Guardrails of Democracy: The Federal Reserve’s Test of Independence

By Eve R. Doster

The Fed. For most of us, the Federal Reserve exists at the edges of our understanding of the economy—an ancillary force we read about in financial news or discuss when interest rates rise or inflation spikes. But in truth, its core function probably remains something of an enigma to many of us.

Until recently, it was customary for average Americans to hold a cursory understanding of the Federal Reserve. It’s wonky and complicated, and for people outside the world of finance, not especially gripping.

But unusual things are happening at the Fed these days, and they warrant our attention. As the May 15 end of Fed Chair Jerome Powell’s term approaches, uncertainty clouds the institution’s next chapter. To make sense of the moment (and the pressures behind it), it helps to step back and understand what the Federal Reserve actually is and how it came to be.

What the Federal Reserve Is 

The Federal Reserve is the central bank of the United States. It’s an independent institution that has authority over managing the nation’s money and credit.

How It Came to Be

Before the Fed existed, America’s banking system was notoriously volatile. Panics in 1873, 1893, and 1907 collapsed the economy, leaving ordinary people destitute with little to no recourse.

It took years of debate, but Congress eventually passed the Federal Reserve Act of 1913 to address and mitigate circumstances that led to previous financial catastrophes. The history-altering legislation enabled the newly formed Fed to set interest rates, manage inflation, and act as an emergency lender if and when the economy faltered. Importantly, its structure was deliberately hybrid—part public, part private—so that no single branch of government could control it outright.

How the Fed’s Public-Private Structure Works:

• Public: the Board of Governors in Washington, D.C., is a federal agency that sets financial policy and whose members are appointed by the President and confirmed by the Senate.
• Private: 12 regional Federal Reserve Banks act as regional arms that carry out policy and provide liquidity to financial communities.  

In essence, the two branches work in tandem to set and carry out policy that keeps the US economy stable.

Why the Public-Private Structure Matters

The Fed’s independence is not a high-minded gesture; it’s a safeguard.

If presidents could dictate interest rates, monetary policy would serve election cycles, not the country. As an independent actor, the Fed can make unpopular but necessary decisions like raising interest rates to fight inflation or tightening credit to prevent bubbles…even when those moves displease politicians.

Why the Fed Is In the News 

For several years, President Trump has been vociferous in his criticism of Powell’s measured approach to lowering interest rates. The tension from this disagreement has spilled into the courts and Congress. 

In the wake of the pandemic and tariff policy confusion, Powell—who was originally appointed by President Donald Trump in 2018 and then reappointed by President Joe Biden in 2022—has favored a gradual approach to recovery, regularly stating the Fed must “focus on the incoming data and evolving risks,” not political pressure. 

Powell’s term ends next month, but he’s indicated he will stay on as chair pro tempore until a successor is confirmed by the Senate. And therein lies the conflict—confirming a new Fed Chair might prove harder than originally anticipated: 

The background: For years, Trump has blamed Powell and the Federal Reserve Board for what he calls its “slow pace” on rate cuts, arguing that the caution is hurting growth. His frustration has led to threats to fire Powell—an unprecedented challenge to the Fed’s autonomy. 

The question of whether a president can legally remove a Federal Reserve governor “for cause” became so serious that the DOJ has taken it all the way to the Supreme Court (oral arguments expected in May 2026 and a ruling likely by summer.)

The “other” problem: There’s an (ongoing) DOJ investigation into the finances of the Federal Reserve’s $3.1 billion headquarters renovation. Critics view the investigation as political intimidation. 

The DOJ’s involvement: In November 2025, U.S. Attorney Jeanine Pirro opened a criminal investigation into whether Powell misled Congress about the Fed renovation’s finances. In March 2026, Chief Judge James Boasberg of the U.S. District Court for D.C. quashed the case, ruling that the probe appeared politically motivated and designed to intimidate Powell into lowering interest rates. Despite the ruling, the Trump administration has vowed to keep the investigation open.

The standoff in the Senate: Republican Senator Thom Tillis, who otherwise supports Trump’s new Fed Chair nominee, Kevin Warsh, has drawn a line in the sand, declaring: “I will not vote for any Fed nominees, including Warsh, until a criminal investigation into Fed Chair Jerome Powell is resolved. This is about process, not people. This is a bedrock principle of Fed independence.” 

Tillis has made his stance clear: the Senate cannot legitimately consider a successor to Powell while the DOJ is engaging in so-called politically motivated prosecutions. 

Why This Moment Matters

What’s unfolding is a test of whether the Fed can remain independent in the face of threats. A politicized Fed would destabilize markets and erode global trust. 

How It Affects You

The Fed’s policies impact mortgage rates, investment portfolios, and job stability. At a time when partisanship is at rancorous highs and rules of engagement are being debated at the Supreme Court, keeping economic policy separate from politics isn’t just wise–it’s essential. Undermining that firewall risks economic chaos. 

The Takeaway

What’s happening at the Federal Reserve right now isn’t just a story about money or leadership, it’s a story about civics. What’s unfolding between the DOJ, the Fed, and the President isn’t just a clash of personalities—it’s the testing of a guardrail.