Seven former top federal financial regulators condemned an investigation launched by the U.S. Department of Justice (DOJ) against Federal Reserve Chairman Jerome Powell as a threat to the agency’s independence.
The DOJ accused Powell of making false or misleading statements to the Senate Banking Committee in June 2025 while testifying about the Fed’s multiyear, $2.5 billion renovation of its Washington, D.C., headquarters.
Powell said the allegations should be viewed “in the broader context of the administration’s threats and ongoing pressure” with respect to monetary policy decisions.
“This new threat is not about my testimony last June or about the renovation of the Federal Reserve buildings,” he said. “It is not about Congress’s oversight role; the Fed through testimony and other public disclosures made every effort to keep Congress informed about the renovation project. Those are pretexts. 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.
“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.”
Standing firmly behind Powell’s assertions are several banking executives, such as JPMorgan Chase CEO Jamie Dimon and Bank of New York Mellon CEO Robin Vince.
Powell has also received expressed support from former Federal Reserve chairs Alan Greenspan, Ben Bernanke and Janet Yellen, as well as former Treasury secretaries including Timothy Geithner, Jacob Lew, Henry Paulson and Robert Rubin, who signed a joint statement criticizing the DOJ’s criminal inquiry as an unprecedented threat to Fed independence.
“The Federal Reserve’s independence and the public’s perception of that independence are critical for economic performance, including achieving the goals Congress has set for the Federal Reserve of stable prices, maximum employment, and moderate long-term interest rates,” the former regulators wrote. “The reported criminal inquiry into Federal Reserve Chair Jay Powell is an unprecedented attempt to use prosecutorial attacks to undermine that independence.”
They further compared Trump’s apparent use of political pressure to influence the Fed’s decisions as an action more closely resembling that of a developing nation rather than an established one.
“This is how monetary policy is made in emerging markets with weak institutions, with highly negative consequences for inflation and the functioning of their economies more broadly,” they wrote. “It has no place in the United States whose greatest strength is the rule of law, which is at the foundation of our economic success.”
Dodd Frank Update asked First American Senior Economist Sam Williamson to break down why the Fed’s independence is so important to the security of the housing finance sector.
Williamson asserted that “any erosion of independence risks chipping away at the U.S. ‘safe-haven’ premium, adding further upward pressure to required compensation for risk.”
“Doubts in the Fed’s independence and policy decisions can prompt investors and households to question whether the Fed will do what is needed to keep inflation in check,” he said. “Such doubts can unsettle inflation expectations and encourage markets to demand a larger risk and term premium, pushing longer-term yields higher and keeping them elevated relative to a fundamentals-driven path.”
Williamson went on to say that whether the Fed’s policy decisions are popular or not is ultimately secondary in importance to ensuring that they are driven by data and not politics.
“While higher rates can weigh on affordability and sales activity, the broader point is that a credible, independent Fed focused on delivering stable prices and a strong labor market creates the most supportive overall environment for housing,” he said. “Fed independence helps anchor inflation, sustain job growth and reduce uncertainty, all of which are essential foundations for a gradual, sustainable recovery in the housing market.”