A remarkable coalition of America's most senior former economic officials has issued a scathing condemnation of a Justice Department criminal investigation into Federal Reserve Chair Jerome Powell, warning it threatens to turn the United States into a "banana republic."
An Unprecedented Coalition Sounds the Alarm
In a rare joint statement, every living former Fed chair – including Janet Yellen, Ben Bernanke, and Alan Greenspan – decried the probe as an "unprecedented attempt" to erode the central bank's cherished independence. The intervention was prompted by revelations that federal prosecutors had opened a criminal investigation into Powell concerning a $2.5 billion renovation of the Fed's Washington headquarters.
The group, which also includes former Treasury secretaries and White House economic advisers from both Republican and Democratic administrations, issued a stark warning. They stated that the US was beginning to resemble an "emerging market with weak institutions," a description almost never used by the nation's own economic elite.
In a separate interview with CNBC, Yellen, Powell's immediate predecessor and the first woman to lead the Fed, was even more blunt. "You have a president that says the Fed should be cutting rates to lower rate payments on the federal debt," Yellen said. "It is the road to a banana republic."
Political Pressure and a Direct Link to Rates
Powell himself directly connected the investigation to political pressure over interest rate policy. "The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the president," he stated.
This follows repeated public attacks from President Donald Trump, who has demanded faster and deeper rate cuts despite the Fed having lowered borrowing costs at three of its past four meetings. Trump has called for rates as low as 1 percent and has openly discussed replacing Powell when his term concludes in May.
The criminal inquiry was approved in November by Jeanine Pirro, a longtime Trump ally appointed to lead the US Attorney's Office for the District of Columbia last year. While Trump has denied knowledge of the investigation, economists fear it marks a dangerous escalation.
Market Jitters and Bipartisan Concern
The news initially rattled Wall Street, with markets opening down, though they largely recovered during the day. Economists warn that any serious attempt to remove Powell could trigger a significant sell-off and increase mortgage and credit costs for consumers.
Concern is not limited to Democratic circles. Senior Republican senators have also voiced alarm. Lisa Murkowski warned on X that the stakes for investors and households were enormous, stating, "if the Federal Reserve loses its independence, the stability of our markets and the broader economy will suffer."
Another senior Republican, Thom Tillis, argued the probe removed any remaining doubt that advisers within the Trump administration are actively seeking to end the Fed's autonomy. The collective warning from the former officials emphasised that both the reality and the perception of Fed independence are critical to economic stability.
"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," the group's statement read. "It has no place in the United States, whose greatest strength is the rule of law."
