The DOJ Comes for Jerome Powell

Ed Elson breaks down the Justice Department’s investigation of Fed Chair Jerome Powell with Liz Hoffman, Semafor’s business and finance editor, and Justin Wolfers, Professor of Public Policy and Economics at the University of Michigan. They discuss how markets reacted and what the escalation of conflict signals for the country. Check out our latest Prof G Markets newsletter Follow Prof G Markets on Instagram Follow Ed on Instagram, X and Substack Follow Scott on Instagram Send us your questions or comments by emailing [email protected] Learn more about your ad choices. Visit podcastchoices.com/adchoices

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• 1:13Ed Elson?

  Today's number 100. That's how many McDonald's chicken nuggets Usain Bolt ate every single day during the 2008 Beijing Olympics. Today's other number is zero. That's how many dieticians deserve employment.

• 1:32Speaker 05

  If money is evil, then that building is hell.

• 1:41Ed Elson?

  Welcome to Prof you markets. I'm Ed Elson. It is January 13th. Let's check in on yesterday's market vitals. The major indices opened the day down after the Justice Department announced it is investigating Jerome Powell. More on that in just a moment. However, they quickly erased their losses with the Dow and the S and P closing at all time highs. Meanwhile, the yield on 10 year Treasury spiked before moderating. Capital One shares fell more than 6% after Trump said credit card companies should Cap interest rates at 10%. Google hit a $4 trillion market cap after Apple said it will use Gemini to power Siri. And finally, President Trump said he is levying a 25% tariff on any country doing business with Iran.

• 2:26Ed Elson?

  Effective immediately, he said, quote, "This order is final and conclusive."

• 2:32Ed Elson?

  Okay, what else is happening? The Justice Department has opened a criminal investigation into Federal Reserve Chair Jerome Powell. The probe, which was launched on Friday, is examining whether Powell lied to Congress in his testimony about the Fed's building renovations. But Powell says that the testimony which took place last June is merely, quote, "pretext" for the Trump administration's threats to lower interest rates. In a rare video statement that was released on Sunday, Powell called the investigation, quote, "unprecedented", and he argued that it is part of the administration's ongoing pressure campaign. Let's listen to what he said.

• 3:08Jerome Powell?

  "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."

• 3:20Ed Elson?

  The chain of events initially rattled markets. The S and P opened Monday in the red, but then it rallied into positive territory by the end of the day. Meanwhile, the dollar slid and investors rushed into hard assets like gold and silver, which hit record highs. So this is a pretty incredible story that we are witnessing. And in keeping with that, we're going to do something a little bit different today. We're joined by two favorites of the Prof G podcast. That is Liz Hoffman, Semaphore's Business and Finance Editor, and also Justin Wolfers, Professor of Public Policy and Economics at the University of Michigan. Liz, Justin, thank you very much for being here today. Excited to get into this.

• 4:03Liz Hoffman?

  Thanks for having us.

• 4:04Ed Elson?

  Absolutely. Liz, I'm going to start with you. I just want to start with your reactions to what we saw. We have seen a criminal investigation opened against Jerome Powell. What is your initial reaction to the news?

• 4:21Liz Hoffman?

  Pretty incredible. I mean, I watched the statement that Jerome Powell gave last night. And this is someone who has just tried as hard as humanly possible to stay away from this narrative, to kind of ignore the noise, ignore the criticism, and finally got to a place where he felt like he could not. And his statement is, I mean, it's really worth, you know, your listeners should go watch it in full. I mean, it is incredible. To state the obvious, this is not about the renovations to the Fed building and what Jay did or did not say to Congress about it. This is punitive and it's retaliatory and it's, I mean, really, you know, unprecedented is a word that's getting used quite a lot these days, but I was really floored by the whole thing.

• 5:04Ed Elson?

  Justin, were you floored? Is this unprecedented?

• 5:08Justin Wolfers?

  Absolutely not floored. I was flabbergasted. Completely different.

• 5:14Justin Wolfers?

