The long-boiling tensions between the Trump administration and Jerome Powell’s Federal Reserve escalated over the weekend, with a New York Times report and subsequent public statement from Powell over the opening of a federal indictment about alleged false statements regarding Federal Reserve building renovations. As Ryan McMaken has already noted on this site, the investigation is a facade for a deeper disagreement over “how exactly to use the Fed’s many powers to inflate, exploit, and help fund an ever expanding federal government.”
Powell’s predictable response is to frame this as an assault of the essential myth of Federal Reserve “independence.” To Fed loyalists, independence is the ultimate liability waiver. Central banks are beyond reproach, their motivations should never be questioned by serious people, and any notion of serious oversight by Congress should be dismissed out of hand. Ron Paul’s presidential campaign succeeded in making auditing the Federal Reserve a common Republican House, but like slogans to abolish the Department of Education or the IRS, these are items Republicans talk about at campaign events that are conveniently never seriously considered by both chambers of the United States Congress.
To this point, it is the Senate that always serves as the reliable gatekeeper of Federal Reserve reform and it is the Senate where the fallout of the Trump administration’s Fed escalation will be the most significant. There are two scheduled openings on the Federal Reserve Board in 2026, including a replacement for Powell as Chair and the re-election of Trump-appointee Stephen Miran. Miran has understandably been seen as a Trump loyalist, who has voted in line with the administration’s calls for larger interest rate cuts than the rest of the board.
The immediate aftermath of the probe’s public release came with a predictable response from institutionalist senators. Outgoing North Carolina Senator Tom Tillis announced he will vote against any further nominations. Several more have announced their own concerns. Given that Miran’s original nomination only passed by a single vote last year (48-47), the administration was already working with narrow margins. A Republican senatorial rebellion could very well ensure that the Fed becomes more aligned with Powell in the future.
The concerns from the Senate should, of course, be viewed as nothing more than reflexive defenders of the Washington status quo than some courageous stand against executive power. The modern Federal Reserve, before but continuing with Powell, has been the great enabler of executive power specifically and the federal leviathan more broadly. Those who now voice concerns about norms and institutions have been toothless about a central bank that has chronically failed to meet its own inflation target, has been unable to restore its balance sheet to pre-2008 levels, and created special purpose corporations as a loophole to bailout foreign banks against their own established rules.
The modern Federal Reserve has long acted like an institution beyond rules, the backlash now has been the Trump administration’s desire to make more explicit the long standing implicit. This, of course, does not mean there are not important concerns about the administration’s desired monetary policy. In both of his terms, Trump has desired to escalate the loose monetary policy that has driven many of America’s economic and cultural issues—including wealth inequality, job offshoring, and even family creation. But the senatorial backlash is not directed towards the damage of these policies, but rather the symbolic reverence of the central bank.
In a sane world, Powell would rightfully be seen as one of the great policy villains of the modern era, alongside his predecessors of Greenspan, Bernanke, and Yellen. Instead, he will almost certainly be celebrated as a brave hero standing up against authoritarian executive overreach, just as his predecessors were celebrated for their own service to Washington’s agenda.
The cost to the administration, however, could go well beyond the canonization of a political enemy. The essential nature of the Federal Reserve in modern Washington is precisely because, unlike Congress, it is functional. While it is not independent from political pressure, it is independent of voters, largely independent of traditional partisanship, and often independent of significant media scrutiny. The Chairman of the Fed reliably gets the policy he or she wants.
For a presidential administration that values action above all else, which explains both the widespread use of tariffs and a strong pivot to foreign policy, Senatorial backlash over the central bank could well prove to have lasting impacts on many future domestic agenda goals.
Unfortunately for Americans, the last impact of a criminal probe on the Federal Reserve—something that may in fact be entirely justified—is likely only to further empower the very institutions that deserve the most amount of blame for creating the hardships that helped drive the populist impulses that empowered Trumpism in the first place.
Such is the way of Washington.
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