DOJ Probe of Powell Raises New Alarm Over Fed Autonomy (Full Transcript)

[00:00:00] Speaker 1: The political earthquake overnight with word that the Department of Justice is investigating has launched a criminal investigation into Federal Reserve Chair Jerome Powell and the Federal Reserve. They say it's over potential testimony he gave over renovations to the Federal Reserve building, but Powell in this extraordinary video statement says it's something about completely different. He says this is about the Fed's independence and the Federal Reserve's ability to raise and lower interest rates independently from political wins here. With us now is CNN Chief Data Analyst Harry Enten. So, Fed Chair Jerome Powell talks about Fed independence, right? How important do the American people think that is?

[00:00:42] Speaker 2: A very, very, and I'll just say to quote the movie Tootsie, this is one nutty hospital, this back and forth, my goodness gracious. They think it's incredibly important that the Fed acts independently of Donald Trump and they think it's best for the economy. We're talking about more than two-thirds of adults, 68 percent, 91 percent of Democrats, 75 percent of independents, and even 41 percent, two-fifths of Trump's base, thinks it's important that the Fed acts independently of Trump for the best of the economy. So, when you get 41 percent of Republicans and 91 percent of Democrats agreeing on something with 75 percent of independents, you know it is a popular position. The bottom line is the American people vigorously disagree with the President of the United States on this. They want a Fed that acts independently of him because they think it's best for the economy.

[00:01:29] Speaker 1: So, the Trump administration very clearly, to an extent, picking a fight with Jerome Powell, a clear political fight which has been at play for months and now perhaps a legal fight as well. Who do the American people sort of pick in that fight?

[00:01:40] Speaker 2: Donald Trump is losing the political fight to Jerome Powell. I mean, you could just see it right here, net approval rating per Gallup in December. Trump comes in at negative 23 points on the net approval rating. Way, way, way underwater. Jerome Powell, not the most popular guy in the world, but at minus three points, he's actually the most popular guy that Gallup polled of any, any of the politicians, any of the folks in government. He is far more popular than Donald Trump.

[00:02:07] Speaker 1: When it comes about the economy in general, how's the President doing it?

[00:02:10] Speaker 2: Yeah, I think this is, of course, a big portion of it, right? It's not just about the cuts. It's also about the economy. You look at Donald Trump's net approval rating on the economy. He started off at plus six points. You go back a year ago, that was the reason why he won a second term in the White House. Look at this now. He is now 19 points underwater, swimming in the deep blue sea. That is a drop, John, of what, 25 points in just a year's time.

[00:02:33] Speaker 1: President Trump has made crystal clear that he wants lower interest rates. You know, the Fed Chair, Jerome Powell, is suggesting this entire criminal investigation is over the President's desire to get lower interest rates. What do the prediction markets think about whether they will get lower interest rates?

[00:02:47] Speaker 2: No, it's not going to work for Donald Trump. Take a look here. The chance that the Fed Reserve maintains interest rates in January, 94%, despite the threats from Donald Trump. It seems that Jerome Powell, the prediction markets think, will hold his ground along with the rest of the Fed.

[00:03:01] Speaker 3: The President is really open about his disdain for Powell, who, by the way, President Trump appointed in his first term. The President is consistently pressuring him to cut interest rates. He said this about the investigation last night to NBC News, quote, I don't know anything about it, but he's certainly not a very, not very good at the Fed, and he's not very good at building buildings. I'm joined by a terrific group of reporters. I mean, I don't know. I don't think his job is to build buildings, so maybe that's a fair criticism.

[00:03:35] Speaker 4: Every contractor would be indicted if that was the response.

[00:03:38] Speaker 3: That's true. But, you know, I sort of joked about using the word unprecedented so many times. But, Frank, this is one of those moments we have to take a step back and remind people this is not normal. This is not run-of-the-mill Washington stuff.

