***I gave blood this afternoon at the local blood center in Scotch Plains and knew I wouldn’t be back in time to do a video.
[And I had my share of Lorna Doone cookies after…oh baby…]
But here’s what I would have covered….
After opening lower today on the following topic, stocks rallied back to finish up, though they were small gains. However, the Dow Jones and S&P 500 closed again at record highs….ditto metals!
But this is the story that shook markets over the weekend and into Monday morning.
Sunday, Federal Reserve Chair Jerome Powell said the Department of Justice has served the central bank with subpoenas and threatened it with a criminal indictment over his testimony this summer about the Fed’s building renovations.
The move represents an unprecedented escalation in President Trump’s battle with the Fed, which he has repeatedly attacked for not cutting its benchmark interest rate as quickly as Trump prefers. The subpoena relates to his testimony before the Senate Banking Committee in June, Powell said, regarding the Fed’s $2.5 billion renovation of two office buildings, a project that Trump criticized as excessive.
Powell on Sunday cast off what up to this point has been a restrained approach to Trump’s criticisms and personal insults, which he has mostly ignored. Instead, Powell issued a video statement in which he bluntly characterized the threat of criminal charges as simple “pretexts” to undermine the Fed’s independence when it comes to setting interest rates.
“On Friday, the Department of Justice served the Federal Reserve with grand jury subpoenas, threatening a criminal indictment related to my testimony before the Senate Banking Committee last June,” Powell said. “I have deep respect for the rule of law and for accountability in our democracy. No one – certainly not the chair of the Federal Reserve – is above the law.”
“This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions – or whether instead monetary policy will be directed by political pressure or intimidation,” he added.
It was a sharp departure from the Fed’s understated response to Trump this year. The central bank has attempted to placate the administration by dialing back some policies, such as efforts to consider the impact of climate change on the banking system, that the administration clearly opposed.
In a brief interview with NBC News Sunday, Trump insisted he didn’t know about the investigation into Powell. When asked if the investigation is intended to pressure Powell on rates, Trump said, “No. I wouldn’t even think of doing it that way.”
Reminder…Powell’s term as chair ends in May, and there are growing signs Trump is announcing his replacement in the next few weeks.
Trump has also sought to fire Fed governor Lisa Cook, an unprecedented step, though she has sued to keep her job and courts have ruled she can remain in her seat while the case plays out. The Supreme Court will hear arguments in that case Jan. 21.
At the Senate Banking Committee hearing in June, Chairman Tim Scott (R-S.C.) said the Fed’s building renovation included “rooftop terraces, custom elevators that open into VIP dining rooms, white marble finishes, and even a private art collection.”
Powell disputed those details in his testimony, saying “there’s no new marble…there are no special elevators” and added that some items are “not in the current plan.” In July, Russell Vought, director of the Office of Management and Budget, said in a letter to Powell that his testimony “raises serious questions about the project’s compliance” with previous plans approved by a planning commission.
Later that month, Trump visited the building site and, while standing next to Powell, overstated the cost of the renovation. Later that day, Trump, speaking to reporters, downplayed any concerns with the renovation. He said, “they have to get it done” and added, “Look, there’s always Monday morning quarterbacks. I don’t want to be that. I want to help them get it finished.”
When asked if it was a firing offense, Trump said, “I don’t want to put that in this category.”
The Justice Department in a statement Sunday said it can’t comment on any particular case, but added that Attorney General Pam Bondi “has instructed her U.S. Attorneys to prioritize investigating any abuse of taxpayer dollars.”
The investigation was launched by the U.S. attorney’s office in Washington, D.C., which is led by Jeanine Pirro, a close Trump ally.
The potential indictment has already drawn concern from Republican Senator Thom Tillis (N.C.), who sits on the Banking Committee, which oversees Fed nominations.
“If there were any remaining doubt whether the 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.”
Tillis added: “I will oppose the confirmation of any nominee for the Fed – including the upcoming Fed Chair vacancy – until this legal matter is fully resolved.”
Trump has attacked Powell as a “numbskull,” a “dumb guy” and an “obvious Trump Hater.” More recently, Trump threatened to sue Powell for “gross incompetence,” pointing to the Fed building renovation.
If the president gets the Fed chair he wants in 2026, there is no guarantee he gets the monetary policy he wants. Today’s economy is solid in many respects, which makes aggressive easing difficult unless the data demands it. Inflation remains above target, with further inflation data coming Tuesday.
The misconception is that a new Fed chair can reset policy direction on arrival. In reality, the chair still needs to convince a majority to act as he sees fit, and the job is more about agenda-setting, coalition-building, and communication, not in overruling the policy committee.
A more hawkish-leaning voter roster, lingering inflation risks, and heightened sensitivity about its independence makes the case for rapid cutting difficult.
Monday market returns….
Dow Jones +86 [49590]
S&P 500 +11 [6977]
Nasdaq +62 [23733]
Oil $59.41 [West Texas Intermediate]
Gold $4612…record high
Silver $85.05…record high
Bitcoin $91,400
2-year…3.54%
10-year…4.19%
Japanese 10-yr…2.08%
Back tomorrow, Tuesday.
Brian Trumbore