  Every day, we hit that day where I think, I never thought I'd see this in my life. So it is unprecedented in American history. It's not in the world. Tinpot dictators do this all the time. This is, and one of the things I admire Liz Full is called it what it is, which is it's the president threatening to jail the Fed chair. Put all the pretext aside. That's what it is. Well, so we've got a president threatening to jail the head of the central bank. That's happened before. It's happened in Russia,

• 5:53Justin Wolfers?

  Venezuela, Argentina, Zimbabwe, Turkey, and now America. So it's not unprecedented, but it puts America in a club of tinpot dictatorships who've experienced hyperinflation and immense economic instability. It's bananas.

• 6:13Ed Elson?

  Based on those examples that we've seen in other nations, so this hasn't happened in America, and when we say this, we're saying the president basically threatening the chair with some sort of criminal charge to enact whatever monetary policy he so desires. But given what we've seen in other nations, like you say, this has happened. How does this usually play out when this happens, Justin?

• 6:41Justin Wolfers?

  Not well. So, look, here's what each of the examples has in common, which is a strong man head of state. A strong man head of state possessed of enormous self-belief who eschews experts. Again, that's common in every one of those stories. And often who finds themselves in some form of economic trouble and they think they can fiddle with interest rates to solve it, or they have an internal belief that if they were to fiddle with interest rates, it would lead to better outcomes. In many of these cases, can we introduce word for the day? The word for the day is fiscal dominance. Fiscal dominance is this idea that, and I think this is what's going on if you listen to what the president has said.

• 7:25Justin Wolfers?

  Normally, we set interest rates with a view to trying to keep inflation low and unemployment low. Interest rates play another role in our economy. The interest rates determine the monthly credit card bill for the United States. We have an enormous government debt. The interest rate determines how much we devote to paying interest. And every dollar we spend on interest is a dollar of tax cuts we can't give to our mates or a dollar we can't spend on roads or defence or ice. So what you get often with cases of fiscal dominance is the head of state says, well, I don't like paying interest and I control the interest rate. Or if I take over the central bank, I can control the interest rate. So they could reduce the interest rate with an eye of reducing the government's interest payments. And so far, so good that works.

• 8:09Justin Wolfers?

  But what that means now is that you're setting interest rates not to control inflation and not to control unemployment. If you were to do that, then you typically set interest rates far lower than current conditions warrant. And the president has already said he'd like interest rates to be 1% right now. They'll give him a whole lot more money to splash around. Now, if you set interest rates below what is required to keep inflation low and stable, you don't get low and stable inflation. You get higher and higher and higher inflation. As inflation goes up, the appropriate interest rate goes up too. But if you're pig-headed, you leave interest rates where they are and then inflation keeps going all the way till you get a hyperinflation. And so, to be clear, this is not moving from an interest rate of, an inflation rate of 3% to 4%.

• 8:54Justin Wolfers?

  It's moving from 3 to 30 or from 30 to 300, or in some of these cases, from 300 to 3,000 or in fact, 3 million percent. We move to an economy where one of the most important things you do every day is you wake up and you think about inflation, you think about how to maintain your family's purchasing power.

• 9:11Ed Elson?

  Hmm.

• 9:11Justin Wolfers?

  You might say this couldn't happen in the United States, and I hope that's true. But you might have said that wouldn't have happened in some of these other countries. Some of these other countries, take Turkey for instance, it had fairly low and stable inflation, it had a checkered history, but it looked like it was determined to be a modern industrial country. And a populist strong man came to power. He got rid of the independence of the central bank. He had, like President Trump, an unusual attachment to low interest rates, implemented his own theory of the case, and Turkey ended up not that much later with eighty percent inflation. Um, I would like to say that's impossible here, I can no longer say that.

• 9:49Ed Elson?

  Yeah. Liz, I mean, just looking at what we've got here, which is probably the clearest evidence we've seen that there is at least significant interest in making, in reducing the Fed's independence to bending it to the will of the strong man in this situation, which, as Justin points out, like, we've seen this before, we've seen this in other countries, it leads to hyperinflation almost every time. But the market's reaction has been quite interesting in that it's reacted but not, not massively. I mean, the S and P was down and then it actually rebounded and, and closed in the green.

• 10:30Ed Elson?

