Former Fed chairs condemn criminal investigation into Jerome Powell

Three former leaders of the US central bank sharply criticized the criminal investigation into President Jerome Powell on Monday, calling it an attempt to undermine the independence of the Federal Reserve.

In a statement, Janet Yellen, Ben Bernanke and Alan Greenspan, along with ten other prominent former officials, rallied behind Powell.

“This is how monetary policy is made in emerging markets with weak institutions, with very negative consequences for inflation and the functioning of their economies in general,” the former officials wrote.

“This has no place in the United States, whose greatest strength is the rule of law, which is the basis of our economic success,” they added.

The move by the Department of Justice (DoJ) comes after a year of relentless attacks on Powell from US President Donald Trump.

In addition to criticizing Powell’s interest rate decisions, Trump made personal attacks, calling the Fed chairman a “big loser” and “numb.”

The president said he “knows nothing” about the investigation. The Justice Department has been contacted for comment.

The DoJ investigation was first disclosed by Powell in an unscheduled video statement on Sunday. He said the Justice Department threatened to criminally charge him for his testimony before a Senate committee last year about the renovation of Federal Reserve buildings.

Powell called the investigation “unprecedented” and said he believed it stemmed from Trump’s anger that the Fed had not lowered interest rates more quickly.

“This new threat is not about my testimony last June or the renovation of the Federal Reserve buildings,” Powell said. “These are pretexts.”

The central bank lowered its policy rate target three times during the second half of 2025, placing it in a range of 3.50% to 3.75%, its lowest level in three years. But Trump has repeatedly said the central bank has not cut interest rates as sharply as he would like.

The DoJ investigation “must be viewed in the broader context of the administration’s continued threats and pressure,” Powell said in his statement.

Monday’s public condemnation of the DoJ’s decision was signed by former federal government officials appointed by both Democratic and Republican presidents.

Asked Monday by Fox News about the independence of the Fed, White House spokesperson Karoline Leavitt deferred to the Department of Justice.

“Jerome Powell has proven that he is not good at his job,” Leavitt said. “As to whether he is a criminal, that is an answer that the Department of Justice will have to find.”

Trump has publicly urged Powell to cut interest rates to reduce the U.S. government’s high borrowing costs and make it easier for Americans to obtain mortgages and other loans.

Last year, he spent months attacking Powell on social media and in remarks to reporters. He floated the possibility of firing Powell, only to quickly abandon the idea, which analysts said would shake financial markets and spark a legal battle.

Yellen, who chaired the Fed for a year during Trump’s first term before being replaced by Powell, said in separate comments that the investigation was “extremely frightening.”

“Knowing Powell as well as I do, the chances that he lied are zero, so I believe they are going after him because they want his seat and want him gone,” Yellen told CNBC.

She suggested investors should be concerned about the development.

“You have a president who says the Fed should cut rates to reduce payments on the federal debt…This is the road to the banana republic.”

Trump is expected to name someone in the coming weeks to replace Powell, whose term as Fed chair ends in May.

But the Justice Department’s investigation and the resulting backlash could disrupt the confirmation process.

North Carolina Sen. Thom Tillis, a Republican on the Senate Banking Committee, said he would oppose Trump’s nomination of Powell’s replacement, as well as any other nominee to the Fed board, until the issue is “fully resolved.”

The initial reaction from US stock markets was muted on Monday. The S&P 500 index was roughly flat in early afternoon trading, a notable contrast from last year, when markets were roiled by perceived threats to the Fed’s independence.

Global markets were also “remarkably resilient” on Monday, said Danni Hewson, head of financial analysis at AJ Bell. She noted that despite the general calm, financial stocks actually fell as investors weighed the effects of a possible 10% cap on credit card interest rates.

However, analysts believe that the market reaction could intensify if Trump manages to influence Fed policy.

Some Republican lawmakers also expressed concerns about how the Justice Department investigation could affect the Fed’s work.

Rep. French Hill, Republican chairman of the House Financial Services Committee, said in a statement that the investigation was causing an “unnecessary distraction” and could “undermine the ability of this and future administrations to make sound monetary policy decisions.”

Sen. Kevin Cramer, a Republican member of the Senate Banking Committee, criticized Powell in a statement but added: “I do not believe he is a criminal, however. I hope this criminal investigation can be brought to a close.”