Podcast Summary:
The Daily – Trump’s D.O.J. Went After the Fed. It Backfired.
Hosted by Natalie Kitroeff | Guests: Colby Smith (Fed Reporter), Glenn Thrush (Justice Department Reporter)
Date: January 15, 2026
Main Theme
This episode explores the unprecedented decision by President Trump's Justice Department to open a criminal investigation into Federal Reserve Chairman Jerome Powell, focusing on whether the probe was politically motivated, how it unfolded, the reaction across Washington, and why the move ultimately backfired—strengthening both Powell's personal standing and the independence of the Fed.
Key Discussion Points & Insights
1. Background: The Longstanding Trump-Powell Clash
- Conflict Origin: Trump has long pressured Powell to lower interest rates amid rising inflation and a weakening labor market. Powell has consistently resisted these overtures.
- Escalation Trigger: Recent focus shifted to a costly and over-budget renovation at the Fed’s headquarters, originally budgeted far lower than the now $2.5 billion price tag.
- Colby Smith (02:24): “Trump has been all over the Fed for not lowering borrowing costs as fast as he would like… standing in the way of that is Chair Powell.”
2. The Move to Criminal Investigation
- New Tactic: Trump seized on the Fed's renovation overruns as grounds for plausible accusations of mismanagement or fraud, seeking greater leverage over Powell.
- Political Motivation: Per reporting, the Justice Department has increasingly become a tool of political retribution for Trump.
- Glenn Thrush (04:44): “The Justice Department has become… its principal conduit for achieving retribution or intimidating political adversaries.”
- Role of Insiders: Bill Pulte (housing finance official) and U.S. Attorney Jeanine Pirro pushed the narrative and investigation within Trump’s circle.
- Pirro’s Actions: Inspired by conservative media coverage, Pirro initiated contact with the Fed, beginning with polite, “breezy” requests for information that the Fed did not consider urgent and thus did not respond to over the holidays.
- Colby Smith (08:18): “These were seen as, you know, casual outreach… Nothing of the sort that would lead to a criminal investigation.”
3. The Subpoena and Powell’s Extraordinary Response
- Pressure Campaign: After a closed-door meeting where Trump berated U.S. attorneys for not being aggressive, Pirro escalated to a criminal subpoena against the Fed.
- Glenn Thrush (10:28): “Trump lashes out at them, calls them weak… It is just a couple of days later that Pirro decides to start playing hardball with the Fed.”
- Powell Speaks Out: Breaking with his usual silence, Powell released a bold, public video statement defending the Fed's independence and rebuking the administration’s tactics.
- (11:15-13:12): Powell: “This unprecedented action should be seen in the broader context of the administration’s threats and ongoing pressure… 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.”
- Commentary (Colby Smith, 12:24): “We hadn’t really seen Powell directly respond to anything the President has really done… This was a moment to step up and say something strong about Fed independence.”
4. Bipartisan Backlash and Political Fallout
- Uninspired Support: Unlike previous DOJ investigations, the move drew rapid, vocal criticism—even from Republican moderates and Trump’s own economic advisors.
- Senator Thom Tillis (15:26): “Another example of amateur hour, as far as I’m concerned.”
- Larry Kudlow (16:24): “He was a terrible Fed chair, but he’s not a criminal.”
- Reasons for Rebellion: Republicans recognize that undermining the Fed’s independence threatens economic and market stability—risking not just political, but economic fallout close to midterm elections.
- Glenn Thrush (17:19): “And there is nothing that makes Republicans speak up louder… than the potential prospect of losing their jobs. And anything that threatens the potential stability or the economy, they are going to fight back.”
- Colby Smith (18:31): “If you flip the script on Fed independence, then it really starts to change people’s perspective of just how stable is the US economy and its financial system.”
5. How the Administration Reacted
- Pirro Walks Back: Pirro downplays the seriousness, re-casts the lack of response as the issue, and tries to maintain her image as an impartial prosecutor.
- Glenn Thrush (19:43): “She did something that you almost never see Justice Department people do in the Trump era, and that is walk it back ever so slightly.”
- Trump’s Stance: Publicly, Trump maintains his harsh rhetoric against Powell, distances himself from the prosecution but does not retreat.
