Three former heads of the US central bank on Monday strongly criticised a criminal investigation into chair Jerome Powell, describing it as a bid to undermine the Federal Reserve's independence.
In a statement, Janet Yellen, Ben Bernanke and Alan Greenspan, along with ten other eminent former officials, rallied behind Powell. This is how monetary policy is made in emerging markets with weak institutions, with highly negative consequences for inflation and the functioning of their economies more broadly, the former officials wrote.
It has no place in the United States whose greatest strength is the rule of law, which is at the foundation of our economic success, they added.
The move by the Department of Justice (DoJ) comes after a year of relentless attacks on Powell by US President Donald Trump, who has criticized Powell's decisions on interest rates and personally attacked him.
The investigation was disclosed by Powell in an unscheduled video statement, where he indicated a potential criminal indictment over his testimony regarding renovations to Federal Reserve buildings.
Powell referred to the investigation as unprecedented and suggested that it stemmed from Trump's displeasure with the Fed's interest rate policies. He stated, Those are pretexts.
Monday's public condemnation of the DoJ's investigation has seen support from former officials appointed by both Democratic and Republican presidents, highlighting the bipartisan concerns regarding Federal Reserve independence.
Notably, Yellen remarked on the chilling nature of the probe, stating, Knowing Powell as well as I do, the odds that he would have lied are zero, so I believe they're going after him because they want his seat and want him gone.
The investigation's fallout could affect Powell's position, as Trump is expected to name a replacement in the coming weeks, which has raised concerns in the Senate regarding the appointment process amidst ongoing investigations.
