Jack Zhou — April 28, 2026
In 1913, the Federal Reserve was created as an independent entity, an idea that has since come under attack. Since returning to office, Trump has relentlessly pressured Federal Reserve (Fed) Chair Jerome Powell to cut interest rates. When Powell resisted, the Department of Justice (DOJ) opened a criminal investigation into him over alleged cost overruns at the Fed’s Washington headquarters renovation. These allegations come despite the fact that a federal prosecutor admitted to a judge last month that his office had found no evidence of any crimes. Nonetheless, the probe sparked something real; it created a Senate blockade on Trump’s nominee to replace Powell, Kevin Warsh. Republican Senator Thom Tillis, a Banking Committee member, vowed to block confirmation until the investigation was resolved. With Powell’s term expiring May 15, that impasse ended Friday when U.S. Attorney Jeanine Pirro closed the probe, handing the matter to the Fed’s inspector general. Tillis signaled his support the same day. The committee is scheduled to vote on Wednesday.
The Hearing
At his Senate Banking Committee hearing on April 21, Warsh worked to present himself as no one’s puppet. He told Senators Trump had “never asked me to predetermine” any rate decision and declared that “monetary policy independence is essential.” He called for the Fed to stay focused on its core mandate rather than straying into fiscal or social policy, a subtle critique of the Powell era’s expansive scope. Furthermore, Warsh said he does not believe independence is “particularly threatened” when elected officials voice opinions on rates, a meaningful departure from the traditional norm where presidents stayed publicly silent on monetary policy. Two hours before the hearing opened, Trump told CNBC he would be “disappointed” if Warsh did not lower rates after confirmation, a statement that hovered over every exchange.
An Uneasy Resolution
The DOJ’s retreat is less decisive than it looks. Pirro made clear that her office could restart the criminal investigation “should the facts warrant,” suggesting that the Trump administration could continue to apply pressure in the future. A separate DOJ investigation into Fed Governor Lisa Cook, who, like Powell, resisted Trump’s rate demands, remains open. Senator Elizabeth Warren (D-MA) put it bluntly by calling the entire episode an attempt to “install President Trump’s sock puppet as Fed Chair,” while Columbia Law professor Lev Menand warned that “we would be foolish to conclude from this that the Fed is out of the woods.” Whether Warsh governs as an independent actor or not, the more lasting damage may already be done: the Trump administration has demonstrated that a sitting president can wield the Justice Department against the central bank, and that the Fed’s independence is a norm to be negotiated rather than an institution to be respected.
Read more here
