Former U.S. Rep. Patrick McHenry, R-10th, joined former Congressional colleagues Monday in blasting the Trump administration after the Department of Justice launched a criminal investigation of Federal Reserve Chairman Jerome Powell.
Speaking at a NC Chamber/N.C. Bankers Association forum in Durham, McHenry left little doubt that he shares the view that the move’s retaliation for Powell’s unwillingness to cut interest rates as deeply as Trump wants.
“What Trump is doing now, I think, is deeply offensive to our system of checks and balances,” McHenry said. “It is deeply offensive to Fed independence, and is the wrong thing to do. It is not right for the economy.”
“The substance of the accusation” the administration is pursuing “is completely false, unjustified and untrue,” he said.
Federal prosecutors said they are investigation the $2.5 billion renovation of the Fed’s headquarters in Washington, D.C. Powell has previously said that cost overruns stemmed from unexpected construction-related problems. His term as chair is scheduled to conclude in May.
McHenry is the former chair of the U.S. House Financial Services Committee. He served in Congress from Gaston and Lincoln counties from 2005-2024 before stepping down last year. He now is a senior advisor at Wall Street investment bank Lazard, focused on public policy, financial services, fintech, and AI-related matters.
His successor in the House committee post, Arkansas U.S. Rep. French Hill, called Powell “a man of integrity” and said the administration’s actions could undermine the government’s “ability to make sound monetary policy decisions.”
North Carolina U.S. Sen. Thom Tillis previously said he will oppose confirmation of any of Trump’s Fed nominees until Powell’s legal matter is resolved.
“If there were any remaining doubt whether advisers within the Trump administration are actively pushing to end the independence of the Federal Reserve, there should now be none,” Tillis said. “It is now the independence and credibility of the Department of Justice that are in question.”
McHenry said he believes Trump is pressing the matter because he has few tools at his disposal in the short term to overcome voters’ concerns about the economy. “When things get boring in Washington, when you have a President Trump, he lights stuff on fire, right?” he said. “ And this is lighting, well, some bankers on fire in particular.”
McHenry also said Trump “firmly rejects” the idea of Fed independence.
The president’s comments had little impact on the U.S. stock and bond markets. The S&P 500 Index and Nasdaq markets gained more than 20 basis points, while the 10-year Treasury yield was flat.
Monday’s Chamber forum also featured an appearance by Richmond Federal Reserve President Tom Barkin, who declined to discuss the Powell situation.
But he emphasized the importance of Fed independence. “It’s been tested that, and you can see it across countries, that an independent central bank delivers better economic outcomes than a non-independent central bank,” Barkin said.
“Why is that? You have the ability to manage inflation,” Barkin continued. “You’re always going to have an incentive, if you’re in the political arena, to stimulate the economy in the short term … and take the risk of inflation in the long term.”
He cited Turkey, where inflation spiked massively recently after President Recep Erdoğan pressured its central bank to cut rates.
In the U.S., then-President Nixon jawboned the Fed for rate cuts in the early 1970s. Nixon wanted the economy humming for the 1972 election, but by 1974 the CPI had risen to 11.8%. The economic fallout “took nearly a decade to resolve,” a 2006 analysis notes.
