Jamie Dimon has seen enough. The JPMorgan Chase chief, who has spent the past year warning about geopolitical risk and fiscal drift, is now training his sights on a more immediate concern: the Trump administration’s criminal investigation of Federal Reserve Chair Jay Powell.
In JPMorgan Chase’s earnings call, Dimon said he has “enormous respect” for Powell and is a “strong supporter” of Fed independence, warning that political interference in the central bank will ultimately push borrowing costs and inflation higher — the opposite of what the White House says it wants.
A Rare, United Front Behind Powell
Dimon is not alone. Central bankers from the European Central Bank’s Christine Lagarde to the Bank of England’s Andrew Bailey have lined up publicly in support of Powell, calling central bank independence a “cornerstone” of price, financial and economic stability.
Former Fed chairs Janet Yellen, Ben Bernanke and Alan Greenspan have gone further, likening the Justice Department’s probe to tactics more often associated with emerging markets that lack institutional safeguards, the kind of places investors typically discount with a permanent risk premium.
Their intervention comes after Powell disclosed that he has been served with Justice Department subpoenas related to a controversial multi-million-dollar renovation of the Fed’s Washington headquarters and whether he misled Congress about the project.
The investigation is the sharpest edge yet of President Donald Trump’s long‑running campaign to bring the Fed to heel after Powell resisted the White House's demands for “meaningful” rate cuts, with the belief that the central bank chair cannot be fired at will.
Why Markets are (Mostly) Shrugging
For all the institutional alarm, asset prices have been surprisingly restrained. In the days after Powell revealed the subpoenas, the clearest market signal was in classic “stress hedge” assets rather than in credit spreads or equities. Gold moved higher and the dollar weakened modestly, a pattern consistent with investors quietly insuring against policy turbulence rather than rushing for the exits.
In the FT’s daily podcast, US financial commentator Rob Armstrong described it as investors saying “choppy water ahead” and trimming their exposure to America’s monetary authorities, which now appear to be “under direct assault,” without yet abandoning the trade.
Armstrong argued that part of the explanation is simply learned behavior. Over the past year, investors who tried to front‑run every Trump outburst or threat have typically been punished; “running and hiding” whenever the president floated something “crazy and destructive” has not been a winning strategy.
That pattern has conditioned markets to discount even serious institutional risks if they appear abstract or slow‑burning relative to immediate data on growth, inflation and earnings — and those near‑term fundamentals still look reasonably solid.
The Parachute Nobody Thinks About
The other reason for the muted response is structural myopia. Markets, Armstrong said, focus relentlessly on the here and now; as long as the economy is “OK” and corporate profits “strong,” a threat to Fed independence can feel like a problem for another day.
He cited an analogy put to him by another observer: the Fed is the parachute on an airplane. As long as the plane is flying smoothly, the missing parachute is easy to ignore; only when the engine sputters does its absence become existential.
That logic could be tested quickly. Upcoming inflation data, including the latest CPI report, could remind investors why a politically insulated central bank matters. If inflation were to re‑accelerate after three straight quarter‑point cuts, markets normally would take comfort that the Fed is prepared to “damn the torpedoes” and tighten again; if traders begin to doubt that resolve under political pressure, the risk premium embedded in long‑term yields and cap rates could rise in ways that directly affect how leveraged real assets are priced.
Armstrong also pushed back on the idea that markets can breathe easy simply because Powell’s term as chair expires in May. In his view, the damage from the investigation lands as much on Powell’s successor as on himself.
Anyone who would accept the job under the current cloud “thereby proves that they are unqualified for the job” because they are implicitly signaling indifference to the Fed’s independence, according to Armstrong. For an institution whose authority rests on being insulated from presidential whims, that is not a small concern.
The Supreme Court and Cook Case
The next test of that insulation will not come from bond desks but from the Supreme Court. On January 21, the justices are scheduled to hear arguments in a case stemming from President Trump’s stalled attempt to fire Fed governor Lisa Cook, whom administration officials accused last year of mortgage fraud tied to her declarations of a primary residence.
Lower courts have so far blocked Cook’s removal, but a win for the White House would set a legal precedent for ousting a sitting Fed official “for cause” — a precedent that Bank of America economist Aditya Bhave says could materially increase the odds that Powell himself is removed on the back of the Justice Department probe.
Analysts at Charles Schwab have warned that the Cook decision will carry “immense weight” for any president’s ability to reshape the Fed, arguing that the case is now more important for the future policy path than the identity of the next chair.
Deutsche Bank has drawn historical parallels to Marriner Eccles, the former Fed chief whose name now adorns one of the central bank’s buildings; after President Harry Truman stripped him of the chairmanship in 1948, Eccles stayed on as a governor until 1951 and became a powerful internal champion for Fed independence.
Powell, whose term as chair may be nearing its end but whose board term runs through 2028, could follow a similar path. Deutsche Bank’s Matthew Luzzetti has floated the possibility that if the administration presses ahead with a criminal prosecution and Senate Republicans refuse to move on Fed nominations, the Federal Open Market Committee could effectively reinstall Powell as its de facto leader regardless of who holds the formal title of chair.
In that scenario, the battle over the Fed would shift from the front pages to a grinding institutional standoff — with direct implications for the path of rates, the term premium in Treasuries, and, by extension, the discount rates that underpin every underwriting model on Wall Street.
For now, markets are treating the Powell investigation as another political squall — one worth keeping an eye on, but not yet thesis‑changing. Futures pricing shows traders betting heavily against any move at this month’s policy meeting, with the next rate cut not fully priced until June.
But as Dimon and other institutional voices keep reminding anyone who will listen, questioning the independence of the central bank that anchors the global bond market risks delivering exactly what the president says he is fighting: higher inflation expectations, higher long‑term rates and a more volatile backdrop for risk assets of every kind.
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