The backlash against Donald Trump’s criminal probe into Jay Powell

Good morning and welcome to White House Watch! Let’s get right into:

• The latest on the Fed-Trump drama

• New tariffs on countries “doing business” with Iran

• Trump’s military options for Iran

Jay Powell is ready to fight back.

The Federal Reserve chair disclosed on Sunday night that Donald Trump’s Department of Justice had launched a criminal probe into him and asked a federal grand jury to subpoena the central bank. 

This move has galvanised the Fed’s top leaders to resist Trump’s attacks — and could motivate the outgoing Powell to stay on as a governor until 2028, officials told the FT’s Claire Jones and Myles McCormick. 

The DoJ’s probe is being seen by those close to the central bank as a sign that the president will go to extreme lengths to force policymakers to do what he wants and greatly lower interest rates. It’s also being widely considered as a threat to the Fed’s independence.

“People inside the Fed will view this development as really alarming and see it as a statement that Trump absolutely intends to gain control over monetary policy,” Janet Yellen, a former Fed chair and Treasury secretary, told Claire and Myles.

All living former Fed chairs and some ex-Treasury secretaries on Monday attacked the DoJ probe, warning that the investigation was an “unprecedented attempt to use prosecutorial attacks to undermine [Fed] independence”. A statement of solidarity from the central bank governors of 11 institutions published earlier today added to the growing support for Powell.

Trump is even facing a backlash from Republicans on Capitol Hill, with at least two senators from the president’s party — Thom Tillis and Lisa Murkowski — saying they are prepared to hold up his next nominations to the central bank over the probe. Fed insiders expect those numbers to grow. 

The DOJ’s investigation focuses on testimony Powell gave to Congress in June about a $2.5bn renovation of the Fed’s headquarters, and is an escalation of the public spat between the White House and central bank over interest rates. 

Trump has lobbed personal attacks at Powell, calling him a “moron” and “stubborn mule”, and threatened to fire him even though his stint as Fed chair is up in May. The president has denied any direct involvement in the DoJ investigation. 

Powell said on Sunday that “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”.

The latest headlines

What we’re hearing

Trump has said he is considering ordering military operations in Iran, warning that the Islamic republic has started to cross his red line amid an intensifying crackdown on nationwide protests.

So what are his military options?

I had a chat yesterday with Dana Stroul, a former deputy assistant secretary of defence for the Middle East, and she said that any military operation would be very different than when the US bombed three Iranian nuclear sites last summer, because that was “a very specific achievable military objective”. Launching military strikes “to protect protesters from the regime’s crackdown is not really an achievable military objective”.

Trump could launch strikes with the aim of destabilising and fracturing Iran’s security forces, hitting elements of the Islamic Revolutionary Guard Corps such as “command and control nodes, warehouses of weapons and supplies, vehicles and means of transportation where the security forces move around the country that would then keep them exposed and isolated”, Stroul said.

The US could strike bases or the remaining missile launchers and other elements of Iran’s ballistic missile programme that remain intact after Israel degraded Tehran’s missile capabilities and the regime expended part of its missile arsenal attacking Israel.

But there are also non-strike options to consider.

Washington could “weaken their command and control capabilities”, said Mara Karlin, former assistant secretary of defence for strategy, plans and capabilities. That would not require air strikes and could be accomplished with cyber capabilities.

The US could also help get Starlink access to Iranians to get around the multi-day, near-total internet blackout, Karlin added.

The US needs to think about intervention in Iran in two ways: “How do you help the protesters get information out?” and “How do you make it harder for the regime to execute co-ordinated attacks on protesters,” Karlin said.

A US defence official told me that so far, no additional troops or jets had been deployed to the region. There are fewer than 40,000 troops in the region, and the navy currently has six ships throughout the Gulf and Red Sea but no aircraft carrier.

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