Trump, Powell, and the Cost of Independence
By Darrell Lee
On the evening of January 11, 2026, the bedrock of the American financial system developed a terrifying fissure. In a video statement that looked less like a regulatory update and more like a hostage proof-of-life, Federal Reserve Chairman Jerome Powell looked directly into the camera and blew the whistle on his own government. He revealed that the Department of Justice had served the Federal Reserve with grand jury subpoenas, threatening criminal charges in connection with a mundane building renovation project. But Powell, stripping away the diplomatic veneer that usually coats central banking, called it what it was: a pretext. It was, he declared, a naked attempt by the Trump administration to force the Federal Reserve to cut interest rates against its better judgment.
This moment marks the most dangerous escalation in the history of the relationship between the White House and the central bank. While presidents have always grumbled about interest rates, Donald Trump has moved beyond grumbling to active demolition. By weaponizing the Department of Justice to threaten the liberty of the Fed Chair, the President has crossed a line that separates a functional economy from a banana republic. To understand the gravity of this crisis, we must look backward. History shows us that when presidents successfully bully the Fed, the American people pay the price in inflation, instability, and economic ruin.
The concept of a "politically independent" Federal Reserve is not explicitly written into the Constitution; it is a norm forged in the fires of conflict. The first major battle occurred under President Harry Truman. Following World War II, the Fed kept interest rates artificially low to help the Treasury finance the massive war debt. By 1950, with the Korean War raging and inflation spiking to 21%, the Fed needed to raise rates to cool the economy. Truman refused. He viewed the Fed not as a guardian of the currency, but as a subordinate agency of the Treasury.
The conflict came to a head in January 1951. Truman summoned the entire Federal Open Market Committee (FOMC) to the White House—a tactic of intimidation. He then released a statement falsely claiming the Fed had "pledged its support" to maintain low rates. The Fed Chair at the time, Thomas McCabe, and a defiant Board member named Marriner Eccles, refused to be cowed. They leaked the true minutes of the meeting to the press, effectively calling the President a liar. The resulting public outcry forced the White House to retreat. On March 4, 1951, both sides signed the "Treasury-Fed Accord," a peace treaty that formally separated monetary policy from fiscal politics. It was the moment the Fed declared it worked for the economy, not the President.
However, norms are only as strong as the men who defend them. In 1965, the wall of independence cracked under the weight of Lyndon B. Johnson’s ego. As LBJ ramped up spending for both the Vietnam War and his Great Society programs, the economy began to overheat. Fed Chairman William McChesney Martin—a man who famously defined the Fed’s job as "taking away the punch bowl just as the party gets going"—raised the discount rate to curb inflation.
Johnson was furious. On December 6, 1965, he summoned Martin to his ranch in the Texas Hill Country. The historical accounts of this meeting are visceral. Johnson did not discuss economics; he discussed betrayal. He physically shoved the Fed Chairman against a wall, towering over him, and shouted, "Martin, my boys are dying in Vietnam, and you won’t print the money I need." Martin stood his ground in that living room, but the pressure eventually took its toll. Over the subsequent years, the Fed accommodated Johnson’s deficits more than it should have, planting the seeds of the inflation that would devour the 1970s.
If LBJ cracked the wall, Richard Nixon bulldozed it. The relationship between Nixon and Fed Chair Arthur Burns serves as the darkest warning for our current moment. Facing reelection in 1972, Nixon wanted a booming economy, regardless of the long-term cost. He did not use physical intimidation like Johnson; he used psychological manipulation and blackmail.
The "Nixon Tapes," released decades later, reveal the smoking gun. In a November 10, 1971, conversation, Nixon bullied Burns, demanding that he expand the money supply. "I don’t want to go out of office and I don’t want to be slaughtered," Nixon told him. He explicitly linked the Fed's policy to his own electoral survival. Unlike Martin, Burns capitulated. He slashed rates and juiced the money supply in the months leading up to the November 1972 election. Nixon won in a landslide, but the American economy lost. The "political business cycle" engineered by Nixon and Burns triggered the Great Inflation of the 1970s, a decade of stagflation that destroyed the purchasing power of the American middle class. It took a decade of pain and the ruthless discipline of Paul Volcker to fix the damage Nixon caused.
