Former Federal Reserve Chair Janet Yellen has expressed serious concerns over the ongoing criminal probe into current Fed Chair Jerome Powell, suggesting that the situation is “extremely chilling” for the independence of the central bank.
Yellen, who also served as Treasury secretary under the Biden Administration, after leaving the Fed, told CNBC that she believes this is an attempt to undermine the Fed’s independence.
She said she was surprised by the lack of concern in financial markets, remarking that “it seems to me that the market should be concerned.”
On Monday, the S&P 500 and Nasdaq Composite closed 0.16% and 0.26% higher, respectively, while the Dow Jones Industrial Average closed higher by 0.17%, shrugging off initial Fed jitters.
Yellen also defended Powell, saying that the odds of him lying “are zero,” and added that she believes the Trump administration is going after him is because they “want him gone.”
Yellen also criticized President Donald Trump‘s public remarks on the Fed, saying she disagreed with his calls for rate cuts to reduce federal debt payments and warned that such an approach would put the country on a path toward a “banana republic.”
Meanwhile, former Fed Chairs Ben Bernanke and Alan Greenspan, ex-Treasury secretaries, and leading economists warned that a criminal probe into Powell threatens the Fed’s independence, comparing it to practices in weak-institution economies and saying it has no place in the United States.
Trump’s Repeated Attacks On Powell
During his second term, Trump has repeatedly targeted Powell, publicly criticizing him and pushing for rate cuts to lower federal debt payments. He also raised doubts about the prolonged renovation of the Fed building and even visited the renovation site in July to validate his claims.
After having expressed a desire to bring in a lawsuit against Powell, Trump’s latest attack came on Sunday with the DOJ’s threat of a criminal indictment against the Fed over Powell’s testimony before Congress, which the Fed has labeled as a pretext for a power struggle over U.S. monetary policy.
Powell Defends Fed As Economist Issues Warnings
Powell hit back at the DOJ’s threats with a video, calling the building renovation costs and related grand jury subpoenas mere pretexts for the real conflict, which he claimed was about control of U.S. monetary policy.
Economist Justin Wolfers characterized Powell’s public address as a direct counter-offensive against executive pressure, declaring that Powell is “going to war” to protect the central bank’s independence against what he terms the “Department of Recriminations.” In another interview with the BBC, Wolfers also warned that the DoJ probe on Powell could lead to “hyperinflation.”
Meanwhile, Yellen has also been critical of Trump’s fiscal policies and attempts to control the Fed. In August, she had warned of potential “catastrophic” consequences of the president’s attempt to dismiss Fed Governor Lisa Cook, stating that politicized central banks deliver higher inflation, volatile growth, and weakened currencies, which cannot be good for the U.S.
Image via Shutterstock
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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