Janet Yellen rips Trump for targeting Fed chair: 'Road to a banana republic'

11h

Former U.S. Federal Reserve Chair Janet Yellen at Wake Technical Community College in North Carolina in September 2024 (Waketechcc/Flickr)

President Donald Trump and his allies ramped up their pressure campaign against U.S. Federal Chairman Jerome Powell when the U.S. Department of Justice (DOJ), headed by Attorney General Pam Bondi, launched a criminal investigation of him. The news broke on Sunday, January 11, and Wall Street had a major reaction when it opened on Monday morning.

According to Newsweek, "The S&P 500 fell by 0.3 percent, the Dow Jones Industrial Average dropped more than 400 points, and the Nasdaq was down 0.2 percent in early trading."

Trump appointed Powell during his first presidency, and the Fed chairman was appointed to a second term by former President Joe Biden. But Trump has attacked Powell relentlessly since returning to the White House, repeatedly calling him a "stupid person" and a "knucklehead" for not lowering interest rates as rapidly as he would like. Powell favors slow, gradual interest rate cuts, while Trump wants major cuts ASAP.

Powell's term as Fed chair ends in May, and Trump is expected to choose a loyalist who will allow him to dictate monetary policy.

Now, a former Fed chair, Janet Yellen, is sounding the alarm about Trump's efforts to compromise the Fed's independence. Yellen, appointed by former President Barack Obama, chaired the Fed before serving as treasury secretary in the Biden Administration.

Interviewed by CNBC's Sarah Eisen, Yellen described Trump's moves as "extremely chilling" and said that she "completely" disagrees with him.

Yellen told Eisen, "I'm surprised the market isn't more concerned. It seems to me that the market should be concerned…. You have a president that says the Fed should be cutting rates to lower rate payments on the federal debt…. It is the road to a banana republic."

In a joint statement released on January 12, two former Fed chairs (Ben Bernanke and Alan Greenspan) and two ex-treasury secretaries (Timothy Geithner and Henry Paulson) joined a group of economists in condemning the DOJ investigation of Powell.

The statement warned, "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. 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."

From Your Site Articles