Marketplace The Fed under attack
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Jan 12, 2026 
Wendy Edelberg, a senior fellow at the Brookings Institution, and Alan Blinder, economics professor at Princeton and former Fed vice chair, discuss a DOJ investigation into the Federal Reserve. They explore the implications of this unprecedented action on the Fed's independence and market credibility. Edelberg warns that politicization could lead to regulatory risks, while Blinder describes the alarm among Fed staff. They also delve into how these developments may alter Fed policy and affect small businesses amidst economic uncertainty.
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Legal Threats Could Undermine Fed Independence
- The DOJ subpoena and threat of criminal investigation challenge the Fed's ability to set rates based on evidence and economic conditions.
- Jerome Powell framed the move as political pressure that could undermine monetary policy independence.
Markets Are Calm — For Now
- Markets barely reacted to the DOJ action, implying investors don't yet expect big rate cuts from a Trump-aligned Fed.
- Wendy Edelberg warns that market complacency may be misplaced and could change suddenly with damaging effects.
Checks On A Compliant Chair May Not Hold
- Edelberg sees two reasons markets stayed calm: hopes the next chair will defend independence or that other FOMC members will check a compliant chair.
- She warns Trump likely extracted promises and will use executive tools to pressure FOMC members, reducing those checks.