Former Federal Reserve Chair Janet Yellen issued a strong critique on Monday regarding the investigation into her successor, Jerome Powell, expressing concerns that it undermines the independence of the central bank. Yellen, who has also served as Treasury Secretary, labeled the situation “extremely chilling” and noted her surprise at the lack of market concern over the investigation. “It seems to me that the market should be concerned,” she commented during an interview with CNBC.
Her remarks came shortly after Powell disclosed that the U.S. Attorney’s Office in Washington, D.C., was probing whether he misled Congress during his testimony last June. Specifically, the investigation centers around an expensive renovation project at the Fed’s headquarters. Jeanine Pirro, a former Fox News host and ally of Donald Trump, oversees the office conducting the inquiry. Although perjury charges could stem from the investigation, the Justice Department has not yet confirmed any details regarding the matter.
Yellen expressed her disbelief regarding the possibility of Powell lying, stating, “Knowing Powell as well as I do, the odds that he would have lied are zero.” She suggested that there may be ulterior motives behind the investigation, implying that some want Powell removed from his position.
Yellen previously served as Fed Chair during the early days of the Trump administration, before being succeeded by Powell. Following her tenure at the Fed, she made history as the first woman to serve as Treasury Secretary under President Biden. During her time in this role, she faced criticism over the growing national debt, which stands at approximately $38.4 trillion. She strongly opposed the idea of using the Fed’s overnight borrowing rate to manage the debt, calling such a move irresponsible. “You have a president that says the Fed should be cutting rates to lower rate payments on the federal debt,” Yellen said, adding, “I completely disagree with that. It is the road to banana republic.”
The investigation has drawn widespread condemnation from former central bank officials. A statement from several prominent figures, including former Fed Chairs Ben Bernanke and Alan Greenspan, criticized the inquiry as an unprecedented attack that threatens the Fed’s independence. They noted that such prosecutorial tactics are more characteristic of emerging markets with unstable institutions, leading to dire economic consequences. “This has no place in the United States whose greatest strength is the rule of law, which is at the foundation of our economic success,” the statement declared.
As the situation develops, the implications for monetary policy and the integrity of the Federal Reserve remain a pressing concern for economists and market participants alike. The scrutiny of Powell amplifies worries about the politicization of the central bank, a hallmark of stable economies. Yellen’s comments and the backing of numerous former officials underscore the crucial need to preserve the Fed’s operational autonomy in maintaining economic stability.
Original Source: https://www.cnbc.com/2026/01/12/yellen-says-powell-probe-extremely-chilling-for-fed-independence-market-should-be-concerned.html
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Publish Date: 2026-01-12 21:51:00