- (21:11, Trump): “He either is incompetent or he’s crooked… certainly he doesn’t do a very good job.”
- (21:25, Trump): “That jerk will be gone soon.” (referring to Powell’s term ending in May)
6. The Unexpected Consequences
- Senate Resistance: The episode may block Trump’s ability to install a preferred successor; key figures like Senator Tillis threaten to stall any nomination as long as the investigation remains active.
- Colby Smith (22:19): “It could very easily be the case that the whole Fed nomination process gets thrown off the rails.”
- Powell Might Stay Longer: The turmoil could prompt Powell to utilize his right to serve as a Fed governor until 2028, frustrating Trump’s influence on the institution.
- Natalie Kitroeff (23:26): “…this dramatic move against Powell may have both made it much harder for Trump to put his own person in as the head… and it also may prompt Powell to stay on … longer than Trump probably wants.”
7. Institutional Limits on Presidential Power
- Lesson for Trump: By overreaching, Trump tested the political and institutional limits of his power—unintentionally bolstering the Fed’s credibility and independence.
- Glenn Thrush (24:29): “But this is a guy who’s got a 40% approval rating, and there are limits to his authority… this might be a real moment, potentially a high watermark in terms of Trump’s control over the economy.”
- Lesson for the Fed: The Fed’s traditional restraint earned them credibility; when finally provoked, their assertive defense bought them renewed respect and protection.
- Colby Smith (25:53): “In some ways, in trying to weaken the Fed, the president and the administration only made it stronger.”
Notable Quotes & Memorable Moments
- On Trump Weaponizing DOJ:
- Glenn Thrush (04:44): “The Justice Department has become for the White House its principal conduit for achieving retribution or intimidating political adversaries.”
- Powell’s Stand (Video Address):
- (11:15-13:12): Powell: “This new threat is not about my testimony last June or about the renovation… 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.”
- (13:12): “Public service sometimes requires standing firm in the face of threats. I will continue to do the job the Senate confirmed me to do with integrity and a commitment to serving the American people.”
- On Republican Backlash:
- Thom Tillis (15:26): “Another example of amateur hour, as far as I’m concerned.”
- Larry Kudlow (16:24): “He was a terrible Fed chair, but he’s not a criminal.”
- On the Stability of the Financial System:
- Colby Smith (18:31): “That independence is what bolsters people’s confidence in the dollar, in US Treasuries. And so if you flip the script on Fed independence, then it really starts to change people’s perspective of just how stable is the US economy.”
- On Presidential Overreach:
- Glenn Thrush (24:29): “This might be a real moment, potentially a high watermark in terms of Trump’s control over the economy… early indications are Donald Trump may have gotten himself into some trouble here.”
Key Timestamps
- 02:24 – Colby Smith breaks down the root of the Trump-Powell conflict over interest rates.
- 04:44 – Glenn Thrush explains DOJ’s role in Trump’s political strategy.
- 06:41–07:27 – Jeanine Pirro begins preliminary inquiry into Powell.
- 08:18 – How the Fed saw Pirro's “breezy” information requests.
- 10:28 – Pivot to criminal subpoena after Trump’s scolding of US attorneys.
- 11:15–13:12 – Powell’s video statement defending Fed independence.
- 15:26/16:24 – Republicans like Tillis and Kudlow openly rebuke the prosecution.
- 17:19–18:31 – Implications for market stability and political risks for Trump.
- 19:43 – Pirro’s attempt to dial back the investigation.
- 21:25 – Trump’s continued personal attacks on Powell.
- 22:19–23:26 – Threats to Fed nomination process and Powell’s future intentions.
- 24:29 – Assessment of the limits of Trump’s power and the institutional strength of the Fed.
- 25:53 – The paradox: Attempt to weaken the Fed instead made it stronger.
Conclusion
The attempt by the Trump administration to criminally investigate Jerome Powell marked a turning point: Instead of intimidating the Fed, it unified bipartisan opposition, highlighted the limits of executive power over independent institutions, and ultimately reinforced the Federal Reserve’s standing. Powell’s direct response, together with the ensuing backlash, underscored that even amid acute partisan tension, some institutional guardrails hold strong.