Pressure on Federal Reserve Chairman
Fannie Mae and Freddie Mac supervisors are publicly pushing for the resignation of Federal Reserve Chairman Jerome Powell. Bill Parte, director of the Federal Housing Financial Institutions (FHFA), has been particularly active on social media, posting numerous times within a day to support this call, turning what are supposed to be independent institutions into a political battleground.
In a recent post on X, Parte stated, “I am asking Federal Reserve Chairman Jay Powell to step down.” This campaign against Powell gained momentum just before the Fed’s announcement on Wednesday, with President Trump expressing his outrage at Powell and the Fed for not lowering interest rates to levels typically seen only during economic crises, even as unemployment remains close to historical lows.
Several of Parte’s posts echoed Trump’s criticism of Powell. Both Trump and Parte argue that the Fed’s decision to maintain interest rates between 4.25% and 4.5% is detrimental to the economy. Specifically, Parte highlights the challenges within the housing market, where 30-year fixed mortgage rates are nearing 7% on average.
As Parte put it, “As chairman of Fannie Mae and Freddie Mac, I can say that Jay Powell is hurting the housing market by being too late to respond. He needs to step down, and it should happen soon.”
However, it’s worth noting that Powell is just one of the twelve officials who determine interest rates. On Wednesday, all twelve, including several appointed by Trump, unanimously agreed to keep rates stable.
The Federal Reserve is also tasked by federal law to juggle unemployment and inflation. Typically, they might lower rates to stimulate the economy or raise them to prevent overheating.
Experts have characterized this dual responsibility as a tricky balancing act. While maintaining moderate rates is crucial, lowering them solely to boost the housing market could risk inflation, which would contradict their broader objectives.
During a press conference, Powell expressed that he and his colleagues prefer to keep interest rates steady given the economy’s resilience despite significant policy changes. “It takes time to understand how tariffs will affect consumers,” Powell noted. “We’re starting to see some advantages and hope for more in the upcoming months.”
Powell emphasized that they’re satisfied with the current interest rates as they monitor the effects of Trump’s tariffs. He stated, “We need to gauge how tariff-induced inflation might affect rates. There’s considerable uncertainty surrounding that.”
There’s a reality check that “someone has to bear the cost of tariffs—it might be the manufacturer, exporter, or even the consumer who ends up paying,” he added.
Since taking over leadership of the Fed in 2018, Powell has faced substantial political pressure from Trump. However, having an independent financial regulator like Parte escalating the situation is quite unexpected.
Parte oversees Fannie Mae and Freddie Mac, which have been under federal control since the housing market collapse during the 2007-08 financial crisis.
Both the Fed and FHFA are federal agencies designed to function independently of political pressures, which makes this current tension particularly noteworthy.
When faced with questions about Trump’s criticisms during the press conference, Powell reiterated his commitment to serve through the end of his term, which concludes in 2026—the option to remain on the Fed Board until 2028 remains open to him.