  Uh, same with the Dow, we did see some, some big moves in gold, gold hit a record high, silver hit a record high. But overall, I guess if I had to, you know, pass what the market's telling us, it's something along the lines of like, this is maybe important, but not that big of a deal. Would you agree with that reading? What do you make of how the market has reacted?

• 10:50Liz Hoffman?

  I would say I was disappointed but not surprised in what the administration did. I was disappointed and surprised in the collective response of the markets today, as you said.

• 10:59Ed Elson?

  Yeah.

• 11:00Liz Hoffman?

  Stocks ended up higher. I mean, really what you want to be looking at here, if you're hoping that there's some check on behavior like this, is the bond market, treasury yields, I think were up a couple of basis points, I mean, not reflecting any kind of concern. And if you wind back to liberation day, it was, it was actually the bond market throwing a temper tantrum that got. The president to back off his most aggressive tariffs, not in fact, the stock market. There's been this talk of is there a Trump put somewhere in the market? Is there a pain point that will reel in the policy process? And it is much more likely to be found in the bond market than in the stock market. As you said, gold and silver hit highs, but they've been doing so pretty consistently for a bunch of months now. I'm very surprised, and you know, I think we had a column last week or saying the market's

• 11:45Liz Hoffman?

  kind of acting like a teenager with noise canceling headphones on. And I wish I had saved that column in my pocket for this week because, you know, one of three things is happening. The market is kind of reading that this is going to be mostly theater, a non-event. And I should say, there was some reporting today that suggested kind of that this was a bit of perhaps a rogue advisor. This is, it came out of the district court in Washington, run by Janine Pirro, that it may have had some influence from Bill Pulte, who's the housing czar, who has, you know, a history of some more aggressive policy ideas. And that perhaps, you know, Scott Besson, Treasury Secretary, who's sort of emerging really as the economics czar of this administration, perhaps has some qualms and wished it had not happened. So we'll see.

• 12:30Liz Hoffman?

  There is an off-ramp, as there often is around Trump, where you have advisors kind of trying to see what he might want them to do in doing it, and he can turn on them too. So there is a bit of an off-ramp. But yeah, you know, so either people think it is just theater and is going to go nowhere. They think it's real, but not a problem, which is alarming. Or they have just so totally tuned out the noise, you know, a year into the Trump administration. And I think that's a real problem. I mean, you know, the one check, like we said, on the president has been severe market reactions. And if that starts to go away, is, you know, the so-called the bond vigilantes, if they're ceding their power here.

• 13:13Liz Hoffman?

  I don't know. I mean, you know, there was a call today from JP Morgan that, you know, they think the Fed's next move on rates is up, not down. Like, I don't know how to square those two things, especially if you assume that there will be a more compliant or White House-friendly Fed chair coming in to replace Jerome Powell. I also think this makes it more likely that he sticks around. He's entitled to stay as a member of the board after his term as chair expires. And you could see him dig in there. So I don't know. And we're coming off this political cycle where inflation was just proven, as it has so many times in history, to just be politically toxic. And they're already flirting with that with the tariffs, which we've not yet really seen come through on prices, but

• 13:55Liz Hoffman?

  at some point probably will. Justin, you may have a point of view on this. They probably have to, if import prices are coming up, get passed on to consumers. So this all just feels very politically dangerous. And my question often is like, who is this for? Like, what, even if you're trying to play kind of crass, kind of campaign politics, who is this for? I don't know.

• 14:13Ed Elson?

  Yeah, an argument that I've seen floating around is that, it's an argument that I've seen in the past, which is that Trump is trolling Jerome Powell. And so it's not to be taken seriously. It's not to be considered like a real threat. He's just having a goof. It's sort of like whatever presidential equivalent of shitposting is, which seems to me to be perhaps how the market is viewing this as well. Oh, he's just trolling. Oh, it's not that big of a deal. Oh, he's just kind of kidding. I guess, Justin, is that wrong? I mean, clearly, we don't want to take this stuff lightly, but maybe he is

• 14:58Ed Elson?

  just trolling and maybe we shouldn't care? I mean, what do you think?

• 15:02Justin Wolfers?

  I have a different story. So let me try and mine out. So, look, I think this is a grave, grave threat to the United States. Liz does too. It sounds like you did too. And every economist I spoke to today agrees.

