The Lunacy of Lawfare Against the Fed
Criminalizing a spat over interest rates is an Argentina-level mistake.
By The Editorial Board, The Wall Street Journal, July 22, 2025
Agitators within the Trump Administration for weeks have flogged a Federal Reserve office renovation as a pretext to harass Chairman Jerome Powell. Now comes the lawfare, with a criminal perjury referral against Mr. Powell to the Department of Justice from a Member of Congress. How low can this crowd go?..
Whatever Mr. Powell’s rhetorical inexactitude [about the renovations to the Federal Reserve building], it’s madness to create a new precedent for prosecuting officials for policy disagreements. Doing so is the road to the hyper-politicized monetary policy you’d expect in Argentina.
Now that Congress is interested in the Fed, lawmakers have plenty of better ways to spend their time. They could debate the dual mandate (price stability, plus full employment) they handed the Fed in the 1970s, or the appropriateness of the Fed’s ample-reserves regime, its delivery of forward guidance, or its practice of paying interest on banks’ reserve balances and whether Congress could or should act to curtail any of this… [end quote]
Congress established the Federal Reserve and its specific mandates of price stability plus full employment.
The Fed has many complex moving parts that they use to tinker with the economy. The fed funds rate is only one of those moving parts. The point of the editorial is that Congress could decide to re-legislate any or all of the specific tools used by the Fed. But that would be a lot of work because it’s not easy to understand all of them and micro-managing the Fed by law might lead to unintended consequences in the economy and markets.
Messing around with the Fed Chair using trumped-up charges on an unrelated subject is more likely to upset the markets.
Wendy