Nobel Laureate & CUNY Economics Professor Paul Krugman Talks Powell Investigation

Summary

Bloomberg Talks – Podcast Episode Summary

Episode Title: Nobel Laureate & CUNY Economics Professor Paul Krugman Talks Powell Investigation
Date: March 13, 2026
Featured Guest: Paul Krugman, Nobel Laureate & Economics Professor at CUNY
Host(s): Bloomberg (Unnamed interviewer)
Main Theme:
A timely discussion with Paul Krugman on the investigation into Federal Reserve Chair Jerome Powell, the recent court ruling on related subpoenas, and what this means for Fed independence, upcoming leadership, and U.S. financial governance.

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Episode Overview

This episode dives into the political and legal controversy surrounding the Federal Reserve's independence amid subpoenas issued to Chair Jerome Powell over alleged cost overruns for renovations. Following a judge’s dismissal of those subpoenas, Nobel Laureate Paul Krugman joins to unpack the implications: Are these moves about law or political pressure? What’s at stake for the Fed’s role as an independent central bank, especially with a looming leadership change? The conversation touches on market reactions, historical comparisons, and the personal impact on officials facing politicized scrutiny.

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Key Discussion Points & Insights

1. The Subpoenas, the Judge’s Decision, and Political Context

• Background: U.S. Attorney Jeanine Pirro had issued subpoenas against Fed Chair Jerome Powell over purported cost overruns at the Fed’s DC headquarters — overruns exceeding $1 billion in some estimates.
• Judge’s Ruling: The court found no substantive evidence of criminality, declaring the subpoenas as “pretextual” and motivated by a desire to pressure Powell to lower interest rates for political benefit.
  • Bloomberg Host [03:24]: “He specifically says that the government produced, I’m using his words, essentially zero evidence to suspect Chair Powell of a crime. Indeed, its justifications are so thin and unsubstantiated that the court can only conclude that they are ‘pretextual.’”

Krugman’s Take (02:20)

• Fed Independence Threatened:
  • “It’s overwhelmingly obvious that this is all about harassing Powell… In previous administrations, you would never have gotten to any of this. We wouldn’t have even had… previous administrations were hesitant to even criticize the Fed’s decisions, let alone bring subpoenas on an unrelated subject against the chair of the Fed. So, yeah, the Fed independence is still very much on the line.”
• On Political Motivation:
  • “The president… keeps on harassing the Fed… saying, time to lower rates… and now this. So far… Powell has fought back and the Fed is defying. And this is actually looking like a big flop for the administration.”

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2. The Future of the Investigation & Powell’s Role

• Ongoing Appeals and Political Pressure
• Succession Concerns: Jay Powell is expected to depart within months, with Kevin Marsh as a likely successor, yet the process is caught up in political and legal maneuvers.

Krugman (04:00)

• On the Investigation’s Motive:
  • “There’s essentially zero people who believe this was actually about suspicion of criminal wrongdoing… They might continue the investigation regardless, because if we know one thing about this administration, it is that they… are kind of vindictive… will probably continue to go after Powell even if he’s no longer chair.”
• Personal Toll on Officials:
  • “Powell has been able to beat this stuff back, you know, a lot of it is money out of his own pocket. Powell has the resources personally to fend off these attacks. Other Fed officials might not. I know that Lisa Cook really had to scramble to find the resources to fight the attacks on her. So this is not a comfortable place.”

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3. Leadership Uncertainty at the Fed

• Political Delays in Nomination: Senator Thom Tillis’s pledge to block Fed confirmation until the legal matter is “resolved.” DOJ’s formal appeal likely slows the process further.

Hypothetical for May (05:16)

• If New Chair Isn’t Confirmed:
  • Krugman: “I could be wrong, but I think in fact Powell stays on until the slot is filled. But… markets have been very calm about all of this because it really won’t matter at least for the near term who is the Fed chair. The Fed chair is just one vote on the FOMC.”
• On Potential Policy Shifts with a Trump-Endorsed Chair:
  • “If Kevin Warsh were to come in… and demand Trump-endorsed interest rate cuts in the face of stubborn inflation, the board would just vote against him. He will not have that kind of weight. So this is probably not going to have any impact on policy in 2026 anyway.”

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Notable Quotes & Memorable Moments

• On the subpoenas and independence:
  • Paul Krugman (02:20): “It’s overwhelmingly obvious that this is all about harassing Powell… In previous administrations, you would never have gotten to any of this.”
• On lack of legal merit:
  • Paul Krugman (04:00): “There’s essentially zero people who believe this was actually about suspicion of criminal wrongdoing… This is not a good look.”
• On the broader impact:
  • Paul Krugman (05:48): “Markets have been very calm about all of this because it really won’t matter at least for the near term who is the Fed chair. The Fed chair is just one vote on the FOMC.”

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Key Timestamps

• 00:46-02:20 – Host introduces the Powell investigation, legal context, political reactions.
• 02:20-03:24 – Paul Krugman’s assessment of the judge’s ruling, Fed independence, and the political nature of the investigation.
• 03:24-04:00 – Discussion about whether the investigation will persist after Powell leaves, Krugman’s insight on internal Fed politics and personal consequences.
• 05:16-05:48 – Hypotheticals about May: What happens if nomination remains blocked? Krugman explains minimal policy impact and outlines how FOMC operates.
• 05:48-06:32 – Krugman on market calm and why near-term monetary policy isn’t at risk.

