The independence of the Federal Reserve has never been so fragile!
On March 4th, Nick Timiraos, the chief economic reporter of The Wall Street Journal, known as the &#34;Federal Reserve's news agency,&#34; published an in-depth report focusing on the severe challenges to the independence of the Federal Reserve following the impending departure of Chairman Jerome Powell.
The core issue of this article directly addresses the most sensitive policy controversy of the moment: When a Federal Reserve chairman, whose independence is supported by bipartisan trust and personal will, leaves office, can this firewall continue to operate? Timiraos's answer is not optimistic—he believes that the independence of the Federal Reserve may never have been so fragile.
The article reveals the entire process of the Trump administration's multi-faceted pressure on the Federal Reserve, including using a grand jury subpoena to coerce Powell, launching political attacks under the pretext of the Federal Reserve building renovation issues, and hinting at possible criminal charges against him. Powell's response—proactively disclosing the subpoena content and recording a video to directly address the issue—while temporarily stabilizing the situation, also clearly shows that the outcome of this game largely depends on one person's courage and qualifications, rather than the resilience of the system itself.
The article points out that what is even more alarming is that as Powell's term ends in May, Trump still has a full three years to gradually infiltrate the Federal Reserve. One scenario that insiders at the Federal Reserve are most worried about is taking shape:
<blockquote>
If Trump's nominee to succeed Powell, former Federal Reserve Governor Kevin Warsh, fails to deliver on the promise of interest rate cuts, the majority of seats held by Trump's camp on the board may quietly reshape the institution from within—attempting to dismiss the 12 regional Federal Reserve presidents who have the authority to set interest rates, concentrating control of monetary policy in the hands of presidential appointees. This has never happened in the history of the Federal Reserve.
</blockquote>
<h2>The &#34;Palace Coup&#34; Incident: An Unprecedented Showdown</h2>
Timiraos states, the story begins with an &#34;unusual email.&#34; At the end of December last year, the Federal Reserve received two emails from a lawyer at the Southern District of New York Attorney's Office, Carlton Davis, which were casual in tone, containing no specific inquiries or mentions of any investigation, resembling more of an informal conversation rather than a formal legal procedure. The Federal Reserve did not respond.
Subsequently, the situation escalated sharply. On January 9, 2025, the Federal Reserve received a formal subpoena bearing the grand jury seal, signed by Davis, investigating the Federal Reserve building's renovation project that had lasted for years.
Timiraos points out in the article that on the surface it was a financial review, but in essence—as Powell stated in a subsequent video—&#34;these are all excuses.&#34; Former Treasury Secretary and former Federal Reserve Chair Janet Yellen harshly criticized this, saying, &#34;Trump's actions are completely unscrupulous, turning the Department of Justice into a weapon. This has never happened in the United States before.&#34;
Faced with this situation, Powell made an unconventional decision: to proactively disclose. No defense attorney would advise doing this, but Powell judged that the political manipulation of this investigation was too obvious, and proactive disclosure could maximize public and political support. He recorded a video in one take at the Federal Reserve studio on a Sunday night and immediately began to contact members of both parties in Congress one by one
Timiraos stated, it has proven that his judgment was correct—just twenty minutes after the video was released, Republican Senator Thom Tillis publicly announced that he would block the confirmation of any Federal Reserve nominees until the investigation is withdrawn.
<h2>The True Foundation of Independence: Institutional Moat or Personal Credibility?</h2>
The article states that the independence of the Federal Reserve has several &#34;moats&#34; in its structural design: it does not rely on congressional appropriations and manages its budget independently; the terms of the board members last for 14 years and are legally protected from arbitrary dismissal. These institutional designs were originally intended to allow the Federal Reserve to maintain its composure amid political storms.
However, former Federal Reserve economist Claudia Sahm pointed out the Achilles' heel of this design: &#34;Whether this institution can continue to stand should not depend on any one person. That is not a sufficiently robust protection.&#34;
Timiraos noted that Powell's ability to stand firm in this game relies on the connections and trust he has built over the years with both parties in Congress—appointed as a board member by Obama, nominated as chairman by Trump, and reappointed by Biden—this bipartisan political experience is almost unique in today's Washington. Once this &#34;personal credibility&#34; dissipates with his departure, it is uncertain whether the institution itself can uphold that defense line.
The article mentions that former Powell senior advisor Jon Faust bluntly expressed his pessimism, saying he is &#34;very pessimistic about whether the U.S. can avoid the complete partisanship of monetary policy during the remainder of Trump's term.&#34; His reasoning is clear: Trump has successfully brought institutions that should remain neutral, such as the Department of Justice and the FBI, into the political fold, and the Federal Reserve has no reason to be an exception.
<h2>The Dilemma of the Successor: Can Waller Maintain This Line?</h2>
Timiraos believes that Trump's choice of Waller to succeed Powell is itself a signal filled with tension. Waller was widely regarded as a staunch defender of institutional independence during his tenure at the Federal Reserve 15 years ago; however, in recent years, he has publicly endorsed Trump's criticisms of the Federal Reserve, stating, &#34;I frankly understand his frustration very well.&#34; Former colleagues find it difficult to reconcile this shift, with some believing it is merely a pose to seek the position.
