Prof G Markets — "The DOJ Comes for Jerome Powell"

Podcast: Prof G Markets (Vox Media Podcast Network)
Date: January 13, 2026
Host: Ed Elson
Guests: Liz Hoffman (Semaphore's business and finance editor), Justin Wolfers (University of Michigan professor of public policy and economics)

Overview

This episode analyzes the DOJ’s unprecedented criminal investigation of Federal Reserve Chair Jerome Powell, sparked by alleged misstatements about renovations at the Fed building. Ed Elson, Liz Hoffman, and Justin Wolfers break down the political context, market reactions, parallels to global authoritarian trends, and the implications for Federal Reserve independence and America’s economic stability. The conversation also explores what happens next for Powell and the Fed’s future credibility.

Key Topics & Discussion Points

1. Recap: Markets and Breaking News

[01:55 – 04:17]

• DOJ announces a criminal investigation into Jerome Powell.
• Dow & S&P 500 initially drop but close at all-time highs; gold and silver hit records; 10-year treasury yields spike then moderate.
• Trump proposes 25% tariffs on any country doing business with Iran; Capital One shares drop on Trump's credit card rate cap comments.
• DOJ probe focuses on Powell’s congressional testimony over building renovations, but Powell calls it a "pretext" for White House pressure on interest rates.

Quote:

“The threat of criminal charges is a consequence of the Federal Reserve setting interest rates and based on our best assessment of what will serve the public, rather than following the preferences of the president.” — Jerome Powell (as cited by Ed Elson, [03:46])

2. Reactions to the DOJ Probe: Retaliation & Global Parallels

[04:17 – 07:00]

• Liz Hoffman: Powell has tried hard to stay out of politics, but this breaks precedent, is clearly "punitive and retaliatory."
• Justin Wolfers: “This is not unprecedented in the world. Tin-pot dictators do this all the time...It puts America in a club of dictatorships who've experienced hyperinflation and instability.” ([05:21])

Memorable Moment:

• Both guests express shock and concern over what this means for U.S. institutional norms and the nation's international standing.

3. Authoritarian Playbook and ‘Fiscal Dominance’

[07:00 – 10:03]

• Wolfers explains "fiscal dominance": When interest rates are set to benefit the government's debt burdens—not to control inflation or unemployment.
• Historical parallels: Russia, Venezuela, Argentina, Zimbabwe, Turkey—loss of central bank independence leads to hyperinflation.
• President Trump has expressed a preference for dramatically lower rates, echoing foreign precedents.

Quote:

“If you set interest rates below what is required to keep inflation low and stable...you get higher and higher and higher inflation...from 3 to 30 or from 30 to 300, or...to 3,000, or 3 million percent.” — Justin Wolfers ([07:59])

4. Market Reaction: Surprisingly Mute

[10:03 – 14:26]

• Liz: Markets acting “like a teenager with noise-canceling headphones on.” ([11:47])
• Bond market, not stocks, is usually the real check on presidential overreach; neither moved much.
• Possible explanations:
  • Markets dismiss incident as “theater”
  • Markets see no real risk
  • Markets are simply numb to political noise after a year of the Trump administration

Quote:

“If you’re hoping there’s some check on behavior like this, it’s the bond market...there’s been talk of a Trump put—some pain point that will rein in the past the policy process.” — Liz Hoffman ([11:08])

5. Is Trump Just Trolling Powell?

[14:26 – 19:34]

• Ed floats the notion that Trump’s threats are “trolling”/not serious, akin to presidential "shitposting."
• Wolfers disagrees: the threat is real, but the markets are unfazed because they already “priced in” Trump’s desire to control the Fed.
• Powell moving the dispute publically prevents quiet coercion and rallies institutional resistance (notably in the Senate).

Quote:

“This was meant to be a private threat. Do what I want or you go into jail, brother. Powell moved it into the public arena...He did so powerfully. He did so directly to the public.” — Justin Wolfers ([15:55])

“If I’m a trader on Wall Street, I would be sick to death of losing money because I responded to a yap only to get tacoed. By the way, those are technical trading terms.” — Justin Wolfers ([18:36])
(humorous moment)

6. Institutional Resistance: Senate Steps Up?

[17:32 – 22:13]

• Senators Tillis and Murkowski publicly oppose any new Fed nominees until cloud over Powell is resolved.
• Paradoxically, Trump's blitz may undermine his own efforts to fill the Fed with loyalists.
• Senate confirmation becomes the new battleground for Fed independence.

Quote:

“What he's done is woken up the Senate...that fight to replace Jay Powell is gonna be vitally, vitally important.” — Justin Wolfers ([17:48])

7. Fed’s Future: Consensus, Chaos, or Compliance?

[22:13 – 26:08]

• Liz: Next chair likely to be more compliant (“one of the Kevins”); longer-term, the Fed becomes more politicized.
• The Fed is consensus-driven and has a diverse, sometimes divided, board; even a “toady” chair only has one vote.
• Trump's lasting impact may be to politicize the Fed, making it more transparent but also more vulnerable to public and political meddling.

