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Welcome to Everybody's Business from Bloomberg Business Week. I'm Max Jaffin.
And I'm Stacy Vanick Smith.
And Stacy, we've got huge news to talk about. The video message heard around the world. The post to end all posts. On Sunday, Federal Reserve Chair Jerome Powell hit record, sent a video message to the nation and President Donald Trump in response to a federal investigation into him and the Fed.
Yes. A criminal investigation in fact. And what I think is really at issue here is the independence of the Federal Reserve. And we have a very special guest to talk about this, former Fed chair and Treasury Secretary Janet Yellen. We'll be talking about
We got Yellen. Yes. And she'll talk about the implications of Fed independence and what all of this latest drama means.
And then Stacy, you're going to want to hit pause on the chill beats to write emails playlist that I know you've been rocking out to this morning because
Ashley Carmen is here to talk about the shakeup at Spotify and what it means for that playlist, how that playlist is going to change.
Excellent. We also have our underrated stories. Mine is about a new app which is sort of funny, sort of poignant, very revealing about modern life.
And I'm going to talk about a new way to get a job on Grinder.
So, Max, President Trump has been calling out all kinds of different companies and industries on his Truth Social media account, and the latest one in his sights is credit cards. It feels like Trump is looking at the polling and trying to frantically do something to get people's attention. A lot of these somethings put him in conflict with business interests. One is credit card interest rates. Trump posted on Truth Social capping interest rates at 10%. You can't do that without a law. Meanwhile, banks are losing their minds. This points to a larger theme of Trump trying to get control of the economy because midterms are coming and people are responding to high prices and high interest rates. The economy is like a wild animal. Trump is trying to find any way to control it. This is a gimmick. JP Morgan is vowing to fight it, while some fintech companies like Built are issuing a 10% credit card to please Trump, but it's essentially the same as introductory offers. Trump also posted about forcing Microsoft to not take government money for data centers, and Microsoft quickly proposed paying for their own electricity and not seeking tax incentives. So Trump is making noise, companies are trying to please him but not give away too much. Trump is desperately trying to control economic forces he cannot control. And we haven't even mentioned the two-front war in Greenland and Minnesota. It has been a roller coaster. Bloomberg Business Week has an awesome package of stories up about Trump's first year.
And Trump desperately trying to control economic forces that he cannot control. While we're talking about this wild week of Trump and we haven't even mentioned the two-front war in Greenland and Minnesota that appears to be happening as we pod. It has been a roller coaster. Bloomberg Business Week has an awesome package of stories up right now all about Trump's first year and how everyone should think about what comes next. It's a really great set of stories and you should check it out.
Okay, Stacy, this is normally the point of the show where we hear from the person on the street, the Vox Populi. And today, we've got one part of that vox, and it is, as we said at the top,
This is an important member of the populi, I would argue.
This new threat is not about my testimony last June or about the renovation of the Federal Reserve buildings. It is not about Congress's oversight role. Those are pretexts. 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.
So this does not sound really dramatic, but when I heard this I completely could not believe it because Trump has been baiting Powell for a year in all kinds of ways just trying to get him. He calls him 'Too Late Powell' and all these things. Never responded. But what happened is that the Justice Department is pursuing a criminal investigation into Jerome Powell and comments he made to Congress about how much a building renovation was going to cost for their Fed headquarters. And he's issued grand jury subpoenas to the Fed. This investigation is basically a pretext for Trump to either push Jerome Powell out of the Fed or to make life so unpleasant that he steps down or to put pressure to lower interest rates. If you're a business person or an economist or a leader of another country, it is very bad because everyone has agreed that the Fed should be independent of political pressure. We are seeing a clear attack on that. And the fact that Powell actually said this was the closest it's come to a clapback.
This is a holy crap moment. If you are a Fed reporter or a Fed super fan,
The holiest of holy crap moments, I would argue.
And we have a former Federal Reserve chair, Janet Yellen, to talk about it. Stacy, you spoke to Janet Yellen earlier this week. I cannot wait to hear this interview.
Yeah, it was really interesting. She has a really unique perspective. Of course, she used to be Fed Chair, she also worked in politics. Chair Yellen, thank you so much for talking with me today. Obviously there's been a lot of drama around the Federal Reserve and its independence lately. I think most people are aware of the drama. I think what's maybe more difficult to understand is what exactly is at stake. So I'd love to start out very basically: how do you think of Fed independence?
I guess I see it as kind of the bedrock of US economic stability. When central banks are not independent, inflation tends to be higher and economic performance is generally worse. This is because, like a doctor who treats a patient, it's necessary to take the long view to figure out the right remedy. The problem is when a central bank is not independent, monetary policy is usually set with an eye to political outcomes. It's a lot more popular to cut interest rates than to raise them. In the run-up to elections, non-independent central banks cut interest rates, juice the economy, run the labor market hot. Take right now: Trump says he wants 1% or less interest rate. If they were cut to one, what would happen to inflation? I think if interest rates were held at 1%, we would see inflation move up a lot, eventually back to something like the 1970s. What's scary is that President Trump has openly demanded interest rates of 1% or less, and when you see the tools he's willing to use to intimidate the Fed, red flags should be going off.
What has been your take on the increasing political pressure on the Federal Reserve for the last year?
Well, I'll just say I personally never experienced this, and no Fed chair that I've ever interacted with has experienced it. This is a very dangerous thing.
What kind of impact does this sort of pressure have on an institution like the central bank?
The Fed is a thoroughly non-political institution. That is the core of who they are. It is focused on doing what's best for the public. I think America is better off for that. President Trump wants the Fed to do what he thinks is best, and he's made clear he is willing to pull out all the stops to try to get his way with the Fed. Trump's idea that he could remove Powell for policy disagreements has not worked. The law does say that individuals on multimember boards who were Senate confirmed can be removed for cause. That was used with Dr. Lisa Cook. So far, the Supreme Court has left her for the time being. The Supreme Court is going to hear oral arguments in that case next week. If the Court said yes, a president can decide if there's cause, that would be devastating. Trump decided to go further and do something that would terrify anybody in senior leadership at the Fed: call my friends at the Justice Department and tell them to level criminal charges against you and convene a grand jury and indict you.
Yeah. What was your reaction to that?
I think the same as Powell's: that this is just going too far. When a president weaponizes the Department of Justice and uses pretenses to go after enemies, we're not living in a democracy anymore. The committee that makes monetary policy decisions has 12 voting members. These people are of integrity. They may have differing views, but they care about meeting their public service responsibilities. There is a reasonable argument that the Fed should answer to the people because its decisions affect jobs, wages, mortgages. If the Fed is subject to political pressure or becomes more political, what are the stakes?
What are the stakes if the Fed is subject to political pressure?
The Fed should be and is accountable to Congress, not to the president. Congress established the mandate for the Fed, and the Fed is an independent agency that reports to Congress. For example, all these issues about the building and whether it was too expensive: the Fed's budget is not set by the president but is overseen by Congress. They have a responsibility to look at what the Fed's doing. I believe they have asked questions about the building and the Fed has provided the information. That's where oversight and accountability lie. I would be very surprised if J. Powell lied to Congress, which is what's being alleged.
You said that you think this is a dangerous moment. I assume you've spoken with people at the Fed. You spent many years there. What is the reaction from other people at the Fed?
I think they're really upset about this and they see it as a mortal threat to the independence of the institution. The Fed has tried to cooperate to the maximum extent possible with President Trump on things like supervision and regulation, but monetary policy is really sacrosanct and this is very disturbing.