• 15:19Justin Wolfers?

  Yet the markets didn't sink. So option one is I'm a fool, Liz is a fool, Ed's a fool, the other economists are fools. Option two is let's go back and make sense of this. So the question is, what do we know right now that we didn't know 24 hours ago? What do we know about the world? Well, what I, last night, I knew that Trump wanted leverage over the Fed, already knew that. Last night, I already knew that Trump had no respect for the independence of the Fed. He's been undermining it for a long, long time. I already knew that he'd weaponized the Justice Department. So all of those things I already knew. So what did they learn today? Now, one thing to understand is, this news cycle

• 16:02Justin Wolfers?

  did not come from the administration. It was Jay Powell, who'd received the subpoenas, who decided he would move this into the public arena. This was meant to be a private threat. Do what I want, or you're going to jail, brother. Powell moved it to the public arena. He did so powerfully. He did so directly to the public. He's literally never done before what he did last night. Neither has any chair of any industrialized central bank that I'm aware of. He released a video directly to the American people, not only put it on the Fed website, but also many others as well to make sure it couldn't be taken down, and spoke directly to the camera about what's going on here. What happened is, we had a

• 16:43Justin Wolfers?

  round of Trump trying to undermine the Fed. Powell won. Powell beat him. Look, Powell said, I'm not backing down, and you don't have the goods. And here we are talking about it right now. And everywhere, no one's saying that tomorrow, that this threat, which is the only news we learned about was this threat, no one's saying this threat in and of itself is doing anything to the standards of monetary policy. And in fact, what we got was, he laid the whole game out so clearly, that we saw Senator Tillis today come out and say, this is not okay. Yeah. Tillis said, I'm not voting for a Federal Reserve Chair until this is cleared up, by

• 17:24Justin Wolfers?

  which he means, I'm not voting for a Trump toady. Lisa Mikowski did the same thing. What that actually means is, now, I'm going to make the argument markets should have gone up. Because what it actually means is, we were, many of us were worried that Trump was going to appoint a toady.

• 17:43Justin Wolfers?

  And that we would have a non-independent central bank and it would have occurred through the normal process of him suggesting Kevin, Kevin, yes, sir, has it. And Kevin would have gone and been Federal Reserve Chair in name only and taken all of his marching orders from the Fed. And we would have gotten all of the negative consequences. And now what he's done is he's woken up the Senate and that Senate confirmation now we have at least two Republicans now on record as saying, no, I'm not going to rubber stamp a toady. And I think what happens in that fight, that fight to replace Jay Powell is going to be vitally, vitally important. But the thing I want you to notice is when I tell the story, we didn't actually learn much that was bad that we didn't already know. And markets respond to new knowledge.

• 18:28Justin Wolfers?

  And so I think that's really the story. Now, let me say it in simpler language, right? Markets had priced in that Trump hates the Fed. Yeah. They priced in a lot of that. And then there's the yap yap yapping. Well, the president yap yap yaps all day. And some of the yaps are really offensive, but only some of them he means. And then even the ones he means he often targets. If I'm a trader on Wall Street, I would be sick to death of losing money because I responded to a yap only to get targeted. By the way, those are technical trading terms. And so of course they're not going to move. Yeah. Right? So you need to discount everything by the probability that actually happens. And for any given yap, the probability it actually becomes an untargeted outcome is

• 19:11Justin Wolfers?

  incredibly low, beyond knowing that he's going to continue this campaign to undermine the Fed. We'll be right back. If you're enjoying the show, give Prof G Markets a follow.

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• 20:48Ed Elson?

  We're back with Frosty Markets. Just thinking ahead, Liz, as Justin was talking about here, about what happens next for the Fed chair. I mean, his term is up in May. The concern was that we'd get some form of a yes man in his place. Do you think that this changes anything looking ahead to the next few months or so? I mean, does this tell us anything about who will be the next Fed chair, what that will look like? Does this change things, I guess is my question.

• 21:23Liz Hoffman?

