Treasury Sec Calls for Fed Overhaul Amid Powell Controversy

- Treasury Secretary Scott Bessent demands review of Federal Reserve performance. - Economist Mohamed El-Erian suggests Fed Chair's resignation to protect institutional independence. The Federal Reserve faces unprecedented scrutiny as converging political and economic pressures raise fears of structural shifts and heightened market risks. On July 21, 2025, U.S. Treasury Secretary Scott Bessent publicly demanded a comprehensive performance review of the central bank, accusing it of mismanaging its response to trade tariffs without clear inflationary evidence. Adding to the discourse, renowned economist Mohamed El-Erian called for Fed Chair Jerome Powell’s resignation, arguing the move could shield the Federal Reserve from intensifying political interference. In an interview with CNBC on July 21, 2025, Bessent specifically criticized how the Fed handled tariff impacts, claiming it overestimated their inflationary effects and arguing that the central bank’s economists lack effectiveness and credibility, making an institutional review imperative. On social media the same day, Bessent clarified his remarks, stressing that his proposal calls for an internal review led by the Fed itself, not for external government intervention. Meanwhile, on July 21, Mohamed El-Erian, Chief Economic Advisor at Allianz, stated on X (formerly Twitter) that Powell’s resignation might be necessary to uphold the Federal Reserve’s independence. El-Erian acknowledged this solution is not perfect but emphasized it would be a better alternative than allowing ongoing criticism to erode the central bank’s autonomy and authority. This scrutiny unfolds amid persistent critiques from the Trump administration, which has been pressuring the Federal Reserve to implement more aggressive interest rate cuts. Over the past several months, administration officials have questioned the Fed’s commitment to its core mandates of inflation control and employment stabilization while also accusing it of overreaching into politically charged issues like trade policy. Both Bessent and El-Erian voiced alarms over what they described as “mission creep,” warning this trend risks further undermining the institution's perceived objectivity. Complicating matters further, the Fed faces criticism for a $2.5 billion renovation of its headquarters, an issue that fuels concerns that its priorities are misaligned with its mission. Bessent clarified that Powell should remain in his position until his term concludes in May 2026, unless he resigns voluntarily. Still, the growing criticism signals broader risks, including leadership challenges and the possibility of restructured oversight, which could compromise the institution’s independence. The intensifying debate underscores the potential for significant disruptions to the Federal Reserve’s core operations. The Federal Open Market Committee (FOMC), which sets monetary policy, is designed to operate independently. However, mounting political pressures introduce uncertainty that could unsettle markets. On July 22, CoinMarketCap reported that as of 12:00 UTC, Bitcoin (BTC) was trading at $30,456, reflecting a 4.7% surge in 24-hour trading volume, while Ethereum (ETH) stood at $1,985, with its trading activity up 3.2%. These movements reflect heightened market sensitivity to the Federal Reserve’s future as traders weigh the implications of the ongoing turmoil.