In an extraordinary video statement Sunday night, Federal Reserve Board Chair Jerome Powell revealed that the Trump administration has subpoenaed him and threatened him with criminal prosecution, in what he called an effort to use the investigative resources of the Department of Justice to force changes in Fed monetary policy.

Powell said that allegations that he had lied in testimony before Congress about cost overruns in the renovation of the Federal Reserve headquarters were nothing more than a pretext. “This new threat is not about my testimony last June or about the renovation of the Federal Reserve buildings,” he said. “The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the president.”

The investigation is headed by Jeanine Pirro, the US Attorney for Washington D.C., a former judge who became a far-right celebrity with her own program on Fox News. Trump chose her to fill the politically critical post in the US capital after his first choice, Ed Martin, former defense attorney and political advocate for many of the fascists who attacked the Capitol on January 6, 2021, had to withdraw his nomination due to opposition in the Senate.

While Attorney General Pamela Bondi declined to comment on the “ongoing investigation” and Trump himself claimed to be completely unaware of the probe, there is no question that the White House ordered the targeting of Powell in order to assert its control over the US central bank.

Powell himself is to leave office in May, when his second term as Fed chair expires—He was first appointed by Trump, then reappointed by Democrat Joe Biden. Traditionally, Fed chairmen resign from the Board of Governors when their term as chair ends, but Powell has the option to stay on as one of the seven members of the board until 2028.

As a legal matter, the investigation into Powell is an obvious frame-up. The renovation of the nearly century-old headquarters of the Fed, which consists of two large buildings, has encountered obstacles typical of such projects, including extensive contamination by asbestos and lead in structures completed in 1930. The cost has risen from $1.9 billion to $2.5 billion, paid for by the Fed from its own resources, derived from fees paid by the banking institutions it regulates.

The real motive for the investigation, as Powell pointed out, was Trump’s insistence that the Fed should slash interest rates more quickly than it judged prudent. This is a dispute within the capitalist ruling elite, in which Trump speaks for the hedge funds, crypto swindlers and other speculators and conmen, who clamor for lower interest rates in order to sustain their debt-fueled operations.

Powell speaks for the more traditional Wall Street interests, including the major banks and investment firms, who fear a resurgence of inflation which would both undermine the global domination of the US dollar and threaten to trigger a movement from the working class seeking wage increases to offset rising prices.

The issue goes beyond the level of interest rates, as Wall Street Journal economics correspondent Greg Ip acknowledged: “The criminal investigation into Federal Reserve Chair Jerome Powell isn’t ultimately about the Fed’s headquarters, or Powell, or even interest rates. It’s about power. President Trump intends to take control of the central bank, no matter what the law or the courts say.”

In other words, seizing control of the Fed is a key step in Trump’s drive to establish a presidential dictatorship.

Trump had previously targeted one of Powell’s key allies on the Board of Governors, Lisa Cook, a Biden appointee, using concocted allegations of mortgage fraud to give him the “cause” required by law for him to remove her from the board. Cook refused to step down, filed suit against Trump and won her case at the district and appeals court levels. She has continued to participate in the Board’s actions, including setting interest rates, but the Supreme Court is set to hear the Trump administration’s appeal of the lower court rulings on January 21.

The immediate response to the open attack on Powell was a sharp upswing in the price of gold, which hit a record $4,612 an ounce, up 2 percent on the day, and an 8 percent jump in the price of silver. The rising price of precious metals is a measure of the declining confidence in global financial markets in the value of the dollar and in the prospects of the Trump administration.

The fears expressed in the corporate media over Trump’s threat to the “independence” of the Fed reflect the concern in the financial oligarchy that the president personally, rather than Wall Street, will be directing the setting of interest rates. Trump tweeted last month on Truth Social that “anybody that disagrees with me will never be the Fed Chairman.” 

The British weekly The Economist warned that if the political prosecution of Powell goes forward, “It will be impossible … for any nominee to replace Powell to be taken at face value by markets or by the other members of the Fed’s Open Market Committee. The only possible assumption, under those conditions, is that any Trump nominee has been chosen because they are an enemy of Fed independence. And any candidate who would accept the nomination under these conditions has proven themselves unfit for the job.”

Powell’s three predecessors as Fed chair, Alan Greenspan, Ben Bernanke and Janet Yellen, issued a joint letter, signed by other prominent former officials, which all but characterized the United States under Trump as a banana republic. They wrote: “This is how monetary policy is made in emerging markets with weak institutions, with highly negative consequences for inflation and the functioning of their economies more broadly.”

The police-state character of the threatened charges against Powell is so obvious that even several Republican senators balked. Senator Thom Tillis of North Carolina, a member of the Senate Banking Committee, said he would block any Trump nominations for the Federal Reserve until the investigation was ended. With a 13-11 Republican margin on the committee, any one Republican can block a nomination by voting with the Democrats.

Senator Lisa Murkowski of Alaska declared, “If the Department of Justice believes an investigation into Chair Powell is warranted based on project cost overruns—which are not unusual—then Congress needs to investigate the Department of Justice.” 

The so-called independence of the Fed does not mean political neutrality; it means that the Fed will be guided solely by the fundamental interests of the capitalist class, without regard to the electoral calendar or the immediate concerns of particular politicians. In the past, this led to conflicts when presidents feared they would pay a political price for Fed actions that resulted in mass unemployment.

Trump’s intervention against Powell goes far beyond this. He is asserting dictatorial authority over all the institutions of the capitalist state. His opponents within the ruling class, for their part, fear that blatant political manipulation of US interest rates will undermine global confidence in the dollar, which has long functioned as the world’s principal reserve currency. 

This conflict has profound consequences for working people. The working class must intervene, not on the side of either faction of the oligarchy, but on the basis of its own class interests, independent of the Democrats and Republicans, and fighting for the socialist reorganization of society. This includes the nationalization of the banks and the control of finance by a workers’ government.