Threat to Federal Reserve's independence and economy, too

More than 50 years ago, a Federal Reserve chairman bent to pressure from a president, as then-Chair Arthur Burns kept interest rates low at the behest of President Richard Nixon, who thought higher rates would hurt his 1972 reelection chances.

Consequences came quickly, in the form of extraordinary and severe inflation. It took a fresh streak of independence from Paul Volcker, the Fed chair under President Jimmy Carter, to push interest rates higher, rebalance the economy and bring inflation down.

The importance of a trustworthy and independent central bank, and a thoughtful leader who makes decisions without regard to political ramifications, can’t be overstated. It’s paramount to the success and stability of the U.S. economy and the world’s financial systems. Any threat to an unfettered, unrestrained Fed is a threat to the economic foundations upon which we depend.

That’s what makes the criminal investigation into Federal Reserve Chair Jerome Powell over the renovation of its Washington headquarters so disturbing. In a rare video message released Sunday, Powell disclosed the investigation, calling it “unprecedented.”

The investigation emerged from the office of Jeanine Pirro, longtime confidante of President Donald Trump and, now, the U.S. attorney for the District of Columbia. As the backlash takes on steam, the White House and the Justice Department are leaking unbelievable reports that they were blindsided by Pirro’s actions.

Trump claims he knows nothing about it. But the move comes amid a constant pressure campaign against Powell, who the president says hasn’t lowered interest rates enough, and came just weeks after Trump highlighted the notion of “a suit against Powell for incompetence.” The inquiry’s focus on cost overruns in building renovations is especially laughable given Trump’s own unilateral White House ballroom construction efforts.

The inquiry is not only further evidence of a weaponized Justice Department, it reveals how Trump wants to consolidate control, eviscerating the laws and traditions protecting an independent central bank. The Justice Department should drop this sham investigation.

Republican Sens. Thom Tillis and Lisa Murkowski rightly pushed back on the DOJ probe, promising to block any Fed nominations — including efforts to replace Powell, whose term as chair ends on May 15, until the situation is resolved. More congressional voices should come forward, as should the nation’s most powerful financial services executives, who know Powell is right and Trump is wrong.

GOP House Financial Services Committee Chairman French Hill said Monday the investigation “could undermine this and future Administrations’ ability to make sound monetary policy decisions.” Rep. Andrew Garbarino, a member of that committee, took a page from Hill’s book, saying the Fed’s “independence is essential to its mission and should not be undermined by political pressure.” Fellow local Republican Rep. Nick LaLota, meanwhile, remained silent Monday.

Powell, however, hasn’t been silent. “Public service sometimes requires standing firm in the face of threats,” he said.

Powell, the Federal Reserve and those who support their work need to do just that.