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Every living former Federal Reserve chief on Monday attacked the Department of Justice’s probe into central bank head Jay Powell, accusing the Trump administration of running the US like an emerging market.
Ex-Fed chairs including Janet Yellen, Ben Bernanke and Alan Greenspan signed a statement blasting what they described as an “unprecedented attempt to use prosecutorial attacks to undermine [Fed] independence”.
“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, which also included top economic officials from both Republican and Democratic administrations, wrote.
“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,” the statement added.
The stark rebuke came after it emerged late on Sunday that prosecutors had opened a criminal investigation into Powell over a $2.5bn renovation of the Fed’s headquarters in Washington.
Powell blasted the probe as a pretext to attack him over interest rates, which Donald Trump has repeatedly pressured the central bank to cut as low as 1 per cent.
“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,” Powell said on Sunday.
Monday’s letter, signed by 13 of America’s most prominent economists, underlines how seriously experts view the threat to Fed independence, which the signatories described as “critical for economic performance”.
As well as the three living ex-Fed chairs, the letter was also signed by former Treasury secretaries Timothy Geithner, Jacob Lew and Robert Rubin, alongside a host of senior economic advisers to Presidents Barack Obama, George W Bush and Bill Clinton.