Wall Street Rallies Behind Jerome Powell as the Fed’s Independence Comes Under Threat

This week, several of America’s most influential banking CEOs came out in support of Jerome Powell after the Trump administration threatened the Federal Reserve chair with a criminal investigation in a move that could shake the central bank’s long-standing independence.

CEOs from JPMorgan Chase’s Jamie Dimon to Bank of America’s Brian Moynihan warned that interference with the outgoing Fed chair could undermine the foundation of the U.S. economy. Their comments come as President Donald Trump ramps up his public pressure on the Fed, which he has spent the past few months criticizing over its perceived reluctance to cut interest rates. Those efforts have included threatening to fire Powell and nominating loyalists to fill the central bank’s board vacancies.

The administration’s attempt to twist the Fed’s arm reached a crescendo earlier this week, when Powell revealed that the central bank had received subpoenas from the Department of Justice (DoJ) related to the $2.5 billion renovation of the Fed headquarters in Washington, D.C. According to Powell, the probe is a thinly veiled attempt to push for faster rate cuts. “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,” he said in a statement.

Wall Street executives might not back all of Powell’s decisions. But one thing they broadly agree on is that the Fed’s autonomy is key to a sustainable economy—one free from short-term political pressures.

“Everyone we know believes in Fed independence,” said Dimon during a recent call with reporters. “Anything [that] chips away at that is probably not a great idea, and in my view will have the reverse consequences,” added the CEO, who noted that the DoJ’s investigation could eventually lead to higher inflation expectations and interest rates over time.

Dimon’s comments marked a departure from the executive’s earlier stance. He has managed to stay in Trump’s good graces by striking a more measured tone on policy disagreements. He also drew a rebuke from the President himself, who called the JPMorgan head “wrong” and suggested that Dimon “probably wants higher rates—maybe he makes more money that way.”

Much of Wall Street has sought to remain on Trump’s good side so far in his second term. But the President’s escalating attacks on the Fed appear to have crossed a line for many banking leaders, prompting an outpouring of support for Powell. Jeremy Barnum, JPMorgan’s chief financial officer, echoed Dimon earlier this week, telling reporters that “loss of Fed independence tends to lead to steeper yield curves and other damage to ongoing economic dynamism,” with the potential to harm both the U.S. economy and “global economic stability.”

Robin Vince, head of the Bank of New York Mellon, also criticized the investigation, calling it a “counter-productive” move that could put the bond market at risk. “Doing things that are going to detract from that agenda don’t seem like the best things to do now,” he said.

It is “fair game” to offer critical commentary on the Fed’s decisions, including whether policymakers are acting too quickly or too slowly, according to Moynihan. But the Bank of America CEO draws the line when it comes to threatening the central bank’s autonomy, which he described as essential to American prosperity. “An independent Fed provides an anchor in this country to a success that all of us believe in,” he told CNBC yesterday (Jan. 14).

Support for Powell has extended beyond sitting CEOs to former economic officials. More than a dozen past leaders, including former Fed chairs Janet Yellen, Ben Bernanke and Alan Greenspan, issued a statement on Jan. 12 warning that such attacks have “no place” in the U.S. They described the approach as akin to 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.”

Internationally, central bankers have also rallied around the Powell. “Chair Powell has served with integrity, judgment and unwavering commitment to the public interest,” read a recent letter signed by the heads of the European Central Bank, Bank of England and Bank of Canada, among others. “To us, he is a respected colleague who is held in the highest regard by all who have worked with him.”