Treasury Secretary Scott Bessent offered support for Jerome Powell amid regular attacks from Trump administration officials, saying he sees no reason for the Federal Reserve chair to step down.
“There’s nothing that tells me that he should step down right now,” Bessent said of the US central bank chief, speaking Tuesday on Fox Business. “His term ends in May. If he wants to see that through, I think he should. If he wants to leave early, I think he should.”
Powell has been under fire from President Donald Trump for months for leading the Fed in holding fast on interest rates — declining to continue last year’s reductions due to concern over the inflationary impact of the administration’s tariff hikes. A number of Republicans this month have also taken issue with the chair over a costly renovation of the central bank’s buildings. Bessent on Monday called for an internal review of the Fed’s non-monetary activities, including the renovation project.
“There’s a real chance here for him, for his legacy — that he right-size the non-monetary policy functions of the Fed,” Bessent said of Powell. The Treasury chief reiterated his view that, for monetary policy, “we should keep that off to the side — that should be kind of like in a jewel box.”
When it comes to other initiatives, the central bank “has just grown and grown and grown. And this is what happens when you don’t have oversight — they aren’t subject to appropriations,” Bessent said. “They just print money to spend it. And I think a thorough review should be done.”
Fed Costs
Since the great financial crisis, the Fed “has had what I call gain-of-function monetary policy, and the expenses have gone up a lot,” Bessent said. At the Treasury Department, by contrast, expenses were cut about 17% last year, he said.
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Trump, when asked last week whether he ruled out the idea of firing Powell, responded, “I don’t rule out anything, but I think it’s highly unlikely — unless he has to leave for fraud. I mean, it’s possible there’s fraud involved” with the building renovation. The president’s housing-finance chief, Bill Pulte, has alleged, without providing details, that Powell’s testimony about the renovations was “deceptive.”
Powell said in a letter to Trump’s budget director, Russ Vought, last week that “we take seriously the responsibility to be good stewards of public resources as we fulfill the duties given to us by Congress on behalf of the American people.” He replied to a number of questions Vought raised about the US$2.5 billion renovation project.
Powell’s term as Fed chair ends in May, though his separate term as a Fed governor runs until January 2028. He has declined to specify whether he will leave the central bank entirely when his chairmanship ends. Bessent last week signaled that he ought to take that step.
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El-Erian, Summers
Former Pacific Investment Management Co. Chief Executive Officer Mohamed El-Erian caught traders’ attention Tuesday with a call for Powell to resign if his “objective is to safeguard the Fed’s operational autonomy (which I deem vital).” El-Erian said in a social media post that “I recognize this isn’t the consensus view, which favors him staying until the end of his tenure in May.”
One of Bessent’s Democratic predecessors, Lawrence Summers, argued against that call, saying it was “very wrong.”
“The idea that allowing himself to be forced out would somehow make Jay Powell be serving the interests of the independence of the Fed is, I think, very wrong,” Summers said on Bloomberg Television’s Wall Street Week with David Westin. “If the Fed chair became a rubber stamp subject to presidential diktat, I think we would have lost the independence of the Federal Reserve on monetary policy,” said Summers, a Harvard University professor and paid contributor to Bloomberg TV.
