Yellen Slams Trump’s Powell Probe as "Extremely Chilling" ... Warns "Managing Debt With Rates Leads to Banana Republic"

Yellen in CNBC Interview
"They Want to Oust Powell... Markets Should Be More Concerned"

Janet Yellen, former U.S. Secretary of the Treasury, strongly criticized the Donald Trump administration on the 12th (local time), stating that its investigation into Federal Reserve Chair Jerome Powell is seriously undermining the independence of the central bank.

Janet Yellen, former U.S. Secretary of the Treasury, spoke at a panel discussion during the American Economic Association Annual Meeting (ASSA) 2026 held on the 4th (local time) in Philadelphia, Pennsylvania, USA. Photo by Kwon Haeyoung

In an interview with CNBC that day, Yellen described the Trump administration's decision to launch an investigation into Chair Powell as an "extremely chilling" situation. She added, "It is actually surprising that the markets are not taking this issue more seriously. This is clearly a matter that deserves greater concern."

Her remarks came immediately after Powell revealed that he had received a subpoena from the U.S. Attorney's Office in Washington, D.C. the previous day, and had been notified of possible criminal charges related to his testimony before the Senate Banking Committee in June of last year regarding the Federal Reserve headquarters remodeling. President Trump had previously criticized Powell publicly for what he considered excessive remodeling costs at the Federal Reserve headquarters, and this issue ultimately led to the investigation. In political and financial circles, this is being interpreted as pressure from the Trump administration on Powell for not complying with demands to lower interest rates.

Yellen firmly dismissed the possibility that Powell had committed perjury. She stated, "The likelihood that Powell, as I know him, lied is zero," adding, "The reason they are targeting Powell is because they want his position and want to remove him."

Yellen served as Federal Reserve Chair from 2014 to 2018 and later as Secretary of the Treasury during the previous Joe Biden administration. Powell succeeded Yellen as Chair of the Federal Reserve and continues to lead the central bank.

She also criticized the use of monetary policy to reduce the national debt interest burden, calling it irresponsible. Yellen said, "There is a president who argues that the Fed should cut interest rates to lower the federal government's interest costs," and added, "I totally disagree with that. That is the road to becoming a banana republic."

Previously, at the American Economic Association Annual Meeting (ASSA) 2026 on the 4th, Yellen also warned, "The Fed is not a funding vehicle for the fiscal authorities," cautioning that the Trump administration's infringement on central bank independence could push the U.S. toward the so-called risk of "fiscal dominance." She pointed out that if the monetary authorities are pressured to cut interest rates to reduce the federal government's debt burden, it could increase inflation and financial market turmoil, ultimately backfiring on the U.S. economy. However, Yellen herself was also criticized for excessive issuance of government bonds during her tenure as Treasury Secretary.