Dem
47
GOP
53
We had a pretty long item yesterday about the sham investigation of Fed Chair Jerome Powell. And we noted that we understand what the plan is: To send a message to the Fed Governors in particular, and to all independent agency appointees in general, that they better fall in line or face a "fraud" investigation (or some other witch-hunt-y type thing).
What we don't understand is why nobody in the administration seems to notice that these various shenanigans are likely to do the White House WAY more harm than good. In the piece yesterday, we talked about some of the substantial blowback, and also some of the really obvious ways that going after Powell is actually going to make it much harder for Trump and his administration to achieve what they want.
Most presidential administrations are very familiar with the notion of trial balloons. You have some lower-level person put something out there, and you see what the response is. If it's positive, or at least not too negative, maybe you stick to your guns. If the response is very bad, you have a higher-level person, quite often the president themselves, clean up the mess by saying that the lower-level person was wrong, or they misunderstood, or something like that. It's a lie, usually, but a lie that most voters will tolerate.
Trump, of course, rarely takes those kind of off-ramps. Once he's in, he's in, and he just keeps pushing the gas pedal. That's even true with silly things like that hurricane map, where he used a Sharpie to try to magic his version of the weather forecast into reality, rather than just admit he made an error. If he can't take his lumps in a low-stakes situation like that, then he's never going to back down when it comes to something really big, like the Fed, and someone he really hates, like Jerome Powell.
And so, rather than letting this quietly fade away, Trump doubled down yesterday. Speaking to reporters outside the White House, he declared that Powell "either is incompetent or he's crooked. I don't know what he is. But he does a—certainly he doesn't do a very good job." The economy seems to have been pretty robust during Powell's term, and he and the Fed have pulled off some near-miracles when it comes to inflation. So, we're not so sure about that assessment. But if Trump is right, maybe he should do something about whatever idiot appointed Powell to be Fed Chair in the first place. Let's see, that would be... oh, wait a minute. We suppose it's possible Trump doesn't remember that he first appointed Powell, and so he's actually blaming the hated Joe Biden, who renewed the appointment. Whatever is going on, Trump promised that "That jerk will be gone soon." Frankly, we're surprised Trump has yet to make the claim that Biden signed the re-appointment with an autopen, and thus it is invalid.
Trump also claimed that many conservatives "love" the plan to investigate Powell, and that he (Trump) "can't help it" if it looks like retribution. We imagine that some conservatives, particularly the ones in Trump's bubble, do like the plan. We're not certain, though, because this is dangerously close to "some people are saying," which invariably means "nobody actually said this, which is why I can't provide any specific names." And it is definitely the case that many Republicans are very unhappy with the whole thing. That not only includes Treasury Secretary Scott Bessent, whom we wrote about yesterday, but also prominent Republicans in the House and prominent Republicans in the Senate. The particular problem for Trump is that many of the Republicans who are speaking out are members of their respective chambers' Banking Committees. And the Banking Committees can veto any Fed nominee he puts forward, if they don't like what's going on.
Powell also has the overwhelming support of the nation's and the world's bankers. Yesterday, the leaders of 11 central banks, including those of the E.U., U.K., Canada, Australia, South Korea, Brazil and Denmark, issued a statement where they praised Powell's service and pointed out how important it is to preserve the independence of the Fed, or any central bank. Of course, they have skin in the game, too, since if the U.S. economy goes on a roller coaster ride, it takes the other economies of the world with it. The CEOs of the United States' biggest banks also came out in support of Powell. So too did all three living former Fed Chairs (Janet Yellen, Alan Greenspan and Ben Bernanke), as well as 10 other former Fed governors.
But perhaps the most important advocate for Powell is Powell himself. We missed it yesterday, but he's already issued a statement making clear he's not going anywhere. He's reiterated that in conversations with the media, and has strongly implied that he just can't vacate his seat as a governor while Trump is on this particular rampage. Powell has been helping manage the economy for the better part of 40 years, in the private sector from 1984-90 and 1993-2012, as part of the Treasury Department from 1990-93, and as part of the Fed since 2012. This is his life's work, and he's not going to let it go down the drain so he has a little extra time to sit on a beach in Florida and drink mojitos.
