Treasury Secretary Janet Yellen speaks with CNBC from the New York Federal Reserve on Sept. 26th, 2024.
David A. Grogan | CNBC
Former Federal Reserve Chair Janet Yellen on Monday condemned an investigation into her successor, Jerome Powell, saying it compromises the central bank’s independence.
Yellen, who served as Treasury secretary after leaving the Fed, added that she thinks financial markets should be more concerned about a situation that she called “extremely chilling.”
“I’m surprised the market isn’t more concerned. It seems to me that the market should be concerned,” Yellen said, according to CNBC’s Sara Eisen.
The comments come the day after Powell confirmed he’d been made aware that the U.S. Attorney’s Office in Washington, D.C., is looking into whether the central bank leader lied during testimony he provided to Congress last June about an expensive renovation project at the Fed’s headquarters. The office is led by Jeanine Pirro, a Trump confidante and former Fox News host.
The Justice Department has not officially confirmed the investigation into what would be perjury charges.
Yellen bristled at the notion that Powell might have lied.
“Knowing Powell as well as I do, the odds that he would have lied are zero so I do believe they’re going after him because they want his seat and want him gone,” she said.
Yellen served during the first year of Trump’s initial term as president but was replaced the following year by Powell after her term ended. She went on to serve under former President Joe Biden as the head of Treasury, the first woman to hold either position.
During her time at Treasury, critics charged Yellen used the levers of debt issuance to underwrite a ballooning national debt. Trump has badgered the Fed to lower rates, in part to ease financing costs of a debt burden currently at $38.4 trillion.
Yellen said using the Fed’s key overnight borrowing rate to manage the debt is irresponsible.
“You have a president that says the fed should be cutting rates to lower rate payments on the federal debt,” Yellen said, adding she “completely [disagrees] with that. It is the road to banana republic.”
Other former Fed and Treasury officials joined the chorus against the Powell investigation.
“The reported criminal inquiry into Federal Reserve Chair Jay Powell is an unprecedented attempt to use prosecutorial attacks to undermine that independence,” the officials said in a statement. Signatories included former Fed Chairs Ben Bernanke and Alan Greenspan, former Treasury Secretaries Timothy Geithner and Henry Paulson, and a number of prominent economists.
“This is how monetary policy is made in emerging markets with weak institutions, with highly negative consequences for inflation and the functioning of their economies more broadly. It has no place in the United States whose greatest strength is the rule of law, which is at the foundation of our economic success,” the statement said.