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Conclusion

Paul Krugman’s candid analysis underscores deep concerns about politicizing the Federal Reserve, the stress this brings to its leaders, and the crucial (if precarious) nature of institutional independence in U.S. monetary policy. Despite political turbulence, Krugman reassures listeners that day-to-day Fed operations and near-term financial stability remain robust—thanks to both institutional checks and the collective FOMC structure.

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End of podcast content.

Transcript

[A]

Every small business owner has that one moment that could have broken them. But remarkably, it didn't. Hi, I'm Ben Walter, CEO of Chase for Business. And on season three of the Unshakeables, my co host Kathleen Griffith and I are bringing you more incredible stories of overcoming the impossible. We're really proud to share that the Unshakeables is nominated for Best Branded podcast at the 2026 iHeart Podcast Awards. Listen to the Unshakeables wherever you get your podcasts and lear more at chase.com/podcast JP Morgan Chase bank and a member FDIC Copyright 20 and 26 JP Morgan Chase Co.

[B]

Bloomberg Audio Studios Podcasts Radio

[C]

News Judge Jeanine Perro, the U.S. attorney for the District of Columbia, she had issued subpoenas back in January of this year related to testimony that Fed Chair Jerome Powell had given in June of last year. This related to purported cost overruns for renovations going on at the Federal Reserve headquarters in Washington, D.C. cost overruns that by some measures have reached over the $1 billion mark. A judge today decided that those subpoenas were not necessarily rooted in any real evidence of criminality and that they had no basis for that to continue towards a grand jury. Jeanine Perro calling that judge, in her words, an activist judge and saying that he has taken away a grand jury tool away from her. She then went on to say that she will appeal the decision and will move forward with this investigation. Joining us right now to talk a little bit more about this is Paul Krugman. He's a Nobel Laureate in economics and research professor over at the City University of New York. And Paul, you've written a lot over the last few months about Fed independence, not necessarily related to this case, but the Lisa Cook case and some other things. I don't know how much you had to hear of what Jeanine Perrott had to say right now, but when you think about those subpoenas and you think about her response to the judge's decision today, are we still now in a world where Fed independence is a question mark?

[D]

Well, you know, the judge, I read a little bit of the ruling, which is is quite brutal. He said a mountain of evidence suggests that the dominant purpose of the subpoenas harass Powell to pressure him to lower rates, which is undoubtedly true. Pirro was fulminating a lot there. But it's, it's very clear that this, you know, it's overwhelmingly obvious that this is all about harassing Powell costs. The president keeps on, you know, he's been harassing the Fed on truth social, saying, time to lower rates, got to cut rates. And now the. So far, clearly, Powell has fought back and the Fed is defying. And this is actually looking like a big flop for the administration. But, you know, in previous administrations, you would never have gotten to any of this. We wouldn't have even had previous administrations were hesitant to even criticize the Fed's decisions, let alone bring subpoenas on an unrelated subject against the chair of the Fed. So, yeah, the Fed independence is still very much on the line.

[C]

I am curious, though. I mean, the judge, without getting too much into the legal stuff here, because neither one of us are lawyers, but I mean, he specifically says that the government produced, I'm using his words, essentially zero evidence to suspect Chair Powell of a crime. Indeed, its justifications are so thin and unsubstantiated that the court can only conclude that they are, quote, pretextual. So I asked you this question primarily because we know Jay Powell is going to be gone in a couple of months one way or the other. Kevin Marsh potentially is most likely going to assume that chair. Does this investigation continue after that?

[D]

You know, they might, but not because there's a good legal basis. I mean, again, I'm not a lawyer, you're not a lawyer. But since, you know, I essentially, I think there's essentially zero people who believe this was actually about suspicion of criminal wrongdoing, that there was any suspicion of anything, that, you know, that this was anything but pretextual. Now, they might continue the investigation regardless, because if we know one thing about this administration, it is that they arethey do not like being crossed, lost, and they are kind of vindictive about things. And they will, they will probably continue to go after Powell even, even if he's no longer chair. And by the way, he will probably stay on the board. So he will still be there anyway. This will continue. But it's. Yeah, I mean, this is not a good look. I mean, the fact that people have, that Powell has been able to beat this stuff back, you know, a lot of it is money out of his own pocket. You know, it happens that Powell has the resources personally to fend off these attacks. Other Fed officials might not. I know that Lisa Cook really had to scramble to find the resources to fight the attacks on her. So this is not, this is not a comfortable place.

[E]

Well, Paul, I want to talk a little bit about what might happen in May with, you know, the caveat that we're talking about a lot of hypotheticals here, but again, we heard from Senator Thom Tillis reiterating that he's going to block any nomination to Fed chair until this is resolved. Resolved that, you know, appealing the ruling will only delay that confirmation. We heard from Jeanine Pirro that the doj, yes, indeed, they're going to appeal this judge's decision. So what happens if we get to May, this isn't resolved and we don't see Kevin Marsh confirmed to lead the Fed?

[D]

I could be wrong, but I think in fact Powell stays on until the slot is filled. But, you know, the, a lot of us have been saying, and markets have been very calm about all of this because it really won't matter for at least for the near term who is the Fed chair. The Fed chair is just one vote on the fomc. And in normal circumstances, the Fed chair carries a lot of weight. But if Kevin Warsh were to come in, which I don't think he'll do, but if he were to come in and demand Trump endorsed interest rate cuts in the face of stubborn inflation, the board would just vote against him. He will not have that kind of weight. So this is probably not going to have any impact on policy in 2026 anyway.

[E]

All right, Paul, we really appreciate you sticking with us. That is Nobel Laureate in Economics Paul Krugman, also a professor of economics over the city of University of New York.

[F]

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