Trump may succeed in isolating Federal Reserve Chair Jay Powell and taking over the Fed himself, but the result would crash the economy.View this email in your browser [link removed]
[link removed]
****JULY 11, 2025****
**On the
**Prospect **website**
[link removed]
Hardly Workin’ [link removed]
The Consumer Financial Protection Bureau is on life support, and consumer scam complaints are surging as a result. The Trump administration wants to pull the plug.
**BY MAUREEN TKACIK, JAMES BARATTA** [link removed]
[link removed]
The Big Beautiful Bill’s Ugly Choice: Internet or Food? [link removed]
The Republican budget bill cuts food assistance benefits to households that pay for internet access.
**BY SEAN GONSALVES** [link removed]
[link removed]
Trump’s FEMA Proposals and Feud With Gavin Newsom Could Devastate California’s Disaster Response [link removed]
Changes to FEMA could cost the state billions as climate-driven disasters intensify.
**BY JEREMY LINDENFELD** [link removed]
****Kuttner on TAP****
**Hijacking the Fed**
**Trump may succeed in isolating Federal Reserve Chair Jay Powell and taking over the Fed himself, but the result would crash the economy.**
Treasury Secretary Scott Bessent has a reputation as the most sensible of the Trump-whisperers, perhaps the only one. It was Bessent who used the potential for a stock market crash to persuade Trump to agree to a 90-day postponement of his lunatic tariff threats in April, and Bessent who kept talking Trump off the ledge whenever Trump threatened Fed Chair Jay Powell.
But lately, as Trump’s policies on both fronts have become more crazed and his rhetoric more frenzied, Bessent has decided to get with the Trump program. He did not talk Trump out of punishing Brazil with 50 percent tariffs or abruptly reviving the threat of high tariffs on Canada as retaliation for the fake story about Canada being a major source of fentanyl that Trump suddenly revived.
And Bessent, who in the past has defended the Fed’s independence, has now **joined Trump in Powell-bashing** [link removed]. “I guess this tariff derangement syndrome happens even over at the Fed,” Bessent said on
**The Ingraham Angle** on Fox News earlier this month, managing to both attack Powell and defend Trump’s tariffs.
And there could be something in it for Bessent himself. As Trump has floated the idea of naming the successor to Powell long before his term expires next May as a strategy of weakening Powell as a lame duck, Bessent has been put in charge of auditioning candidates. This recalls what we can dub the Cheney Rule, named for George W. Bush’s assignment of Dick Cheney to find his running mate: If the person responsible for recruitment wants the job him- or herself, the recruiter will find a way to get it.
Treasury and White House sources have been quoted as pointing out that until Congress changed the law in 1936, the same person usually held both jobs of Treasury secretary and Fed chair. That would be a nice coup for Bessent. He wouldn’t have to choose which job he wanted. He could have both. Trump’s toadies in Congress could revise the law again, or Trump could just name Bessent to both posts, never mind the law, and trust the captive Supreme Court to rubber-stamp it.
[link removed]
Multiple job-holding seems a habit of the Trump administration. Marco Rubio is secretary of state, national security adviser, and head of USAID. (All three entities suffer, but that seems to be the point.) Sean Duffy now runs the Department of Transportation and NASA. Russ Vought runs OMB and CFPB (**into the ground** [link removed]). And Stephen Miller is said to be the **de facto head of the Department of Homeland Security and ICE** [link removed], as well as deputy White House chief of staff, his official title.
So Bessent could well go through the motions of vetting the other candidates for Fed chair. They include Kevin Hassett, director of the National Economic Council; former Fed governor Kevin Warsh of the Hoover Institution; and Christopher Waller, a current Fed governor loyal to Trump. But it would all be a charade, charades being another Trump signature.
The consequences of the White House controlling monetary policy would be all too real. Trump has made clear that he wants lower interest rates, whether or not economic conditions warrant it, because of the increased cost of financing the enlarged national debt that is the result of his budget bill.
However, the combination of increased tariffs and increased debt means that Powell is correct that inflation is likely to increase later this year and in 2026. Thus, any rate cut should be deferred.
If Trump does manage to get control of the Fed, and our central bank plows ahead with rate cuts in the face of rising inflation, that would only create more inflation. This in turn would spook the stock market and weaken the dollar. Sooner or later, the Fed would have to reverse course and tighten money, creating “stagflation”—simultaneous inflation and recession.
It would be better not to raise tariffs through the roof, better not to inflate the national debt to finance tax cuts for billionaires, better not to end the independence of the Fed. But reality has never stopped Donald Trump.
**~ ROBERT KUTTNER**
Follow Robert Kuttner on Bluesky [link removed]
[link removed]
To receive this newsletter directly in your inbox, click here to subscribe [link removed]
**Click to Share This Newsletter**
[link removed]
[link removed]
[link removed]
[link removed]
[link removed]
The American Prospect, Inc., 1225 I Street NW, Suite 600, Washington, DC xxxxxx, United States
Copyright (c) 2025 The American Prospect. All rights reserved.
To opt out of American Prospect membership messaging, click here [link removed].
To manage your newsletter preferences, click here [link removed].
To unsubscribe from all American Prospect emails, including newsletters, click here [link removed].