In short, it is clear to us that this is a losing battle for Trump, and one that ends with multiple pokes in the eye, and lots of other damage being done to his personal interests. But again, he rarely backs down. So, we will get to see how long he and his team decide to play chicken. Days? Weeks? Months?
Also, since we are on the subject, we wanted to pass along this very relevant message we got from reader M.M. in Homosassa, FL:
One thing about the entire Powell and cost overrun story at the Federal Reserve that Trump and his team either have no clue about, or are lying to the country about, is this: Not one penny of taxpayer money, no Congressional appropriations were ever spent on these renovations.
The administration cannot accuse Powell of fraud in the use of taxpayer funds for this refurbishment of the Fed headquarters because the entire budget is self-funded by the independent Federal Reserve. And to say that major jobs like this often, or even usually, go over budget is an axiom. Contractors often underbid to get the work, but even when a remodel job is properly bid, you know that in a project this size there are going to be the unexpected hidden costs.
The federal reserve headquarters is actually two buildings, with a total of 400,000 square feet. This is not some post-office-level structure; it is the heart of the entire economic and banking system of the U.S. They desperately needed a lot more space for servers and modern equipment, so the footprint is being expanded to 1.1 million square feet and in the heart of D.C., that acreage does not come cheap.
The old headquarters, the larger Eccles Building, opened in 1937. Then, the rooms were small but comfortable. Now, with more people and more equipment, they are cramped. Meanwhile, the grand public spaces are protected historic spaces going on a century old. They are chock-full of antiquated plumbing, wiring, asbestos, lead paint, and features that must be preserved, like antique wood paneling and marble trim work. All of that is pricey, too.
Because no taxpayer funds were used to nearly completely rebuild these buildings, while saving the shells and historic value, and adding more than 600,000 square feet of usable space, the executive branch—and, indeed, the federal government—has no jurisdiction, any more than they would be able to accuse you of a cost overrun by putting in a spare bathroom in your home that came in over budget.
The Federal Reserve secured bids, got planning permits and construction oversight from the appropriate authorities from District officials, and have complied with the law entirely. To claim that was some nefarious fraudulent design on the part of Jerome Powell that requires investigation and possible indictment and imprisonment for this project would be laughable, if it were not for the intimidation of the Federal Reserve and a possible takeover of monetary policy by the ignoramus Trump administration. That, and not some remodeling cost overruns, are the real crime here. The charter of the Federal Reserve makes presidential nomination of board members and of the chairman, along with advice and consent by the Senate, the limit of federal authority over the Federal Reserve. That's a bright, red line.
And much damage has already been done; even the appearance of interference with the Fed's independence is corrosive to the international and domestic FAITH in our money and economics. And lest you did not know, our prosperity, banking system, government borrowing, and ability to repay in kind are all based on FAITH. It is what I learned in college for my finance degree; the only thing currently backing the U.S. dollar and our banking system is a clause in the Constitution that says:Full Faith and Credit shall be given in each State to the public Acts, Records, and judicial Proceedings of every other State. And the Congress may by general Laws prescribe the Manner in which such Acts, Records and Proceedings shall be proved, and the Effect thereof.If you are planning to loot the U.S. Treasury, what better way to do it than to effectively void that faith?
Thanks, M.M.!
We will finish by pointing out, consistent with M.M.'s remarks, that Trump has brought nearly all of the U.S. economy under his direct control, thanks to his use of tariff power, his making impoundment "legal" again by fiat, and Congress' general inability to push back. The Fed is the last remaining substantive check on his economic power. So, the administration is not going to give up this crusade easily, even if it's evident to nearly everyone outside the bubble that it's a losing proposition. (Z)