Bessent calls for full Fed probe as Trump ally refers Powell for criminal case
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The news: US Treasury Secretary Scott Bessent has called for an inquiry into “the entire Federal Reserve institution”, while a Republican representative has referred Chair Jerome Powell for a criminal investigation by the DOJ, as pressure from Trump administration officials and allies intensifies.
Speaking on CNBC, Bessent questioned whether the Fed has “been successful” and he also accused the central bank of “fear-mongering over tariffs”. Republican Representative Anna Paulina Luna referred Powell to the Department of Justice for allegedly lying under oath.
The context: Bessent’s comments come amid a report from The Wall Street Journal that he has been so far successful in convincing Trump not to fire Powell despite his frustrations about the Fed not cutting interest rates. Powell cannot be fired unless a specific legal cause is established, which according to the Journal, Bessent has stressed would likely face major political, legal and market repercussions.
Following market volatility last week in reaction to the pressure, Trump said it was “highly unlikely” he will fire Powell unless he “needs to leave for fraud”.
Trump and his allies are nonetheless using the Fed’s USD2.5 billion headquarters renovation, which is reportedly between USD600 million and USD700 million over budget, to ramp up criticism.
Luna’s referral follows Powell’s 25 June testimony to the Senate Banking Committee, where she alleges he made “several materially false claims” about the state of the Eccles Building and the nature of cost increases.
Responding to the claims, the Fed has been releasing information and materials about the renovation, including a FAQ and a video tour of the project, including challenges encountered such as asbestos abatement and preservation of historical details.
Powell has directed the Fed’s inspector general to review the renovation project.
What they said: “What we need to do is examine the entire Federal Reserve institution and whether they have been successful,” Bessent said during the CNBC interview. “Has the organization succeeded in its mission? If this were the [Federal Aviation Administration] and we were having this many mistakes, we would go back and look at why has this happened.”
“They were fear mongering over tariffs, and thus far we have seen very little, if any, inflation,” Bessent said. “We’ve had great inflation numbers. So, you know, I think this idea [is] of them not being able to break out of a certain mindset. All these Ph.D.s over there, I don’t know what they do.”
In her social media post, which had a copy of the referral to the DOJ, Luna said: "Chairman Powell knowingly misled both Congress and executive branch officials about the true nature of a taxpayer-funded project. Lying under oath is a serious offense— especially from someone tasked with overseeing our monetary system and public trust."
The sources: Reuters, Anna Paulina Luna, Federal Reserve, Fox News, The Wall Street Journal, Financial Times, CNBC