This brings us to the present war between Donald Trump and Jerome Powell. The current conflict echoes the Nixon era but adds a modern, litigious twist. Trump’s frustration with Powell is not new; during his first term, he famously tweeted on August 23, 2019, asking, "Who is our bigger enemy, Jay Powell or Chairman Xi?" But in his second term, the rhetoric has evolved into administrative warfare.
The Trump administration’s strategy is a two-pronged assault on the institution’s architecture. First, there is the legal siege. The DOJ subpoena regarding the building renovation is transparently not about architecture; it is about leverage. By threatening the Chair with indictment, the administration hopes to force a resignation or a capitulation on interest rates. This is a tactic Nixon never dreamed of—using the threat of prison to set monetary policy.
Second, there is the personnel war. The administration is currently attempting to fire Fed Governor Lisa Cook, a case slated for argument before the Supreme Court later this month. Trump argues that the President has the authority to remove Fed governors for "inefficiency," a loophole he intends to widen into a trapdoor. If the Court rules in Trump’s favor, he will gain the power to stack the Board with loyalists who view interest rates as poll-boosting levers rather than economic stabilizers.
The harm of this behavior cannot be overstated. The Federal Reserve’s power rests entirely on a single, fragile asset: credibility. Investors lend money to the United States government at relatively low interest rates because they believe the dollar will retain its value. They believe this because they trust that the Fed will fight inflation, even when it is politically unpopular to do so.
If Trump succeeds in turning the Fed into an arm of the White House, that credibility evaporates. Markets will instantly price in the "political risk" of inflation. Bond yields will spike as lenders demand higher returns to compensate for the likelihood that the President will print money to fund his projects or juice his approval ratings. This acts as a tax on every American family. Mortgages, car loans, and credit card rates will rise, not because the economy is strong, but because the government is untrustworthy.
Furthermore, the Fed's independence is the only thing preventing the "fiscal dominance" nightmare. The United States is currently running historic deficits. If the President controls the printing press, the temptation to "monetize the debt"—to print money to pay the government’s bills—becomes irresistible. This is the path taken by Zimbabwe, Venezuela, and Weimar Germany. It provides a short-term sugar high followed by the necrotic rot of hyperinflation.
Powell’s decision to turn "whistleblower" is an act of institutional desperation. By taking the dispute public, he is betting that the American people and the global markets will value stability over the President’s wrath. He is forcing the country to choose between the "Nixon Model"—where the economy serves the President’s reelection—and the "Accord Model"—where the money supply is protected from the mob.
The lesson of history is clear: When the White House dictates interest rates, the economy suffers. Truman tried it and sparked a revolt. LBJ tried it and birthed the Great Inflation. Nixon tried it and successfully bought an election at the cost of a decade of economic misery. Donald Trump is now attempting the most aggressive takeover of the Fed since its inception in 1913. He does not just want a compliant Chair; he wants to break the seal of independence entirely.
We must recognize this conflict for what it is. It is not a bureaucratic squabble or a legal drama about building renovations. It is a battle for the integrity of the US dollar. If Trump wins, the Federal Reserve becomes just another political agency, swinging wildly with every election cycle, printing money to please the party in power. Jerome Powell is currently the only man standing between the US economy and that abyss. His capture would not just be the removal of a bureaucrat; it would be the surrender of the American economy to the whims of a single man.
Darrell Lee is the founder and editor of The Long Views, he has written two science fiction novels exploring themes of technological influence, science and religion, historical patterns, and the future of society. His essays draw on these long-standing interests and apply a similar analytical lens to politics, literature, art, culture, and historical events. After retiring from a 36-year career as a software and systems engineer on the Space Shuttle and then the Space Station programs, he now splits his time between rural east Texas and Florida’s west coast, where he spends his days performing variable star photometry, dabbling in astrophotography, hunting, thinking, napping, fishing, scuba diving, and writing, not necessarily in that order. He is a member of the American Astronomical Society, American Radio Relay League, the American Association of Variable Star Observers, and the US Chess Federation.