  I would still expect to see one of the Kevins probably. Kevin Hassett, as Justin said, or Kevin Warsh, who are both seen as, you know, fairly compliant, I would say. There was a longer list of people who would probably likely be a little bit more independent. There was a BlackRock executive, Rick Reader, on that list at one point. A current Fed governor, Chris Waller, was on the list at one point. I don't know exactly.

• 21:48Liz Hoffman?

  But the other thing to think about, and this gets kind of a little inside the way the Fed works and Fed baseball, is that it is fundamentally a consensus-driven place. People vote and no one has more power than anyone else. And a bunch of new voting members rotate on and rotated on this year. And there's a real, there's a real mix, the dot plot that everyone talks about, which is this, I think, twice a year, the Fed officials kind of say where they expect to see interest rates over the next one, two, three years. And for, in most normal times, they're in a fairly tight band. They are all over the place right now. And there were dissents in both directions at the last Fed meeting in late last year.

• 22:30Liz Hoffman?

  And so, I don't know, but I think the one thing that Powell had tried very hard to do as Fed Chair was kind of maintain consensus. And you could see it fraying on him. And he hasn't quite lost control of it, but I think you're going to end up with just people who have wildly different points of view, some for political reasons, but also because, especially with the government shutdown, we were in a bit of a blackout. And it was the dual risk to the economy right now, or that the labor market is weakening even faster than we think, or that inflation is sort of primed to rise again, and we're going to get this double dip thing. And the policy prescriptions for those are really different. Justin's the economist here, he can tell you about it. But depending on which of those you think is a bigger risk to the economy, like that's

• 23:15Liz Hoffman?

  kind of how you're going to vote on rates. And smart people can, in fact, disagree on that particular point. But looking ahead, the other thing I would just kind of keep in mind, and it's a little bit of a longer-term question, is for so many institutions that Trump has put his fingerprints on, there's a question of how much of that, those changes and that influence outlast him. And the Fed's credibility, for a bunch of fair reasons, has been eroded.

• 23:42Liz Hoffman?

  They had a mistake on the policy side coming out of the pandemic. You know, we're too slow to respond to inflation. I would note a bunch of that was a fiscal policy decision. That last round of stimulus did not do anyone any favors. But, you know, the broader discussion around kind of Fed independence, the more charitable flip side of it, I would say, is Fed accountability and should it be accountable? And once these institutions start kind of coming down from the mountain and being a little more transparent, there's an argument that the Fed has been too transparent about how it's making these decisions because it just lets people pick and pick and pick and second guess. I think that some of that is just going to stick around. This is going to be a more political body. It's going to be a body that is sort of expected to answer for itself

• 24:27Liz Hoffman?

  in a way that it didn't really have to for a long time. And kind of the flip side of independence is accountability to the public. And I thought Powell did a very good job kind of speaking to that yesterday. But I think that influence is going to remain for a long time with us.

• 24:43Ed Elson?

  Yeah, having this conversation, it's interesting. It makes me feel more confident in the Fed. It makes me feel more confident in institutions. In a funny way, it's almost as if when Trump tests the limits of US institutions, we get to see how strong they really are. And it's a good point. It's like, well, yeah, he's the Fed chair, but he only gets one vote. Same as every other member of the committee. So, you know, how bigger deal is it if we have a complete toady as the Fed chair? I'm not totally sure. One thing that is clear to me, though, is that this is very much a political story at this point.

• 25:25Ed Elson?

  And it seems to be playing really badly for Trump, based on the reactions that I've seen. Also, I found quite interesting is Powell's approval rating. And this is from before this happened, but he has one of the highest approval ratings among anyone in Washington, 44% compared to Trump at 36%. This is from December of last year. I have no idea what it's going to look like tomorrow or the next day. But I guess, Justin, what do you think this does to the political story? I know we're talking about economics and markets, but how has this changed the political story, especially considering we've got midterms coming up?

• 26:04Justin Wolfers?

  Yeah, look, I'm no political guru, so let me not pretend to be that. But I think what makes this particular story very interesting is Trump does a lot of stuff that would offend institutionalists, that would offend folks who believe in the status quo, but often he's doing so because it serves a MAGA interest. So I don't approve of a single damn thing that ICE is doing, but I do know that there's enormous anti-immigrant sentiment out there and he's serving that sentiment. What's not true, there's no one, no one, who's saying, you know what, I really wish monetary policy was run out of the White House.

