Duke: Could See Fed's Powell Stay Until 2028

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00:00I'm curious if you were more surprised by what the Trump administration and the DOJ did this

00:05weekend or more surprised by how quickly and publicly Jay Powell's response was to that salvo.

00:12I'm not sure I can judge my level of surprise on either one of those.

00:16But I think the response from the Fed and from Jay Powell is telling in that it was direct to

00:23the public. It was direct, not in response to a question, not in the middle of a press conference.

00:28And the timing of it on Sunday night would tell me that they were really concerned about

00:35saying something before markets opened in Asia. When I was at the Fed, we were in the middle of

00:41the financial crisis. And always over the weekend when we were fighting one market or another,

00:48the deadline was Sunday night to make the announcement before markets opened in Asia.

00:53So I think that explains the timing. I think the reason for it is just to reassure

00:58markets of Jay Powell's resolve in case anybody had any question that Jay Powell's resolve

01:03is to continue to do his job. The gravity of all of this was also captured in the fact that earlier

01:10today, three former Fed chiefs, the three surviving Fed chiefs out there, four former Treasury officials,

01:17as well as other public officials, including Bernanke, Ben Paulson, Tim Geithner and several

01:21others came out here and made it very clear. I'm just going to read you one line from their

01:24statement today, Betsy, very explicitly saying that the Fed's independence and the public's

01:29perception of that independence are critical for economic performance. And it says that right now,

01:35based on the actions of the DOJ, this is a foundational attack on that independence.

01:42Yeah, this just makes no sense, honestly, because it seems to be contrary to everything that this

01:49administration is trying to do. The Fed's job is to focus on inflation and unemployment, both of which

01:57are important to the financial performance of the American public. And so certainly important to the

02:03administration. I would think that at a minimum, this is going to send mortgage rates up a bit.

02:10It's certainly going to oil stocks a bit. And it just makes no sense.

02:16It gets to this idea, though, too. How does this, if at all, Betsy, actually complicate

02:21the making of monetary policy going forward? I think we came into this year with I think

02:27most investors felt like they had a pretty clean read on what the Fed would do next,

02:31or at least what they should do next. I am curious as how this complicates the discussion over the next

02:36three meetings that Powell has to preside over.

02:39So I don't think it complicates the discussion there. I think the FOMC has been pretty clear.

02:45All the members of the FOMC have been clear that they're going to continue to make their decisions

02:50based on the data that they receive and their reading of that data.

02:54You saw that they have already reappointed all of the presidents of the reserve banks.

03:00That was something that would have come up in January, but that's been done in advance.

03:03So they are all serving five-year terms now.

03:07Where I think it complicates things is in any nomination for Fed chair to succeed Jay Powell.

03:12And the second place I think it's going to complicate things is it's hard for me to see

03:17Jay Powell leaving the Fed board, leaving his seat unoccupied and subject to appointment to somebody

03:24that he may not have confidence in, particularly while this lawsuit is going on.

03:30So I think this will probably lean, Jay, towards staying until 2028.

03:37And this is just a reminder, too, that next week, January 21st, the Supreme Court is supposed

03:42to start hearing oral arguments in that case regarding Lisa Cook and the president's power,

03:47if at all, to actually remove Fed officials.

03:51And I guess that does raise the question, Betsy, here about the interview process for a new Fed

03:56chief or really any member of the Fed and whether investors can have any confidence that the

04:01people being selected will be acting in the best faith based on their own economic read rather

04:07than, I guess, what other, I guess, for lack of a better phrase, sycophantic sort of allegiance

04:12they feel they have to the president.

04:14Well, so you started with that.

04:17Would he appoint somebody who would promise to do exactly what he wanted and somebody that

04:21he believed would do what he wanted?

04:23But in this case now, you've raised the threat level to anybody who is going to sit on that

04:29board.

04:29And I think when you look at what Lisa Cook is doing, you look at what Jay Powell is

04:33doing, they're not fighting their own individual cases.

04:36They're fighting for the institution.

04:39And, you know, when you think about somebody going on the Fed board, not as a new chair even,

04:44just to go on that board, if you're going on there with the threat that you could be personally

04:49criminally prosecuted for the work that you were doing there, even though you've done

04:54it entirely in good faith, I think that's chilling.

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