: And the thing is that a lot of powerful people – including some powerful Republicans – do agree with Powell.
DETROW: Right, tell me more about that and how this move can be tied to the Warsh confirmation.
ASPAN: So the DOJ investigation was creating real problems for Warsh, including with Trump’s own party. Senator Thom Tillis is a Republican who’s a key member of the banking committee, and he had threatened to block Warsh’s confirmation unless the Trump administration dropped this criminal probe. This is what Tillis said to Warsh during a confirmation hearing earlier this week.
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THOM TILLIS: Let’s get rid of this investigation so I can support your confirmation.
ASPAN: So now a few days later, the administration has indeed gotten rid of this investigation.
DETROW: If Warsh does get confirmed, what does that mean for Powell and for the future of the Fed?
ASPAN: So Powell has said he would step down as Fed chair once a new nominee is confirmed and the DOJ drops its investigation. But the open question is if he’ll stick around on the Fed’s board, which is the group that collectively votes to set interest rates. Powell’s term on the board doesn’t end until 2028, and if he stays, that means he gets to keep on having a say in interest rates. If he leaves, that means Trump will get another chance to nominate a new board member. And he could try to find someone who will be more likely to cut interest rates like Trump wants.
DETROW: That is NPR’s Maria Aspan. Thanks so much.
ASPAN: Thank you. Transcript provided by NPR, Copyright NPR.
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