Last Friday, the Justice Department served the Federal Reserve with grand jury subpoenas related to Fed Chair Jerome Powellâs congressional testimony regarding the Fedâs building renovations.  Powell cried foul, claiming the real target is Fed independence and interest rates.
Whether or not Powell is right about central bank pressure, the fact remains that tension between presidents and the Fed is as old as the idea of a U.S. central bank itself.  Presidents have been battling the Central Bankers since Andrew Jackson killed the Second Bank in 1832. LBJ strong-armed Fed Chair William McChesney Martin at his Texas ranch. Nixon allegedly planted stories about his Fed chair raising his own salary to undermine Arthur Burns. Even Alan Greenspan, the so-called âMaestro,â ignored George H.W. Bushâs pleas for rate cutsâBush later blamed him for losing the 1992 election.
What is clear is that now Trump is saying out loud, and taking action, on what many presidents clearly believed: The Fed should work with the White House and not against it.
From Talk To Action
Trump has gone further than his predecessors. In August, he fired BLS Commissioner Erika McEntarfer after her agency revealed massive downward revisions to jobs dataâcutting 258,000 jobs from May and June estimates alone. The Fed uses employment data to determine monetary policy as part of its dual mandate to have stable prices and maximum employment. In response, critics screamed about norms. But when a statistical agency releases data missing the mark by hundreds of thousands of jobs, maybe fresh leadership and a new approach isnât the worst idea.
Trump also moved to fire Fed Governor Lisa Cook over alleged mortgage fraudâthe first time a president has ever attempted to remove a Fed governor in accord with the Federal Reserve Act âFor Cause.â That case goes before the Supreme Court on Jan. 21, and the ruling could reshape presidential authority over the central bank for a generation.
Meanwhile, when Gov. Adriana Kugler resigned last August, Trump moved quickly to install Stephen Miran, his Council of Economic Advisers chair, onto the Fed Board. Miran has been an outspoken critic of Fed consensus. Just last week, he argued publicly that policy is âclearly restrictive and holding the economy backâ and called for over 100 basis points of cuts in 2026.
Biden Checked Out
Hereâs what the Fed-independence crowd wonât tell you: Powell testified in July 2024 that he hadnât had a substantive meeting with then-President Joe Biden in over two years. Biden never asked. Powell never offered.
Thatâs not independence. Thatâs two ships passing in the night while Americans got crushed by inflation.
During the 2008 crisis, Fed Chair Ben Bernanke and Treasury Secretary Hank Paulson talked daily. That coordination helped save the economy.
Trump wants a Fed that communicates and works with elected leadership. Thatâs not authoritarianism â itâs common sense. And letâs be clear: Fed independence is a product of tradition, not constitutional mandate; 14-year terms donât mean 14 years of isolationism, and the Federal Reserve Actâs âfor causeâ removal provision has never been tested at the Supreme Court âuntil now.
The Next Chair
Powellâs term as chair expires in May. Trump says heâll announce a replacement soon, with Kevin Hassett and Kevin Warsh widely seen as frontrunners.  But watch for other names, in particular Stephen Miran. His current term expires Jan. 31, but Trump could nominate him for a full 14-year seat and the chairmanship. Miran offers a proven track record of alignment with Trumpâs economic vision combined with serious credentialsâHarvard Ph.D., Treasury experience, and private sector success. Heâs already shown heâll challenge Fed groupthink from the inside.
The Real Question
The subpoenas have escalated this fight to DEFCON 1. Republican Sen. Thom Tillis of North Carolina â a retiring Banking Committee Republican â is blocking Fed nominees until the legal mess is sorted. Markets are watching closely. Powell says he wonât resign.
But hereâs the thing: while the President is consistently unorthodox in his approach, he has exposed a real problem. The Fed operates like a fourth branch of governmentâunelected and seemingly allergic to coordination with anyone. Its forecasts are routinely off. And its current leadership apparently believed that not meeting with the President for years was OK.
Powell declares he wonât bow to pressure. The Fed insists on its independence. But the real question isnât whether the Fed stays independentâitâs whether a Fed that refuses to work with the President serves the American people better than one that actually works with our most powerful elected representative.
The President has raised the stakes and put the Fedâs relevance in the crosshairs. The results of this battle will impact jobs and affordability for decades to come. President Trump has made it clear â he will not back down until his vision for the economy becomes our reality for winning big.
Alan Rechtschaffen is senior lecturer of capital markets law at New York University, the author of âCapital Markets, Derivatives, and the Law,â and the upcoming self-help book âTrump Your Mind.â He is also a Trustee of the Woodrow Wilson Center for Scholars.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.
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