Yellen says Powell probe ‘extremely chilling’ for Fed independence

Former Fed Chair Janet Yellen on Monday condemned the investigation into her successor Jerome Powell, saying it jeopardized the independence of the central bank.

Yellen, who served as Treasury secretary after leaving the Fed, added that she thought financial markets should be more concerned about this situation, which she described as “extremely chilling.”

“I’m surprised the market isn’t more worried. It seems to me that the market should be worried,” Yellen said, according to CNBC’s Sara Eisen.

The comments came a day after Powell confirmed that he had been informed that the US attorney’s office in Washington, D.C., was investigating whether the central bank leader lied during testimony to Congress last June about an expensive renovation project at the Fed headquarters. The office is run by Trump confidant and former Fox News host Jeanine Pirro.

The Justice Department has not officially confirmed the investigation into what the perjury charges might be.

Yellen bristled at the idea that Powell might have lied.

“Knowing Powell as well as I do, there’s zero chance he’s lying, so I believe they’re going after him because they want his seat and they want him gone,” he said.

Yellen served during the first year of Trump’s first term but was replaced by Powell after his term ended the following year. She went on to serve as head of the Treasury under former President Joe Biden, becoming the first woman to serve in both positions.

During her tenure at the Treasury Department, critics alleged that Yellen used debt issuance instruments to finance the ballooning national debt. Trump is angry that the Fed is cutting interest rates, in part to ease the financing costs of the debt burden, which now stands at $38.4 trillion.

Yellen said it was irresponsible to use the Fed’s overnight borrowing rate to manage the debt.

“You have a president who says the Fed should cut interest rates to lower interest payments on the federal debt,” Yellen said. [disagrees] with this. It’s the road to a banana republic.”

Other former Fed and Treasury officials have joined the chorus opposing the Powell investigation.

“The reported criminal investigation into Federal Reserve Chairman Jay Powell is an unprecedented attempt to use prosecutorial attacks to undermine that independence,” officials said. he said. in a statement. Signatories included former Fed Chairs Ben Bernanke and Alan Greenspan, former Treasury Secretaries Timothy Geithner and Henry Paulson, and a number of prominent economists.

The statement said, “It is stated that monetary policy is carried out in this way in emerging markets with weak institutions, and that it has extremely negative consequences on inflation and the functioning of economies in general. This has no place in the United States, whose greatest strength is the rule of law, which is the basis of our economic success.”