Federal Reserve News Agency: After Powell, can the Federal Reserve still maintain its independence?

The Federal Reserve’s independence has never been more fragile!

On March 4th, Nick Timiraos, chief economics reporter at The Wall Street Journal—often called the “Fed Correspondent”—published an in-depth article focusing on the serious challenges to the Fed’s independence after Chair Powell’s upcoming departure.

The core issue of the article directly addresses the most sensitive policy controversy today: when a Fed chair, who relies on bipartisan trust and personal credibility to maintain independence, leaves office, can this firewall continue to operate? Timiraos’s answer is not optimistic—he believes the Fed’s independence may be more vulnerable than ever before.

The article reveals the full process of the Trump administration exerting pressure on the Fed, including using Department of Justice grand jury subpoenas to compel Powell, launching political attacks under the pretext of renovations at the Fed building, and hinting at possible criminal charges. Powell’s responses—publicly releasing subpoena details, recording videos to address the public—temporarily stabilized the situation but also made it clear: the outcome of this game largely depends on one person’s courage and credibility, not the resilience of the system itself.

The article points out that what’s even more alarming is that, with Powell’s term ending in May, Trump still has three years to gradually influence the Fed. A scenario is forming inside the Fed that worries insiders most:

If Trump’s nominee to succeed Powell, former Fed Governor Waller, cannot deliver on promises to cut interest rates, the majority of the Federal Reserve Board, which is held by Trump’s allies, could quietly reshape the institution from within—including attempting to dismiss the 12 regional Fed presidents with authority over interest rates, consolidating monetary policy control into the hands of the President’s appointees. This has never happened in Fed history.

The story of Powell’s “pressure campaign”: an unprecedented showdown

Timiraos states that the story begins with an “unusual email.” At the end of December last year, the Fed received two emails from Carlton Davis, a lawyer in the Southern District of New York’s prosecutor’s office. The tone was casual and informal, with no specific inquiries or mention of any investigation—more like an informal meeting request than a formal legal process. The Fed did not respond.

Soon, the situation escalated sharply. On January 9, 2025, the Fed received a formal subpoena bearing a grand jury seal, signed by Davis, investigating years of renovation work at the Fed building.

Timiraos notes that on the surface, it’s a financial review, but in reality— as Powell stated in a subsequent video—“these are just excuses.” Former Treasury Secretary and Fed Chair Janet Yellen harshly criticized this: “Trump’s approach is completely unscrupulous, turning the Department of Justice into a weapon. This has no precedent in the U.S.”

Faced with this situation, Powell made an unconventional decision: to proactively disclose. Any defense lawyer would advise against this, but Powell judged that the political manipulation behind the investigation was so obvious that transparency could mobilize public and political support. He recorded a video in the Fed’s studio on a Sunday night, speaking directly to Congress members from both parties.

Timiraos states that the evidence shows he was right—within twenty minutes of releasing the video, Republican Senator Thom Tillis publicly announced he would block any Fed nominee’s confirmation until the investigation was dropped.

The true foundation of independence: institutional safeguards or personal credibility?

The article states that the Fed’s independence is protected by several “moats” in its structure: it is not dependent on congressional appropriations, manages its own budget; its board members serve 14-year terms and are legally protected from arbitrary dismissal. These design features were originally meant to help the Fed stay steady amid political turbulence.

However, former Fed economist Claudia Sahm sharply pointed out the weaknesses of this setup: “Whether this institution can continue to stand should not depend on any one person. That’s not a sufficiently robust safeguard.”

Timiraos suggests that Powell’s ability to hold his ground in this game relies on his years of bipartisan trust and connections—appointed by Obama as a director, nominated by Trump as chair, and reappointed by Biden—such cross-party political credibility is almost unique in Washington today. Once this “personal credit” dissipates after his departure, whether the system can still support that firewall remains uncertain.

The article quotes former senior Powell advisor Jon Faust, who candidly says he is “very pessimistic” about whether the U.S. can prevent monetary policy from becoming fully partisan during Trump’s remaining term. His reasoning is clear: Trump has already successfully politicized agencies like the Department of Justice and FBI, so there’s no reason for the Fed to be immune.

The dilemma for the successor: can Waller maintain this line?

Timiraos believes that Trump’s choice of Waller as Powell’s replacement is itself a tense signal. Waller, 15 years ago at the Fed, was widely regarded as a staunch defender of independence; but recently, he has publicly supported Trump’s criticism of the Fed, saying “I frankly understand his frustration.” Former colleagues find this shift difficult to reconcile, some see it as a move to seek the position.

The problem is, Waller faces a structural dilemma: on one hand, he must show enough loyalty to secure the appointment; on the other, once in office, markets, Congress, and colleagues will demand independence—which Trump cannot tolerate. Claudia Sahm calls this situation “pre-compromised.”

The article notes that, the day after Trump announced his nomination, he joked at a dinner that if rates don’t go down, he will sue Waller. This joke’s “punchline” is based on the real legal threats Powell faced at the time—an obvious irony and a stark warning. Powell’s only advice: “Don’t get caught up in partisan politics. Don’t do that.”

The most dangerous scenario: internal disintegration of the Fed

Timiraos states that if Powell’s era was characterized by external pressure, the risks after his departure are more about internal infiltration. Currently, Trump has appointed three of the seven Fed governors and is trying to remove another, Lisa Cook, on charges of “mortgage fraud”—which she denies, and the case is still before the Supreme Court.

If Cook is dismissed and Trump fills Powell’s vacated seat, the majority of the Board will be Trump appointees. At that point, the most concerning scenario for insiders could become reality.

The core concern inside the Fed is: once most governors align with the President, they might try to dismiss the 12 regional Fed presidents who set interest rates. This has never happened before in Fed history. If it does, the authority over interest rate decisions would effectively be concentrated in the President’s appointees, rendering monetary policy independence a thing of the past. It would be akin to transforming a traditionally independent central bank into an arm of presidential economic policy—without changing any laws, just by replacing personnel gradually.

Chronic erosion is more dangerous than direct conflict

Timiraos offers an important framework: the loss of Fed independence does not necessarily require dramatic breakages, such as the President directly firing the Fed Chair or Congress rewriting the Federal Reserve Act.

The real threat is often silent—“a president demanding rate cuts, a chair unable to refuse, and a few Congress members willing to intervene.”

Historically, President Johnson reportedly cornered the Fed Chair, questioning his patriotism; Nixon also exerted enormous pressure during his term, contributing to inflation. But threatening the Fed Chair with criminal investigations is a different level of overreach—unprecedented.

The deeper consequence is that once markets and the public start to believe “the Fed Chair is just a political appointee,” every future president will have motivation to treat the Fed the same way. Once this expectation takes hold, it’s hard to reverse—like breaking a window that, if left unrepaired, makes it easier to break the next one.

Who will defend this firewall after Powell?

This in-depth article ultimately points to a more fundamental issue than interest rates: can a democracy’s monetary policy remain independent under sustained political pressure?

Powell’s departure takes away not just a chair but the trust moat he built over eight years across bipartisan lines. His successor, Waller, will operate in a tighter, more dangerous space, facing constant tug-of-war from the President, markets, and colleagues.

Meanwhile, Trump still has three years to gradually influence the Board through personnel appointments, potentially achieving a goal he has never openly admitted but has been actively pursuing: making the Fed’s rate decisions subordinate to political agendas.

As former senior Powell advisor Jon Faust said, he’s no longer surprised by Trump’s next move—“I think he will push this to the extreme.” The exact “extreme” may only become clear when the next Fed chair faces their first real test under pressure.