• 26:43Speaker 11

  Yeah.

• 26:43Justin Wolfers?

  I am utterly convinced that Trump's version of the Taylor rule would be superior to Jay Powell's version of the Taylor rule. There is no one who sees lower unemployment. There's no one who sees lower inflation coming out of this. It's serving no political interest at all. And I think that gives a lot, that's part of the reason you haven't said, you've not heard a single person defend the president's actions. And let me go a step further. Not only is it bad, it doesn't serve Trump's interests. Right? So to the extent that we now believe even more that he wants to undermine Fed independence, what does that do? If he succeeds at undermining Fed independence, he can get his toady in there to reduce the short-term interest rate. But what matters for government debt is the long-term interest rate.

• 27:28Justin Wolfers?

  And the long-term interest rate depends on expectations of inflation. And the moment he appoints a toady, or he undermines central bank independence, what we've seen, every time we've seen versions of this, this movie before is, yes, you can get the short-term rates down, but long-term rates rise. So in fact, he ends up undoing exactly that which he hopes to do. But it's, you know, it's, it's, it's even worse than, it's even worse than that. I think the way that this is played out is you've, you've actually seen Republican senators discover a spine.

• 27:59Speaker 11

  Yeah.

• 28:00Justin Wolfers?

  And so I don't, but it's even, actually even worse. If you wanted to get rid of Fed Chair Jay Powell, if you actually thought Powell was bad at his job, I have a secret plan that will work. But I, Liz, Ed, I need you to keep it a secret so that it doesn't get out on the Hill.

• 28:20Justin Wolfers?

  What you do is you wait till May.

• 28:22Ed Elson?

  Right.

• 28:23Justin Wolfers?

  And in May, his term ends. And then you appoint a new bloke. And May is four months away.

• 28:32Ed Elson?

  Yes.

• 28:33Justin Wolfers?

  So trying to destroy an institution because you can't wait four months

• 28:40Justin Wolfers?

  is absurd.

• 28:41Ed Elson?

  Yes.

• 28:41Justin Wolfers?

  And if he'd waited four months, he probably could have gotten the toady appointed. This game might actually prevent him from doing that. So he isn't serving the American people. He's not serving MAGA. He's not even serving Trump's interests.

• 28:53Ed Elson?

  Right. But it seems to say something about his urgency. Perhaps it does have something to do with the midterms. He needs to get a hold of monetary policy right now so that things go his way. I we've exhausted our time. I just want to end with a quick question to you, Liz, before we go. Jerome Powell's term is ending. He'll be done with the job. What do you think Powell's legacy will be in America? And do you think this will be a big piece of that legacy?

• 29:27Liz Hoffman?

  I think he did a lot of rewriting it in the last 24 hours. I think you can look at Powell's legacy. Really, there's two halves to it. I mean, just a textbook response to the pandemic. I mean, I think really handled that very well, borrowed from what was actually a pretty good response. You know, under, you know, in conjunction with the White House and Steven Mnuchin, Treasury Secretary. I think that whole crew actually like really overperformed on the way in. Clearly too late on inflation. And again, part of that just goes to the Fed just not being historically that political a place. This is why Janet Yellen had trouble with that job, that, you know, with the Treasury job, which is a more political institution. They tried to stay out of the fray, but clearly misjudged inflation.

• 30:13Liz Hoffman?

  I mean, I think he's shown himself to have a real backbone and, you know, that statement, I think it's sort of been one of those things in the archives that people point to. So I think he deserves a lot of credit here. And I think he will think very carefully about his next step, whether he stays on the board, based in large part on how the confirmation, the nomination and confirmation process for his successor goes.

• 30:37Justin Wolfers?

  Can I just add one thing here? Because Liz highlighted something so important, which is Powell showed enormous spine. We've seen business leaders roll over. We've seen university leaders roll over. We've seen big law roll over. We've seen public servants roll over. What we saw this time was an economist, well, Trump's, he's actually, Powell's actually a lawyer, but planning an economist not roll over. And let me give you one other example. Mark Carney hasn't rolled over. And so we spend days as economists being reviled as being the worst possible people in the world. But when it comes time for hard choices and a spine, I'm proud to call myself an economist and to be in the same profession as those blokes.

