The Fed must change course
In the long history of tensions between elected governments and their central banks, the United States now faces one of its most consequential tests. Treasury Secretary Scott Bessent has called for a sweeping review of the Federal Reserve's powers — from interest rate authority to staffing and spending — while the Trump administration simultaneously searches for a successor to Chair Jerome Powell. The episode raises a question as old as democratic governance itself: whether institutions designed to resist short-term political pressure can endure when that pressure becomes a matter of deliberate policy.
- Bessent published simultaneous op-eds demanding the Fed surrender bank supervision, curtail bond purchases, and submit to a full review of its operations — framing an aggressive political offensive as a defense of institutional integrity.
- The administration is already interviewing Powell's potential replacements, with candidates including Kevin Hassett, Kevin Warsh, and Christopher Waller — all seen as more aligned with the White House's appetite for aggressive rate cuts.
- Fed Governor Lisa Cook is fighting her removal in court after the White House cited allegations she denies, while the administration's Fed nominee pledged unpaid leave from his White House role — a compromise Democrats say undermines independence before he even takes his seat.
- No sitting Fed policymaker has endorsed either the rate cuts Trump demands or the structural overhaul Bessent advocates, and the central bank appears set to begin modest cuts this month on its own terms, not Washington's.
- The outcome of this confrontation could permanently alter how American monetary policy is made — and whether the firewall between the Fed and the executive branch can survive an administration determined to breach it.
Treasury Secretary Scott Bessent launched a sweeping public attack on the Federal Reserve on Friday, calling for a comprehensive review of the central bank's authority over interest rates, regulation, communications, staffing, and research. Writing simultaneously in the Wall Street Journal and The International Economy, Bessent accused the Fed of fueling inflation, deepening inequality, and wasting public money — citing everything from headquarters renovations to the cost of maintaining its own police force. Fed officials and independent economists have disputed these characterizations.
Bessent's critique extended beyond rhetoric. He argued the Fed should transfer its bank supervision responsibilities to other agencies and end bond purchases outside genuine crisis conditions. The timing was pointed: as his essays appeared, he began interviewing candidates to replace Chair Jerome Powell, whose term expires in May. The White House's shortlist includes National Economic Council Director Kevin Hassett, former Fed Governor Kevin Warsh, and current Governor Christopher Waller — all figures more sympathetic to the administration's push for lower rates.
President Trump has clashed with Powell since appointing him in 2018, and the pressure has intensified this year. Last week, the administration moved to remove Fed Governor Lisa Cook over mortgage fraud allegations she denies; she is contesting the removal in court. Meanwhile, the administration's nominee for a vacant Fed seat told his confirmation hearing he would take unpaid leave from his White House advisory role — an arrangement Democrats say compromises his independence from the start.
The contradiction at the heart of Bessent's campaign is difficult to ignore. He frames his assault as a restoration of the Fed's autonomy, yet the administration is simultaneously working to install allies and reshape the institution's leadership. The Fed itself appears ready to begin cutting rates modestly this month in response to labor market softness — but on its own terms, with no policymaker publicly endorsing the structural overhaul Bessent demands.
What emerges from this confrontation will determine whether the Federal Reserve's traditional insulation from short-term political pressure — long considered essential to controlling inflation — can survive an administration that has made dismantling that insulation an explicit goal.
Treasury Secretary Scott Bessent opened fire on the Federal Reserve on Friday, calling for a comprehensive overhaul of an institution he accused of fueling inflation, deepening inequality, and mismanaging public resources. In essays published simultaneously in the Wall Street Journal and The International Economy, Bessent demanded what he framed as an "honest, independent, nonpartisan review" of the central bank's entire operation—its power to set interest rates, its regulatory authority, its communications strategy, its staffing decisions, and its research operations.
Bessent's critique went further than institutional restructuring. He argued the Fed should surrender bank supervision to other government agencies and curtail what he called "distortions" in the economy, particularly the bond purchases the central bank has undertaken outside genuine crisis periods. More pointedly, he accused the Fed of partisan behavior and wasteful spending, citing everything from headquarters renovations to the cost of maintaining its own police force. These charges, which Bessent presented as evidence of institutional drift, have been disputed by Fed officials and economists who argue they misrepresent how the central bank operates and allocates resources.
