
The next Fed chair's dilemma: Maintain Fed independence while pleasing Trump
Even if the president doesn't remove Powell before his term is up in 10 months, he has made it clear that he wants the next Fed boss to do what he wants: Bring interest rates down.
"I'm only interested in low-interest people," he said Wednesday, while denying reports that he intended to fire Powell yet leaving the door open to doing so for "fraud."
The various candidates who are being considered by Trump have all expressed a support for lower rates, including National Economic Council Director Kevin Hassett, former Fed governor Kevin Warsh, Fed governor Christopher Waller and Treasury Secretary Scott Bessent.
Trump "is putting somebody in place who he says he expects to cut interest rates very aggressively," StoneX senior adviser Jon Hilsenrath told Yahoo Finance. "Whoever becomes the next Fed chair is going to have some implicit promise to live up to.'
Media reports this week suggested that Hassett is now rising as a leading candidate. He benefits from being close to Trump, having worked for the president during both of his terms, but whether Wall Street will view that as a shot to central bank independence remains an open question.
'Kevin has the qualifications to get the Fed job because he is close to the president,' Hilsenrath added. 'In terms of doing the Fed job well, I think it will be a real challenge.'
Hassett told NBC Wednesday evening that "everybody at the White House understands the independence of the Fed is super important." When central banks lose their independence, Hassett said, 'it's bad for the economy and bad for markets.'
Hassett did agree that rates should be lower than where they are right now, matching the easing cycles of other central banks around the world. And the fact that rates have not been lowered raises a "legitimate concern that independence of the Fed is not being respected by Fed members themselves."
Another candidate for Powell's job, Warsh, told CNBC Thursday that 'history tells us that the independent operations in the conduct of monetary policy is essential.'
'But that doesn't mean the Fed is independent in everything else it does,' he added, while arguing that the Fed's reluctance to cut rates "is actually quite a mark against them."
'Fed independence is a myth'
US history is full of examples where American presidents challenged Fed chairs, including a confrontation between President Johnson and Fed Chairman Bill Martin in the 1960s.
President Nixon also leaned on former Fed Chair Authur Burns to bring rates down before the 1972 presidential election. Nixon's White House even leaked false stories about Burns seeking a pay raise as way of undermining his authority.
'What's currently unfolding before our eyes has been happening for decades behind closed doors,' wrote JPMorgan Chase's Ilan Benhamou said in a note Thursday that cited the Johnson-Martin clash.
'What's happening for everyone to see is definitely damaging for the institution, but let's be honest, the Fed independence is a myth,' Benhamou added.
The pressure on Powell is not due to let up, with Trump and other White House officials continuing to raise questions about Powell's handling of a $2.5 billion renovation of the Fed's headquarters.
'It seems as though every single day now we have the White House beating up the Fed' and Powell 'in particular,' Yardeni Research president Ed Yardeni told Yahoo Finance.
Some Republicans are supportive of a Powell firing but others in that party that now controls Washington are starting to warn that any removal of Powell would in fact deal a blow to Fed independence.
'If anybody thinks it would be a good idea for the Fed to become another agency in the government subject to the president, they're making a huge mistake,' GOP North Carolina Sen. Thom Tillis said Wednesday.
Majority Leader John Thune of South Dakota added on Fox News Wednesday night that 'I think the markets want an independent Federal Reserve. I think they want a central bank that isn't subject to the whims of politics.'
Even Democratic Sen. Elizabeth Warren, a past critic of Powell, said Wednesday that 'markets will tank' if Trump fires Powell.
'When his initial attempts to bully Powell failed, Trump and Republicans in Congress suddenly decided to look into how much the Fed is spending on building renovations,' she added. 'Independence does not mean impunity and I have long pushed for more transparency and accountability at the Fed. But give me a break.'
