Trump Blindsided as Ex-Fed Chair Confronts Him

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2:37Michael Popok:It took a speech in the last 24 hours as Jay Powell accepted the JFK Profile in Courage Award for him not backing down to Donald Trump and not allowing the Federal Reserve's integrity and independence for 113 years to be destroyed. It took a speech in the last 24 hours for Jay Powell to reveal in his own modest but forceful way with tremendous gravitas why he bucked tradition and decided not to step down from the Federal Reserve and serve out his complete term until 2028, even though his chairmanship ended on May 15th. See, usually Federal Reserve chairs step down rather than be sort of the third wheel on a date, so to speak, and sit there while there's a new chairman, in this case, Kevin Warsh.

3:31Michael Popok:But because Donald Trump continued to bash Jay Powell, called him a criminal, attacked him publicly to try to get him off, to try to get control of the seven-member Board of Governors in order to try to control interest rates. because of all that, because of the attack on the very existential nature of the independence of the Federal Reserve, Jay Powell said no, and now we know why. By agreeing to accept and attend the JFK Profile and Courage Award given by the Kennedy family, along with others like governors and elected officials who resisted the Trump assault on democracy, In fact, Jay Powell may be one of the only people to ever get the Profile in Courage Award who's not an elected official in that way.

4:23Michael Popok:But when you hear the introduction, which, of course, Jay Powell knew what the introduction was going to be by Jack Schlossberg, the grandson of the president, who is running for Congress himself. When you hear the introduction and then some of the clips from Jay Powell, you're going to understand that you're going to know everything you need to know about Jay Powell's rebuke of Trump and the way he does it so artfully. Now, before I get to the speech, let's just remember who Jay Powell is. The night that it was announced that the Department of Justice over the holidays was going to criminally investigate him and the Federal Reserve related to cost overruns about a construction remodeling of the 100-year-old Federal Reserve campus, he came out swinging in a way I'd never seen.

5:13Michael Popok:I mean, he's a modest chap, as my late mother would say. He is, but not to be trifled with, an intellectual powerhouse, which when you see him and it's all five foot eight of them, if he weighs 130 pounds, I'd be surprised. You're like, hmm, this guy is a powerhouse. Here's him coming out on social media the night it was announced about the importance of the independence of the Federal Reserve. And that is the through line, the thread that you're going to hear again in the speech for the last 24 hours. Play the clip. 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.

5:58This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions or whether instead monetary policy will be directed by political pressure or intimidation. I have served at the Federal Reserve under four administrations, Republicans and Democrats alike. In every case, I have carried out my duties without political fear or favor, focused solely on our mandate of price stability and maximum employment. Public service sometimes requires standing firm in the face of threats. I will continue to do the job the Senate confirmed me to do with integrity and a commitment to serving the American people.

6:35Michael Popok:Donald Trump thought he was going to get rid of that guy. He was going to accuse that guy of crimes. He was going to destabilize the Federal Reserve? No way. Seven-member board, four were picked by Democrats. Well, four were against Trump, I guess, because Powell was picked by Trump. And three weren't. Three are kind of Republicans. Got to get a majority to control the Federal Reserve Board of Governors, to then ultimately control the rest of the Federal Open Markets Committee, a 12-member committee, seven on the Board of Governors, five picked from a rotating group of regional reserve presidents, which are controlled by the board.

7:15Michael Popok:Trump tried two destabilizers, one we're still waiting on, went after Lisa Cook claiming she committed mortgage fraud because she bought another condo in Atlanta and got a favorable interest rate, really. That firing or attempted firing got blocked by courts, including the Supreme Court. And any minute now, hopefully before this video goes up, we're going to get the result from the Supreme Court as to whether Trump can just take away her 15-year term, which she has a Fifth Amendment write-in without any due process at all by social media posts. He also then went after Jay Powell. Now, here is the introduction of Jay Powell by Jack Schlossberg in the last 24 hours at the award ceremony.

7:59Michael Popok:And I think this is going to clue you in to where Jay Powell is going to go next. Play the intro. When President Trump's second term began, Trump continued to do what no president had ever done and publicly pressure Powell to cut interest rates. It was a campaign that began years earlier. A tweet, when it was still called a tweet, from 2019 from President Trump asks, Who is our biggest, bigger enemy, Jay Powell or Chairman Xi? This year, Trump escalated the situation when his Department of Justice served the Federal Reserve and Jerome Powell with subpoenas. and opened a criminal investigation under the false pretenses of an investigation into the Fed's renovation and Powell's related testimony.

8:44The true aim was thinly veiled. Trump was using the DOJ to intimidate Powell for his refusal to follow orders and cut rates. In response, Powell took the extraordinary and brave step of explaining as much to the public in a video, directly and forcefully resisting the president and the Department of Justice. As we have seen over the last decade, and especially over the last two years, many others submit to this type of intimidation, but not Jay Powell. Although his term as Fed chair has ended, his courage continues. He chose to remain on the Fed's board of governors moving forward. As he said, quote, I'm literally staying because of the actions that have been taken.

9:31I had long planned to be retiring. The things that have happened in the last three months have left me no choice, but to stay until I see them through at least that long. We are also grateful that you are staying.

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11:01Michael Popok:One, the independence of the Federal Reserve is all that he cares about and trying to stop administrations from going after them and going after the Fed because it will destabilize and take away the currency of the Federal Reserve to protect our democracy and its capitalist system. play the clip about the independence. What the public has every right to expect is that we will make our decisions based only on our best economic analysis of what would most benefit the people we serve. We do not take into account the fortunes of any political party or politician in making those decisions.

