Trump economic nominee (and Powell critic) faces new questions about Fed independence

Sen. Elizabeth Warren is pressing one of Donald Trump's top economic picks to explain his stance on Federal Reserve independence as scrutiny of the central bank intensifies in Washington, D.C.

The leading Democrat on the Senate Banking Committee this week sent a 27-page letter to Stephen Miran, Trump's nominee to chair the Council of Economic Advisers, asking him to clarify his positions on everything from tariffs to tax cuts ahead of a confirmation hearing Thursday.

When Warren raised the subject of the Fed, she noted that Miran has "called into question the central bank’s independence" — citing a report Miran co-wrote last March arguing that Fed board members should serve shorter terms and be fireable at will by the president.

"Will you commit to supporting the Fed’s independence from political influence?" Warren said in her letter, and adding: "Do you believe the President can fire at-will a Board official?"

Miran, who served Trump during his first term in the Treasury Department, has been critical of past steps taken by Fed Chair Jerome Powell to stimulate the economy during the Covid-19 pandemic.

"Powell was wrong politically and economically when he urged Congress to 'go big' on fiscal stimulus in October of 2020, on the eve of a Presidential election," Miran said on X, a social-media platform, last September.

"We know what happened next," he added.

Since Trump's election win, Powell has repeatedly reinforced his intention to serve out his term as chair through May 2026, telling reporters he didn't intend to go anywhere even if Trump tried to fire or demote him.

"Not permitted under the law," the central bank chair said in November when reporters asked about it.

Trump has made it clear he doesn’t intend to fire Powell and has softened his criticisms of the Fed's monetary policy decisions.

But it's clear the White House does want a closer relationship with the central bank — and other independent agencies — after issuing a new executive order last week that gives Trump's appointees more power over such agencies.

The new order makes clear that monetary policy — the direction of interest rates — will remain under the Fed's full control, but that the Fed's oversight of the country's biggest banks will now have a closer connection to the policies and priorities of the White House.

There are other signs in Washington that closer scrutiny of the Fed could be in the offing.

Billionaire Elon Musk suggested last week at a gathering of conservatives that he plans to audit the central bank, answering yes on stage at the Conservative Political Action Conference when asked if that's something he intended to do.

Musk first suggested he might be in favor of a Fed audit on Feb. 9 in a series of social media posts on his platform, X.

When another X user argued the Fed never had a full audit or a full disclosure of monetary policy decisions, Musk responded: "All aspects of the government must be fully transparent and accountable to the people. No exceptions, including, if not especially, the Federal Reserve."

The Fed is required by law to have its financial statements audited annually by an independent, outside public accounting firm. To ensure auditor independence, the Fed requires that the external auditor be independent in all matters relating to the audit.

In addition, the Government Accountability Office and the Federal Reserve board's Office of Inspector General frequently audit many Fed activities.

But some conservatives, notably former Congressman Ron Paul, have long pushed for a GAO audit of the Fed that would include the central bank's private deliberations on interest rate policy. Paul also authored a 2009 book called "End the Fed."

Powell was asked during an appearance before the House Financial Services Committee earlier this month about new calls to audit the Fed, specifically whether he expects that could result in an effort to politically micromanage monetary policy.

"I have no way of knowing really what it is," Powell said.

Powell noted that the GAO "is free to work on every area of the Fed except monetary policy" and the “threat would be if that were to go away you'd have investigations into decisions on monetary policy.”

There is also an effort underway by some members of Congress to take a closer look at the Fed's current dual mandate, which is to ensure price stability and maximum employment.

A new House panel — the Monetary Policy, Treasury Market Resilience, and Economic Prosperity Task Force — will convene next week to discuss that subject and other matters relating to how the Fed makes rate decisions.

The Republican head of that panel, rep. Frank Lucas, told Reuters he has questions about whether the current approach is correct: "Is there really a dual mandate? And how does that affect the primary mandate of price stability?" he said, according to the news outlet.

Warren touched on that topic in her letter this week to Miran, asking whether he views full employment as a “macroeconomic priority” and whether he supports proposals to remove the Fed’s responsibility to promote full employment from the Federal Reserve Act.