The timing of Bessent's assault was deliberate. As he published his critiques, he began conducting interviews to identify candidates to replace Fed Chair Jerome Powell, whose term expires in May. The search itself signals the administration's intention to reshape the institution's leadership and direction. The White House has already circulated a list of potential successors that includes National Economic Council Director Kevin Hassett, former Fed Governor Kevin Warsh, and current Fed Governor Christopher Waller—all figures seen as more sympathetic to the administration's preference for lower interest rates and a fundamentally different approach to monetary policy.
President Trump has been openly frustrated with Powell since appointing him in 2018, and throughout this year has escalated pressure on the Fed to cut rates aggressively. Last week, Trump moved to remove Fed Governor Lisa Cook, citing allegations of mortgage fraud that Cook denies; she is currently fighting the removal in court. The administration's nominee to fill a vacant Fed seat, Stephen Miran, announced at his confirmation hearing this week that he would take unpaid leave from his White House economic advisor position while serving on the Fed—an arrangement Democrats argue compromises his ability to make independent monetary policy decisions.
Bessent's language about restoring Fed independence is striking given the context. He frames his sweeping critique as a defense of the institution's autonomy, yet the administration's simultaneous efforts to interview Powell replacements and install allies at the central bank suggest a different objective: bringing the Fed into closer alignment with executive branch priorities. Some of Bessent's specific criticisms echo those of potential Powell successors; Warsh, for instance, has long advocated for what he calls "regime change" at the Fed.
The Fed itself appears poised to begin cutting interest rates this month, a move intended to support a labor market showing signs of weakness. Yet no current Fed policymakers have publicly endorsed either the aggressive rate cuts Trump has demanded or the institutional overhaul Bessent is now advocating. Fed Governor Christopher Waller dissented from the Fed's July decision to hold rates steady, signaling some openness to cuts, but the central bank's current leadership has given no indication it intends to fundamentally restructure its operations or cede its independence to political pressure.
What unfolds over the coming months will test whether the Federal Reserve can maintain its traditional insulation from short-term political demands—an insulation widely understood as essential to effective inflation control. The administration's campaign to reshape the institution's leadership, combined with Bessent's public assault on its operations and authority, represents an unprecedented challenge to that independence.
Citas Notables
There must also be an honest, independent, nonpartisan review of the entire institution, including monetary policy, regulation, communications, staffing and research.— Treasury Secretary Scott Bessent, writing in the Wall Street Journal
The Fed must change course.— Treasury Secretary Scott Bessent, in The International Economy
La Conversación del Hearth Otra perspectiva de la historia
Why does Bessent frame this as restoring Fed independence when the administration is clearly trying to install allies?
That's the rhetorical move. He's saying the Fed has drifted from its proper role, so remaking it is actually returning it to what it should be. It's a way to make institutional capture sound like institutional repair.
What does he actually want the Fed to stop doing?
Bond purchases outside crisis conditions, mainly. He sees those as distorting markets and enriching wealthy asset holders while ordinary people struggle with housing costs. He also wants the Fed out of bank supervision entirely.
Is there evidence the Fed's policies actually caused the housing crisis he's describing?
That's contested. Economists disagree sharply on how much the Fed's low rates contributed to housing unaffordability versus other factors like supply constraints and investor buying. Bessent's making a political argument, not a settled economic one.
Why does the timing matter so much—the essays and the Powell search happening at the same time?
It signals intent. You don't call for a complete institutional overhaul while quietly searching for a new leader unless you're planning to use that leadership change to implement the overhaul. The public pressure and the private recruitment are working together.
What happens if they succeed in replacing Powell with someone more aligned with Trump?
The Fed becomes much more responsive to administration pressure on rates. Interest rate decisions that should be based on inflation and employment data could start reflecting what the White House wants. That's what the independence is supposed to prevent.