Reading · My Adirondack Diary

May 2, 2026, Vol. # 53

I would like to buy Jerome Powell a drink. No, seriously. If anyone deserves a drink, it is the soon to be former Chairman of the Federal Reserve, Jerome Powell. If anyone needs a drink it is no doubt the soon to be former Chair (but not the soon to be former member of the board of governors) of the Federal Reserve Bank. Powell’s term as chair and his term as a Fed Governor do not end at the same time. It is tradition, but nowhere codified in law or regulation, that the immediate past chair of the board also retire from the board of governors. On this or any other board, it usually makes sense for the retiring chair to ride off into the sunset and let the incoming chair steer the ship without the last chair looking over their shoulder. But these are strange times we live in and Mr. Powell has decided that these times warrant a break from tradition. He has declared his intention to keep his seat as a Governor on the Fed’s board until his Governor’s term expires on January 31, 2028. His term as Fed Chair expires this month, on the 15th of May. I’m quite sure that Powell’s announcement landed like a wet sloppy thud in the President’s inbox, as Trump has used any and all means available to him to force Powell out the door.

I’m sure that Trump’s pick and the presumptive new chair, Kevin Warsh, had also hoped that he would be free to steer the ship without Powell still in the picture, albeit in a diminished role. I give Powell an enormous amount of credit for agreeing to submit to Trump’s slings and arrows for another twenty months, because Powell believes strongly in preserving the independence of the Fed and worries that giving up his seat would bring Trump one vote closer to having his way with the board. Even though Powell will no longer be chair, Fed policy—most importantly setting the level of interest rates—is set by the board collectively, not at the direction of the Board Chair. Having control over the level of interest rates— influencing the discount rate and the Fed Funds rate—influences the prime rate which dictates how much large credit worthy customers pay to borrow money. The Fed’s open market operations - buying and selling bonds in the open market, influences bond prices, which influences all current bond yields, (bond prices go up, bond yields go down) which influences the yield on the ten year treasury, which is the primary metric used in how banks then set current rates on mortgages. So most of us have a stake in the ebb and flow of the interest rate cycle—the hip bone’s connected to the thigh bone, so to speak. The Fed adjusts the level of interest rates based upon objective, measurable, quantitative economic data. Trump wants interest rates lowered - because he says so.

If any one organization has their “hand on the tiller” of a nation’s economy, it is the Board of Governors of the Federal Reserve Bank. Reserve Banks operate independently of government—and political— interference, something that Trump has a most difficult time coming to terms with. He wants interest rates to be lower, much lower, always lower, regardless of the economic circumstances, and Powell—and the Fed Board of Governors—have refused to follow his instructions and have set rates as economic circumstances dictate. The circumstances that the Fed cares most about are the level of economic growth, and prices. One of the Fed’s mandates is to keep inflation contained—ideally at or below the Fed’s long standing target rate of 2%. The Fed will raise rates to contain inflation, but raising them too much could constrain economic growth. These two metrics—inflation and economic growth— are of equal importance, and the yin and yang of an economic cycle can make steering rates in the right direction decidedly difficult. Allowing economic growth to slow can lead to a recession. Allowing the economy to advance at too strong a rate can also allow prices to escalate which can lead to an inflationary spiral that becomes embedded in the economy. If inflation becomes embedded, lasting for many years, labor assumes that inflation is here to stay, and will demand wage increases to offset the anticipated rise in prices. Those negotiated wage gains are in-and-of-themselves inflationary, as labor costs are part of the cost of production. Thus begins a vicious cycle of systemic inflation, and the only way to stop it is to strangle the economy with an induced recession by raising rates to unaffordable levels. The double digit mortgage rates of the early 80’s were the result of exactly that phenomena.

Adding politics to the decision-making process is a recipe for nothing good, and Powell, and all of his predecessors, have stood firm in keeping politics —and the White House—out of the decision making process. The rising energy prices caused by the war in Iran which we are currently experiencing complicates the calculus immensely, since the textbook response to rising prices is to raise rates, but if the Fed did that, it would slow economic growth, which is already decelerating. Also - Trump’s head would explode. Powell’s response to the current state of affairs is to study the data and act accordingly. Trump’s response is to try to indict Powell. This is the reason for the standoff. Since a Fed governor can only be removed “for cause”, the White House had Trumped-up (pun intended) charges against Powell, alleging that construction cost overruns on a Fed building project were all Powell’s fault, and reason for dismissal. Most legal analysts did not see the alleged infraction as a breach of Powell’s fiduciary duties, even if they were true.

The President’s Art of the Deal methodology is to bully his adversaries, and absolutely everyone is potentially an adversary. All relationships are transactional. You are important to Trump for as long as you are useful, and when you no longer are, you are fired, or sued, or indicted. Sometimes all three. Sometimes he incites a lynch mob to come hang you. And then he pardons the seditionists. It doesn’t matter if you are a political adversary (see FBI Director James Comey, NY AG Leticia James, Senator Mark Kelly, or an ally (see Vice President Pence, former Attorney General Bill Barr, Chief of Staff John Kelly, former Secretary of State Rex Tillerson, or former Representative Marjorie Taylor Green.)

A recurring legal firefight was recently rekindled when his (accent on his) Justice Department found a grand jury willing to indict former FBI Director James Comey. The alleged offense - posting a photo of seashells on social media that spelled out 86-47. Seriously. Comey has been living rent free in Trump’s head since Comey left the FBI. Compounding the Comey vendetta, any affiliation with the man is enough to trigger an attack from the White House. If you were a line FBI agent assigned to investigate Russian interference in the presidential election, you were just doing your job, you were just following orders, but you were targeted with termination at the direction of the Oval Office. Comey’s daughter, a highly regarded federal prosecutor at the Manhattan US Attorney’s office, was terminated for absolutely no apparent reason other than being Jim Comey’s daughter. Apparently you can literally ransack the capital and threaten to lynch the Vice President of the United States and you will be pardoned, but post a picture of sea shells spelling out “86-47” on social media and Trump has you indicted. Like most prior Trump related litigation, they are all performative, and all a sham. All of these “prosecutions as retribution” are nothing more than that - revenge. And we are paying the bill, literally.

In his pre-White House past, real estate developer Trump would sue someone he viewed as an adversary (his contractors, his partners, his lenders) into submission —and then stiff the lawyer he had hired to argue the case. Now he does not even need to find a lawyer willing to chance getting paid, he has weaponized the Justice Department to do his bidding and the taxpayers are paying the bill. It is worth pointing out that the defendants in all of these cases, Powell, Comey, et al, are responsible for paying for their own defense.

Comey’s beach seashells photo is just another pretense. “86” is a restaurant term which began as a code to tell the staff that you ran out of something. “86 - Tuna” scribbled on the back of a restaurant check taped up in the kitchen means no more tuna sandwiches. That definition was expanded to “86-ing” a customer who had been “over-served” at the bar. In no one’s dictionary does it mean to shoot the tuna, or to assassinate the drunk. This case should have zero chance of proceeding, but we all will have to pay to watch. Your tax dollars at work. And that is the reason that I would like to buy Jim Comey a drink too. He’s an ex-cop so he will probably be more fun than Jerome Powell. And I need a drink too.

This is now the world we live in, but we voted for him. Twice. Actually I didn’t, but perhaps you did. Shame on us all for letting it come to this.

Buy those guys a drink.

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