• 31:12Ed Elson?

  I love that. Revenge of the economists.

• 31:14Liz Hoffman?

  I also think, by the way, this is a very good week for the private sector to find one, right? We're going to have big bank earnings. Every big bank and financial institution's CEO is going to be in front of big crowds over the next two weeks, being asked exactly about this. And I'll be very curious how much appetite they have to say a thing that's true.

• 31:31Ed Elson?

  That's a great point. Thank you. Liz Hoffman, Sunfor's Business and Finance Editor. Justin Wolf is Professor of Public Policy and Economics at the University of Michigan. Liz, Justin, this has been great. Thank you both so much.

• 31:43Liz Hoffman?

  Thanks, Ed.

• 31:48Ed Elson?

  Before we end, just a quick reminder of why Powell has been subpoenaed here. This whole investigation supposedly revolves around this renovation of this Fed building, which was approved, by the way, by Trump in his first term. But ever since then, the renovation has gone over budget. They thought it would cost $1.9 billion. Instead, it is projected to cost $2.6 billion. So this renovation under Jerome Powell's watch has gone over budget by about 35, 36%. Trump has complained about this a lot in the past. And to his credit, it's not ideal that they are going over budget. Where things take a completely different turn, though.

• 32:32Ed Elson?

  Is the fact that this is being used as the basis for an investigation into criminal activity. And the assumption appears to be Powell went over budget, therefore he must be doing something illegal, which is obviously ridiculous. And it is a lot more ridiculous when you realize that Trump's own construction project, the ballroom, has gone from $200 million to $400 million, a 100% increase in just a few months. But of course, as Powell said in that video, this has nothing to do with the renovation of the Eccles Building. They might say it's about the renovation, but ultimately it is obvious what this is

• 33:16Ed Elson?

  really about, and that is interest rates, monetary policy. Trump wants interest rates to go down further and faster. Powell isn't budging, and this is Trump's attack on Powell, a criminal investigation into the renovation of a building. Now, usually when something like this happens, I feel the need to spend my time trying to convince people of what's really happening, trying to expose the lie. But what's fascinating about this story is I don't feel the need to do that, because it seems to me that everyone agrees on the left and the right that Trump is lying and Trump is in the wrong.

• 33:59Ed Elson?

  In less than 24 hours, Powell's statement received over 70 million views on Twitter. It was reshared nearly 60,000 times. Everyone was sharing it. Everyone was saying in unison what a terrible thing this was. Here are some quotes from some Republicans. Senator Murkowski, quote, "This is nothing more than an attempt at coercion." Senator Tillis, as Justin mentioned, quote, "The independence and credibility of the Department of Justice are in question." Even a very popular Trump-supporting Twitter account said, quote, "We are going full-blown banana republic." And this says nothing of the market's reaction, which of course also agreed, this isn't about

• 34:40Ed Elson?

  the renovation, this is about interest rates, this is the president using the DOJ to intimidate and influence Jerome Powell, which is why futures fell and it's why gold and silver both hit a record high. Put another way, something about that video got through to people.

• 34:58Ed Elson?

  Maybe it was Jerome Powell's delivery. Maybe it was his history of being so unemotional, so focused on the numbers. Or maybe it's just the fact that the facts of the case here are at this point so glaringly obvious to everyone. I don't really know. But it's clear to me that something about this story is different. Something about it perfectly encapsulates what is really going on in America today. Whether you're on the right, whether you're on the left, whether you're an investor, whether you're not an investor, it seems most of us can agree this is unprecedented. And more importantly, this is wrong.

• 35:47Ed Elson?

  Okay, that's it for today. This episode was produced by Claire Miller and Alison Weiss, edited by Joel Patterson and engineered by Benjamin Spencer. Our research team is Dan Shlon, Isabella Kinsel, Kristen O'Donoghue and Mia Silverio. Thank you for listening to Profitey Markets from Profitey Media. If you liked what you heard, give us a follow. I'm Ed Elson. I will see you tomorrow.

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