Powell publicly refuses to resign, and a bipartisan shift in Congress has hindered Trump’s plan to take over the Federal Reserve. The market remains temporarily calm, but the long-term creditworthiness of the dollar faces tests.
(Background: Trump “means business”: Powell faces criminal investigation threats, and the rate battle escalates)
(Additional context: Trump again threatens to fire Powell: “Incompetent to the point of being prosecutable, Bissett, if you don’t handle this, I will fire you”)

Table of Contents

• Judicial measures trigger a backlash in Congress
• Staggered terms form the toughest safeguard
• Market appears calm on the surface, risks quietly accumulating
• May deadline becomes the next pressure point

Yesterday (11), a three-minute video personally shot by Federal Reserve Chair Jerome Powell ( dropped a bombshell over Washington. He not only refused to respond to the Department of Justice’s subpoena demanding his resignation but also directly stated that the White House’s use of criminal investigations to “interfere with monetary policy” signaled a showdown with the executive branch. The core of this conflict is no longer about job retention but whether the $29 trillion U.S. Treasury market can continue to trust the constitutional bottom line that “the central bank is free from political interference.” Bloomberg further believes this has already posed a substantial threat to Trump’s plans.

) Judicial measures trigger a backlash in Congress

According to Fortune, on the 9th, the Department of Justice issued a grand jury subpoena to Powell, questioning statements made during a June 2025 congressional hearing regarding $2.5 billion in headquarters renovation costs. The general interpretation is that the real trigger was the Fed’s reluctance to cooperate with the White House’s proposed $200 billion mortgage bond purchase plan. The subpoena was intended to force Powell to step down early but backfired due to overreach, triggering the Senate’s institutional protective instincts.

In the Senate Banking Committee, which has a 13-11 seat split, Republican Thom Tillis publicly defected, stating he would not support any White House nominee. This critical vote could block plans for Kevin Hassett or Kevin Warsh to succeed Powell. The Trump administration’s use of judicial tactics to clear obstacles ultimately left the obstacle for itself, exemplifying typical Washington-style political backlash.

Staggered terms form the toughest safeguard

Another miscalculation by the White House was its shallow reading of the Federal Reserve Act. Although Powell’s chairmanship will end in May, his term as a board member extends until 2028. The Los Angeles Times notes that Powell is prepared to “stay on as a board member” after stepping down as chair, with full voting rights at each decision-making meeting. Former Vice Chair Donald Kohn warned:

“They thought they could force him out, but his message yesterday was: You can’t push me out, I will fight to the end.”

If a new chair has to make decisions alongside the predecessor, monetary policy could face unprecedented internal gridlock, with any radical rate cuts or targeted easing likely to be blocked by Powell himself.

Market appears calm on the surface, risks quietly accumulating

Despite the crisis-like nature of the event, capital markets responded with new highs. The S&P 500 index rose for two consecutive days, and the 10-year U.S. Treasury yield only saw a slight increase. Investors tend to interpret Powell’s tough stance as a sign of “system resilience,” betting that Congress and the Fed can still uphold their independence. Fortune’s other report describes this reaction as “dangerous optimism,” because if the executive branch decides to ignore legal procedures, the risk of long-term inflation expectations becoming unanchored will surface.

In the 1970s, the “Bond Militia” collectively sold off U.S. bonds during runaway inflation, forcing the government to pay higher interest rates. Today, with a much larger global capital allocation, if the dollar’s credit is shadowed by political interference, reactions will be even more intense. For investors, the current concern is not whether Powell will be prosecuted, but whether the tug-of-war among the executive, legislative, and central banking branches will shake the dollar’s status as an irreplaceable anchor.

May deadline becomes the next pressure point

Powell has temporarily resisted the Department of Justice’s heavy pressure and has received some support from Congress, but before his term ends in May, there are still four public meetings and one FOMC statement. If the White House continues to seek legal or personnel breakthroughs, market confidence in the institutional safeguards will face repeated tests. This war over “who controls the printing press” will not end with the release of the video but will reignite at every rate decision.

History shows investors that once political power tastes the sweetness of influencing monetary policy through executive orders, self-restraint becomes difficult; and when the Fed is forced to defend its position by retaining board members, systemic cracks become apparent. Powell has held today’s ground, but the market will continue to measure tomorrow’s costs through prices.

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