Quote:

“This is going to be a more political body. It’s going to be a body that is expected to answer for itself...the flip side of independence is accountability.” — Liz Hoffman ([25:11])

8. Political Implications

[26:08 – 30:18]

• Ed: Powell’s approval ratings remain high—even higher than Trump's.
• Wolfers: “There’s no one who’s saying, ‘I really wish monetary policy was run out of the White House.’ ...It serves no political interest at all.”
• Attempting to rush Powell out serves no one—even Trump—since waiting four months would have allowed a clean replacement.
• Trump’s impatience may backfire and galvanize resistance (especially in the Senate).

Quote:

“Trying to destroy an institution because you can't wait four months is absurd.” — Justin Wolfers ([29:58])

9. Powell’s Legacy and Institutional Integrity

[30:18 – 32:57]

• Liz: Powell's “textbook response” to the pandemic, eventual miscalculation on inflation, but now displays rare “backbone."
• Wolfers: Powell stands out for not rolling over under White House pressure—contrasting with repeated capitulation by business, academia, and other public servants. Economists, despite their reputation, can have spine.

Quote:

“Powell showed enormous spine. We’ve seen business leaders roll over. We’ve seen university leaders roll over. We’ve seen public servants roll over. What we saw this time—the Fed Chair not roll over.” — Justin Wolfers ([32:02])

10. Building Renovation: The “Pretext”

[33:14 – End]

• Ed: The criminal case uses the Fed’s overbudget, $2.6B renovation as pretext, but the real issue is Trump’s desire to force monetary policy changes.
• Near-unanimous condemnation—across political and market lines—signals the attempt is widely recognized as an abuse of power, not a genuine legal concern.
• Massive public outcry over Powell’s video; broad agreement that this attack is both “unprecedented” and “wrong.”

Quote:

“Something about it perfectly encapsulates what is really going on in America today… most of us can agree this is unprecedented. And more importantly, this is wrong.” — Ed Elson ([34:12])

Notable Quotes & Timestamps

• “This is punitive and it’s retaliatory.” — Liz Hoffman ([04:35])
• “It puts America in a club of tinpot dictatorships…” — Justin Wolfers ([05:28])
• “Word for the day is ‘fiscal dominance.’” — Justin Wolfers ([07:13])
• “Markets are acting like a teenager with noise canceling headphones on.” — Liz Hoffman ([11:47])
• “Powell moved it into the public arena… He did so powerfully.” — Justin Wolfers ([15:55])
• “If I’m a trader on Wall Street, I would be sick to death of losing money because I responded to a yap only to get tacoed.” — Justin Wolfers ([18:36])
• “This is going to be a more political body… The flip side of independence is accountability.” — Liz Hoffman ([25:11])
• “There’s no one…who’s saying ‘I really wish monetary policy was run out of the White House.’” — Justin Wolfers ([27:51])
• “Powell showed enormous spine… What we saw this time—the Fed Chair not roll over.” — Justin Wolfers ([32:02])
• “Something about it perfectly encapsulates what is really going on in America today…” — Ed Elson ([34:12])

Important Timestamps

| Time | Segment Description | |---------|--------------------------------------------------------------------------| | 01:55 | Market update and news recap | | 04:17 | Panel's initial reactions to DOJ probe | | 06:54 | Wolfers outlines the global playbook for undermining central banks | | 10:03 | Dissecting the market's reaction to the Powell investigation | | 14:26 | "Is Trump just trolling Powell?" debate | | 17:32 | Senate opposition to confirming a new Fed Chair escalates | | 22:13 | Prospects for the next Fed Chair and the institution's politicization | | 26:08 | Political dangers and lack of Trump-supporter enthusiasm for this move | | 30:52 | Powell's legacy in light of these events | | 33:14 | Ed Elson recaps the "renovation pretext" and the near-universal outrage |

Tone & Takeaways

• Candid, urgent, and analytical: The panel doesn't hold back, candidly connecting recent U.S. events to global patterns of democratic erosion.
• Biting humor emerges: Wolfers’ “yap-yap/tacoed” riff lightens the tone despite the gravity of the subject.
• Profound institutional concern: Repeated focus on the fragility and resilience of American institutions—central bank independence in particular—is central.
• Unusual consensus: Both left and right reject the administration’s maneuver; market reactions are muted, while intelligentsia and public opinion are nearly uniformly alarmed.

Summary for the Uninitiated

• The DOJ’s investigation of Fed Chair Jerome Powell is widely viewed as political retaliation, not a genuine corruption inquiry.
• Historical precedents worldwide show that undermining central bank independence often leads to disastrous inflation and instability (Turkey cited as a warning).
• Market reactions are notably subdued, likely because investors have already factored in political “noise”—but both guests warn against complacency.
• The episode spotlights the importance of institutional resistance (notably from Powell himself and members of the Senate), and the high stakes for Fed independence.
• Powell’s public response is called a defining moment of leadership, with the panel hailing his “spine” in contrast to many others under Trump-era pressure.
• The future of Fed leadership and the politicization of monetary policy are now front and center in U.S. economic debate.

For further context or specific segments, see the timestamps and quotes above.