Click here for in-depth analysis of the latest stock market news and events moving stock prices
Hashtags

Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
20 minutes ago
- Yahoo
If You're Thinking About Buying an EV, Trump Made Now the Time To Do It
If you've been on the fence about switching to an electric vehicle (EV), now might be the perfect time to make the leap. Tax credits for buying an EV were supposed to last through 2032, per CNBC, but President Donald Trump's 'One Big Beautiful Bill' killed the tax breaks for new and used EVs. While the bill axed the credit, there's still time to take advantage before EVs become more costly. With the clean vehicle credit, qualified buyers can receive a $7,500 credit for new EV or a $4,000 credit for a used EV until Sept. 30 2025. The credit can reduce the cost of the vehicle by thousands; however, there are several restrictions to take note of. Read Next: Check Out: Here's what to know about the credit and why it might be the smartest time to buy. Clean Vehicle Credit Guidelines Not all buyers can cash in on the credit. According to the IRS, income ceilings stop at $150,000 for individual filers. That rises to $225,000 for heads of household and $300,000 for joint filers. According to Rob Dillan, automotive expert and founder of EVhype, there are price caps for vehicles, too — $55,000 for sedans and $80,000 for vans, SUVs and trucks. 'Fifty percent or more of a vehicle's battery must also be made with American parts, and the vehicle must be constructed with materials from the United States or countries the United States has trade agreements with,' he explained. 'These criteria will also rule out some EV models, so potential buyers will need to verify eligibility before purchasing.' In addition, the EV must weigh less than 14,000 pounds in gross vehicle weight, have a battery storage capacity of 7 kilowatt-hours or more, go through final production in North America, and be produced by a qualified manufacturer (excluding fuel-cell vehicles), per TurboTax. Learn More: Now Is the Time To Buy If you qualify, the credit could significantly lower the cost of buying an EV. 'The credit is going to make a big difference in cost, since the average transaction price of a new EV in 2025 is projected to be $56,910,' Dillan said. 'The federal tax credit is also likely to disappear in September based on timing alone, so now certainly seems to be the time for potential owners to move if they want to cash in on this financial bonus.' EV Considerations EV sales are up 11.4% year over year, according to Kelley Blue Book, with new models from Acura, Audi, Chevrolet, Honda and Porsche helping drive up sales. But before deciding whether an EV is the way to go, there are many things to consider. 'Depreciation is a big factor to take note of,' Dillan said. 'Some electric vehicle models hold only 49% of their value after two years, compared with 83% for gasoline-powered cars.' Reasons for the drop in value include battery life, limited charging stations, quickly evolving tech that becomes obsolete in older models and brand reputation, per Diminished Value of Georgia. With that in mind, it reported that the Tesla Model 3 and Hyundai Kona Electric are proving to have a higher resale value than previous EV models. Owning an EV will save you on gas, but Dillan said without the tax credit savings, 'the massive savings on maintenance and fuel bills are likely not enough to recoup the higher purchase price and possible depreciation hit of an electric vehicle.' Editor's note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on More From GOBankingRates Here's the Minimum Salary Required To Be Considered Upper Class in 2025 This article originally appeared on If You're Thinking About Buying an EV, Trump Made Now the Time To Do It

Associated Press
20 minutes ago
- Associated Press
Trump's settlement with Columbia could become a model for his campaign to reshape higher education
WASHINGTON (AP) — The Trump administration's milestone settlement with Columbia promises to bring stability to a university in crisis. It also delivers a crucial win to President Donald Trump in his campaign to reshape higher education. And at colleges around the country, the deal clarifies the stakes for anyone weighing whether to fight the administration's demands or concede. Columbia agreed Wednesday to pay more than $220 million to the federal government to restore federal research money that was canceled in the name of combating antisemitism on campus. That decision offers a contrast to the path taken by Harvard University, which has lost billions of dollars in government funding as its legal battle escalates with no end in sight. Yet the Columbia deal also raises questions about university independence as the school submits to closer federal oversight. No sooner had Trump announced the deal than he sent a warning: Numerous other universities, he said, 'are upcoming.' The deal is the first to settle a federal investigation into allegations of campus antisemitism since Trump returned to office. It's also the first agreement with a university touching on so many elements of the president's agenda, including diversity, equity and inclusion programs and admissions to women's sports and campus protests. Columbia agreed to some provisions similar to those that Harvard rejected and called a dangerous precedent. The settlement requires the hiring of new faculty in Jewish studies and a review of academics to ensure 'balance.' Additionally, Columbia will be placed under the watch of an independent monitor and ordered to disclose hiring, admission and discipline data to be audited for compliance. In what Columbia described as a victory for university autonomy, the agreement includes a clause saying the government has no authority to dictate hiring, admissions decisions or the content of academic speech. Acting University President Claire Shipman said it was 'carefully crafted to protect the values that define us' while restoring the university's federal research funding. Where some see pragmatism, others see capitulation Some at Columbia called it the best feasible outcome. Some called it capitulation. Rep. Jerry Nadler, D-N.Y., a Columbia graduate whose district includes the Manhattan campus, called it a 'cowardly' agreement that won't improve the campus. Columbia has effectively waved 'the white flag of surrender in its battle at the heart of the Trump Administration's war on higher education and academic freedom,' Nadler said. Columbia had been threatened with the potential loss of billions of dollars in government support, including more than $400 million in research grants canceled earlier this year. David Pozen, a law professor at Columbia, said the settlement raises legal questions about Trump's strategy of regulation by dealmaking. Instead of applying a single standard across all of higher education, Pozen said, Trump is relying on one-off deals with individual universities as a condition to regain federal funding. It mirrors his hardball approach with trade partners and prominent law firms. 