[00:03:56] Speaker 4: It's not normal. And part of the reason it's not normal is that the Fed exists in almost this sacred space in our politics and our economics. It was created in 1913 to take interest rate setting out of the hands of politicians. Because if we left management of the economy to politicians, they would print cheap money on the eve of every election, and they'd flood, and we'd be stuck in a cycle of endless financial crises. And after the Fed was created, we basically removed bank runs and crises from our system. They used to be something that happened every decade or so. That doesn't happen. And what makes this such an interesting test is that I think a lot of Trump supporters in Silicon Valley, on Wall Street, they all know in their brains, in their heart of hearts, that maintaining the independence of the Fed is the ballgame. It's the foundation of our strength of this economy.

[00:04:56] Speaker 3: Yeah, no question. Now, nobody is saying, even those who are the most critical, that if there is something that is done that is illegal or untoward, that there should be an investigation. But as you just heard directly from Powell, in that extraordinary statement, that is not what most think is actually going on. In fact, just adding to this extraordinary evening and morning, the last, I guess, 12 hours, a group of former Fed chairs, appointed by Democrats and Republicans alike, including Ben Bernanke, Alan Greenspan, Janet Yellen, and there were other Treasury secretaries in economics who signed on to a statement, and I'm going to read some of it right now. This is how monetary policy is made in emerging markets and 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.

[00:06:01] Speaker 5: I mean, quite a statement from them. And look, I think there's two things we're probably going to see come out of this, two reactions, at least I'm looking very closely at. One is, of course, how the markets are responding to this. We've seen them down a little bit today, but how this continues, and if the market really does react in a way that sets off alarm bells inside the West Wing. Because I'd remind you, the President has talked in the past repeatedly about wanting to fire Jerome Powell, and he was talked out of it by his top economic advisors, people like Secretary of the Treasury Scott Besant. The other thing is, of course, what we're going to see with Capitol Hill. I mean, I thought one of the statements from Tom Tillis, a retiring Republican, him coming out and saying, essentially, pledging to oppose any future Trump appointees for the Fed until this is resolved is a huge deal. But one thing as well I wanted to point out is just, you know, you read that quote from the President last night to NBC News saying, you know, insisting he doesn't have anything to do with this. Two weeks ago, when he was speaking publicly, he actually kind of, you know, said that he believed a lawsuit was coming against Powell over this exact issue. He called it, I have this quote here, he said, we're thinking about bringing a gross incompetence, what he said was called a gross incompetence lawsuit against Powell. That's, of course, catching a lot of people by surprise day when they're saying, you know, you're saying you have nothing to do with this, but you kind of, you know, led or kind of gave a leading answer about some of this unsolicited a couple weeks ago. And so there's a lot of questions about what's actually going on behind the scenes.

[00:07:33] Speaker 3: And I just want to, because you mentioned Tom Tillis, I want to read a little bit more of what he said. This is a Republican senator from North Carolina who has now said he's not running for re-election. So he has definitely been more, clearly felt more liberated to say what he really thinks. If there were any remaining doubt, whether advisors within the Trump administration are actively pushing to end the independence of the Federal Reserve, there should now be none. It is now the independence and credibility of the Department of Justice that are now in question. And then he went on, as Elena said, to say that he's going to hold up any nominations, which is significant because Trump didn't fire Powell, but his term is up in a couple of months.

[00:08:15] Speaker 6: Yeah, it is significant in part because we haven't seen that level of backbone from Republicans using their power of advice and consent to hold the president and the administration to account. They have not used their ability to stop or block nominations, and they have not said, I will not continue with any of these presidential nominations unless I see what I need to see from the administration. Tom Tillis is doing that. We saw from Senator Lisa Murkowski essentially endorsing that approach, and we're waiting to see whether other Republicans are going to be willing to speak up. And the fact that President Trump's own nominee, Jay Powell, did release that video speaking out and saying this is a pretext. This is not about a law that was broken. This is clearly the president trying to exert influence over the Federal Reserve and take away the independence of the Fed. Speaking in very plain language, it's pretty clear between Jay Powell and Tom Tillis that some people who previously may have not been willing to speak out are now willing to speak out, and we'll have to wait and see if more do that.