The Federal Reserve Standoff

National Review Online

Friday, April 17, 2026

 

There is a crisis brewing at the Federal Reserve, and a completely unnecessary one.

 

President Trump wants the current chairman, Jerome Powell, whose term expires in a few weeks, to be gone. The Republican-led Senate wants to replace Powell with Kevin Warsh, but only if Trump agrees to end the absurd criminal probe into Powell that he launched earlier this year. Powell also wants Trump to end that probe and has threatened to stay in place, pro tempore, until his successor is approved. Trump neither wishes to end the probe nor leave Powell in place, and he has thus threatened to fire Powell if he stays on after his term is up. If Trump were to follow through, we would enter uncharted waters, with potentially significant economic consequences.

 

The easiest way out of the thicket would be for the DOJ to stop the legal harassment of Powell. He is yet another example of a person on Trump’s bad list who we are supposed to believe — very conveniently for Trump’s purposes — just happened to engage in suspected criminal behavior worthy of investigation and perhaps prosecution. Powell’s underlying offense, of course, is not cutting interest rates on a timetable to Trump’s liking. This almost certainly makes him the first monetary official in the history of the United States to be criminally investigated over his worries that core inflation might still be too high.

 

The probe is supposedly over Powell potentially misleading Congress about the expensive renovation of the Fed’s headquarters, a topic that Trump has banged on about. The DOJ has already seen a federal judge take the unusual step of squashing subpoenas in the clearly pretextual investigation. Showing persistence, if nothing else, the department sent a team of prosecutors and a federal investigator to the construction site the other day, only to get turned away.

 

Senator Thom Tillis, who sits on the banking committee, is vowing to block Warsh’s nomination until the DOJ probe ends.

 

As a legal matter, all of this, for now at least, involves questions of “ought” rather than “is.” Legally, President Trump can bring criminal probes — even frivolous ones. He should not have brought this one.

 

Legally, the Senate can decline to move expeditiously to confirm a new executive official. In this case, it should do the opposite. And, yes, there is a serious argument that under Article II, Trump can fire the chairman of the Federal Reserve. But, understanding that the United States (and his administration) has a great deal to gain from the separation of transient politics and stable monetary policy, he should not wish to do any such thing. Ultimately, then, this is a matter of prudence.

 

If things continue along the current path, consequential legal questions will come into play.

 

Because the Federal Reserve is so important, and its ostensible independence is so useful, the desired aim here should be to bring about a resolution that will prevent the president from summarily firing its leader and putting the constitutional basis of the Fed to the test.