'In short, the agreement gives legal form to an extortion scheme,' he said. Lawrence Summers, a former Treasury secretary and former president of Harvard, called the settlement an 'excellent template' for agreements with Harvard and other universities. He said it preserves Columbia's independence while addressing antisemitism and renewing a focus on merit. 'This may be the best day higher education has had in the last year,' Summers wrote on the social media platform X. Dozens of colleges are facing federal investigations With the deal, Trump has new momentum in his expanding campaign to bring the nation's universities in line with his vision. Dozens of campuses are under federal investigation for allegations related to antisemitism, DEI and transgender athletes in women's sports. Trump has saved his strongest rebuke for elite private universities, yet his administration has also recently turned attention to big public universities including George Mason University. Among Trump's backers, the Columbia agreement is seen as a first step to counteract the liberal bias they say has permeated college campuses. Education Secretary Linda McMahon called Columbia's reforms a roadmap for universities looking to regain public trust. 'I believe they will ripple across the higher education sector and change the course of campus culture for years to come,' McMahon said in a statement. The settlement follows smaller wins for the administration, including a recent deal with the University of Pennsylvania over transgender swimmer Lia Thomas. Penn agreed to modify school records held by Thomas and to apologize to female athletes 'disadvantaged' by Thomas' participation. Just days earlier, the president of the University of Virginia agreed to resign amid a Justice Department investigation over DEI policies. Dozens of university presidents have rallied behind Harvard in its fight against the Trump administration, seeing their own independence jeopardized by the government's sanctions against the Ivy League school. Harvard, the nation's oldest and wealthiest university, is often seen as a bellwether for other institutions, and some regard it as the best hope to repel the Trump administration's pressure campaign. Now even more rides on Harvard's case. Earlier this month, Trump said a deal with Harvard appeared imminent, only to lash out at the university this week following a court hearing in one of Harvard's legal battles. 'A big part of it is going to be how much Harvard gets in the future,' Trump told reporters this week. 'And they're not going to get very much.' Even before Trump took office, more universities had been pulling back on DEI and taking other steps to backtrack on what some see as a leftward political drift. Yet if the Columbia agreement becomes a model, it could force an even deeper reckoning. The agreement requires full compliance with the administration's interpretation of Title IX, the federal law barring sex discrimination in education. Trump officials have used the law to force the removal of transgender athletes from women's sports. The deal also requires regular reports to ensure Columbia does not 'promote unlawful DEI goals.' On admissions, the settlement pushes Columbia to limit the consideration of race even beyond the Supreme Court's 2023 decision ending affirmative action. That decision left open the possibility that universities could consider an applicant's discussion of how their race affected their life, including in college application essays. The Columbia deal appears to bar such considerations. It also requires Columbia to heighten scrutiny of international students and ask questions about their reasons for wanting to study in the United States. It orders the school to take steps to 'decrease financial independence' on international students. Columbia has one of the largest international student populations in the nation, making up about 40% of its enrollment. How much Columbia ceded in exchange may not be clear for years. There's also no guarantee that the school is fully in the clear — the agreement leaves open the possibility of future 'compliance reviews, investigations, defunding or litigation' by the government. Still, Trump commended the university for doing 'what is right.' 'I look forward to watching them have a great future in our Country, maybe greater than ever before!' he said on his social media platform. ___ The Associated Press' education coverage receives financial support from multiple private foundations. AP is solely responsible for all content. Find AP's standards for working with philanthropies, a list of supporters and funded coverage areas at


Buzz Feed
21 minutes ago
- Buzz Feed
The White House's Response To That Trump "South Park" Episode Is Going Viral
I'm sure you're all well aware of South Park's season 27 premiere episode absolutely trashing Donald Trump. The paintings: The pillow talk: That PSA: And, of course, the micropenis: While we're all waiting for Trump's inevitable Truth Social rant, our appetite is being satiated by this statement the White House gave Rolling Stone: "The Left's hypocrisy truly has no end — for years they have come after South Park for what they labeled as 'offense' [sic] content, but suddenly they are praising the show. Just like the creators of South Park, the Left has no authentic or original content, which is why their popularity continues to hit record lows. This show hasn't been relevant for over 20 years and is hanging on by a thread with uninspired ideas in a desperate attempt for attention. President Trump has delivered on more promises in just six months than any other president in our country's history — and no fourth-rate show can derail President Trump's hot streak." "'As a longtime fan of the series, they found it 'disappointing'" is HILARIOUS," one person wrote. "Smh this generation is so sensitive," another person joked. And then a bunch of people pointed out that calling the show irrelevant makes no sense because they're on their 27th season and just signed a $1.5 billion contract. I guess we'll have to wait to see what he *really* thinks about it!