The problem is that Waller is taking over a structural dilemma: on one hand, he must demonstrate sufficient loyalty to secure the appointment; on the other hand, once in office, the market, Congress, and colleagues will demand that he show independence—and this independence is precisely what Trump cannot tolerate. Claudia Sahm refers to this situation as &#34;pre-compromised.&#34;
The article points out that Trump, the day after announcing the nomination, jokingly said at the Alpha Club dinner in front of everyone that if interest rates do not drop, he would sue Waller. The &#34;punchline&#34; of this joke is built on the background that Powell was facing real legal threats at the time—its irony is self-evident, and the warning is all too clear. Powell's only piece of advice was: &#34;Don't get caught up in partisan politics. Don't do that.&#34;
<h2>The Most Dangerous Scenario: Internal Collapse of the Federal Reserve</h2>
Timiraos stated that while the Powell era faced external pressures, after Powell's departure, the risks are more likely to come from internal infiltration. Currently, Trump has appointed 3 of the 7 Federal Reserve governors and is attempting to remove another governor, Lisa Cook, on the grounds of &#34;mortgage fraud&#34;—Cook denies any wrongdoing, and the case is still under review by the Supreme Court.
If Cook is removed and the seat left by Powell is also filled by Trump, then Trump's appointees will hold a majority on the board. At that point, the scenario most feared by insiders at the Federal Reserve could become a reality.
The core concern among Federal Reserve insiders is: Once a majority of governors align with the president, they may attempt to dismiss the 12 regional Federal Reserve presidents who have the authority to set interest rates. This has never happened in the history of the Federal Reserve, and if it does, the decision-making power over interest rates will effectively be concentrated in the hands of the president's appointees, rendering the independence of monetary policy a mere facade. It would be akin to quietly transforming a central bank that should operate independently into an execution department for presidential economic policy—without rewriting any laws, simply by gradually replacing personnel.
<h2>Chronic Erosion is More Dangerous than Direct Confrontation</h2>
Timiraos presents an important judgment framework in the article: The loss of the Federal Reserve's independence does not necessarily require dramatic ruptures, such as the president directly firing the Federal Reserve chairman or Congress rewriting the Federal Reserve Act.
<blockquote>
The real threat is often insidious—&#34;a president demanding interest rate cuts, a chairman unable to refuse, and a few congress members willing to intervene.&#34;
</blockquote>
Historically, President Johnson reportedly cornered the Federal Reserve chairman, questioning his patriotism; during Nixon's term, immense pressure was also applied to the Federal Reserve, leading to subsequent inflation. However, directly threatening the Federal Reserve chairman through criminal investigation is a completely different level of overreach, unprecedented.
<blockquote>
The more profound consequence is that once the market and the public form the expectation that &#34;the Federal Reserve chairman is merely a political appointee executing orders,&#34; every future president will have the motivation to treat the Federal Reserve in the same way. Once this expectation is established, it is difficult to reverse—like breaking a window; if it is not repaired, the next window is even easier to break.
</blockquote>
<h2>After Powell, Who Will Guard This Line of Defense?</h2>
The deep reporting article ultimately points to a more fundamental question than the direction of interest rates: Can the monetary policy of a democratic country maintain its independence under sustained political pressure?
Powell's departure takes away not just a chair but also the trust moat he built between the two parties over eight years. His successor, Waller, will operate in a tighter and more dangerous space, facing a three-way tug from the president, the market, and colleagues at any moment.
Meanwhile, Trump has a full three years to gradually infiltrate the board through personnel arrangements, potentially achieving his goal that he has never publicly acknowledged but has been advancing through actions: to make the Federal Reserve's interest rate decisions subordinate to the political agenda
<blockquote>
As former senior advisor to Powell Jon Faust said, he is no longer surprised by Trump's next move - &#34;I think he will push this to the extreme.&#34; And where that &#34;extreme&#34; actually lies may only become clear when the next Federal Reserve Chair faces the first real stress test
</blockquote>

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Timiraos believes that after Powell's departure, the independence of the Federal Reserve faces severe challenges. Trump's previous extreme pressure was only alleviated by Powell's personal qualifications, exposing the institutional weaknesses. The biggest threat in the future is that Trump may control the majority of the board through personnel infiltration, forcing his successor to compromise, or even dismissing regional Federal Reserve presidents to centralize monetary decision-making power, quietly undermining the independence of the Federal Reserve from within

- The article discusses the challenges facing the Federal Reserve's independence following the impending departure of Chairman Jerome Powell.  
- It outlines the systemic pressures from the Trump administration and the potential for internal changes that could undermine the Fed’s autonomy.  
- The piece ultimately raises concerns about whether a successor can maintain this independence amid political pressures, signaling a concerning trend for future monetary policy.

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Federal Reserve News Agency: After Powell, can the Federal Reserve still have independence?