11:52Like so many other institutions, the Fed has been undergoing a stress test. Congress wisely chose to insulate monetary policy decisions from political pressure. All other advanced economy nations have done the same. Our federated structure is a bit complex, with reserve banks and the board and all that, but the legal protections that support the non-political conduct of monetary policy are straightforward. forward. Fed governors and Reserve Bank presidents hold office with legal protection against removal. We serve long terms unrelated to the four-year presidential election cycle. When a new administration takes office, its role is to fill vacancies on the Board of Governors and for chair and vice chair as and when those vacancies arise, subject in all cases to Senate confirmation.

12:47Administrations play no role in the selection or oversight of the 12 Reserve Bank presidents.

12:57These protections have served the public well, and administrations from both political parties have respected them. If any administration finds a way to remove Fed officials over policy differences, then And future administrations will do so as well. The public would lose faith that the central bank will make decisions based only on what's best for all Americans. The Fed's credibility would be lost. That credibility enables the Fed to support a strong and stable economy for the benefit of American families and businesses. Credibility has been built and sustained over many decades, and we have a duty to safeguard that priceless asset for our fellow citizens and for generations to come.

13:46Michael Popok:Now, that stands in sharp contrast to Kevin Warsh, who got picked to replace Jay Powell and has been serving there since the 15th of May. He's somebody that said, I'm going to lower interest rates, but he's already hit roadblocks in the first two weeks, where other members of the Federal Reserve said this is not the time to lower interest rates given how upside down the economy is run by Donald Trump. Scott Besant, the Treasury Secretary, thought he was going to do like a some sort of counterweight, a call in response to Jay Powell. Here's him trying to defend Kevin Warsh as he kind of indirectly tries to undermine Jay Powell, which of course he can't do.

14:29Michael Popok:I mean, of the two people, the one that's closest to impeachment and removal is Treasury Secretary J. Scott Bessett. Play the Bessett clip about Kevin Warsh. So the president has publicly said that you are the reason that he has not fired Chairman Jay Powell. Will you make that case again to him? Look, I am confident that the process that we've laid out in terms of Kevin Warsh becoming the next Fed chair, he's going to have the hearing on the 21st of this month. He's a great candidate. We know that the Republicans on the Senate Banking Committee are aligned in that. And I am very optimistic that Kevin Warsh will be the chair of the Fed on time.

15:14Michael Popok:Now back to the speech. Here's Jay Powell. And when you listen to it closely, you'll now know why he could not step down. Give Donald Trump the immediate majority on the Federal Reserve. Destroy its independence. play the clip on the democracy. As Americans, we are motivated by the belief that freedom and democracy greatly enhance human fulfillment. The work to preserve and strengthen our own democracy can be noisy, frustrating at times, and embattled. Partisan political differences are normal, indeed essential in a thriving democracy. But we ought to be united in our commitment to the higher principles that define our nation.

16:04Chief among them is respect for the rule of law. As John Adams of Massachusetts wrote,

16:16as John Adams wrote, ours is a government of laws, not of men. Our public institutions carry us forward through change. These institutions embody our commitment to freedom, democracy, and service of the public good. The philosopher Edmund Burke warned that democratic institutions take much time, effort, and patience to build, but can be torn down all too quickly. It is essential that we preserve what is good in our institutions, even as we strive to improve them. While we will have political differences, at the end of the day, we all love this wonderful country and want what is best for it and for all of our fellow Americans.

17:01And this is the reason that Jay Powell did what most other Federal Reserve chairs

17:08Michael Popok:never would do. He did not step off the Federal Reserve when his term wasn't up, but his federal chairmanship was up. Most of them would have stepped off. And here's the reality. If Donald Trump had just shut his big fat trap, stop attacking Lisa Cook and Jay Powell. Just let nature take its course. Jay Powell would have stepped off on the 15th of May. He would have likely gone off into retirement and stopped or onto corporate boards. He would have not stayed on. Donald Trump would have got another vote. And even with or without Lisa Cook and the result of the Supreme Court, he would have control of the Fed if he wanted it, which he did.

17:49Michael Popok:But no, he attacked mercilessly Jay Powell, earning him the Profile in Courage Award. And now he's not going anywhere until Donald Trump leaves office. They're going to leave office together. Go off into the sunset. It's like the Roadrunner and the other one. What was the major cartoon enemies between each other? They were always chasing each other. Wile E. Coyote and the Roadrunner. Okay. Well, Jay Powell is the Roadrunner and Donald Trump's Wile E. Coyote, if you know what I mean. So I'm glad you're here. Hit the free subscribe button on Legal AF YouTube channel. Come over to our sub stack as well and help us to continue our pro-democracy channel.

18:33Michael Popok:Until my next report, this is Michael. Can't get your fill of Legal AF? Me neither. That's why we formed the Legal AF Substack. Every time we mention something in a hot take, whether it's a court filing or a oral argument, come over to the Substack. You'll find the court filing and the oral argument there, including a daily roundup that I do call, wait for it, Morning AF. What else? All the other contributors from Legal AF are there as well. We got some new reporting. We got interviews. We got ad-free versions of the podcast and hot takes. Where? Legal AF on Substack. Come over now to free subscribe.