Threatening Powell with criminal prosecution is a dire step

To the editor:

The reported criminal investigation involving Federal Reserve Board Chair Jerome Powell should alarm anyone who cares about financial stability, bank supervision and the rule-based operation of U.S. markets.

This is not about a building renovation. It is about power.

When political actors are dissatisfied with monetary policy — interest rates, inflation or the impact of tariffs — they increasingly seek leverage outside the policy process. Investigations, early leaks of confidential economic data, and public insinuations concerning legitimate private financial arrangements become tools of pressure. That is not accountability; it is intimidation.

Just as the fatal shooting of Renée Nicole Good by an Immigration and Customs Enforcement agent in Minneapolis sparked questions about the appropriate use of force, the criminal inquiry into Powell over his congressional testimony about a building renovation — a question of public record and policy disclosure — invites the same fundamental question: When does oversight become excessive?

We have already seen this tactic deployed against Lisa Cook, whose credentials and research were repeatedly attacked in ways that had little to do with substance and everything to do with delegitimization. The escalation from reputational attacks to criminal framing marks a troubling new phase.

For the banking system, the implications are profound.

Central bank independence is not an abstract ideal — it is a core input into risk pricing, duration management, capital planning and credit allocation. When markets begin to believe that rate decisions, supervisory stances, or liquidity backstops can be swayed through political retaliation, uncertainty rises. Risk premia widen. Volatility follows. Monetary policy in the U.S. risks becoming virtually indistinguishable from that of a banana republic.

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Banks operating in minority communities and underserved markets are especially exposed. Politicized enforcement — real or perceived — distorts lending incentives precisely where capital is already scarce. We saw the result during the subprime lending crisis of 2008. 

If every contested decision by a regulator can later be reframed as criminal exposure, regulators and policymakers will simply stop making decisions. Financial market innovation will stop, given the lack of effective regulation. Crisis response also stops. And the financial system becomes less resilient, not more accountable.

There are legitimate mechanisms for oversight of the Federal Reserve: Congress, inspectors general, public audits and transparent reporting. Weaponizing the criminal process is not one of them.

Disagree with policy. Argue the data. Change the law if you have the votes.

But do not criminalize independence.

Because once monetary policy becomes a prosecutorial battlefield, no bank — large or small — can reliably operate. The banking system fails.