If one understands the history and functioning of the Federal Reserve system, one must wonder if Jerome Powell’s recent remarks in Chicago were not just careless, but instead carefully premeditated? What if his speech was the bait in a premeditated trap for an ill-informed president known to have zero capacity for self-control?

The new administration’s wholesale firings violate a slew of laws, the Civil Service Act, the Administrative Procedures Act and the legislation setting up sundry quasi-independent commissions with their own five- or seven-member boards. In any single set of firings, people who were harmed can file for redress in federal court. But that is a daunting challenge.  It takes a lot of money.  Law firms are gun shy, not wanting to offend a patently vindictive highest official. And exactly how vital an issue are details in federal personnel management regulations?

Trump renews attacks on Federal Reserve Chair Powell, accelerating US market slide.

But the Federal Reserve system is different in all important ways. The Board of Governors was created by Congress in the Federal Reserve Act of 1913 that was greatly amended in 1935.  The central issue in all of this was to have an effective central bank that was free of control by either political officials or Wall Street.

The 1913 Act established a set of autonomous Federal Reserve District Banks, each as a legally private entity incorporated in the state where located. This was precisely to placate the often radical populists of early 20th century America, now seen as forebears of Trump’s MAGA movement.  The Fed, despite the enmity it draws from this group, was created, in large part, as a bulwark protecting MAGA interests from political and financial elites,.

Employees of these district banks are not government employees. They are categorized by the U.S. Labor Department as banking and financial workers. They do not have civil service protection, mandated veterans’ preference or any other trapping of federal employment. Their officers, unlike those of the Board of Governors in Washington, are not subject to the salary caps that apply to members of Congress, federal judges or generals. So each of the 12 district bank presidents earns some multiple of Jerome Powell’s $226,300.

Thus no one, other than the nine-person boards of directors of each district bank, can tell their president and other officers what to do.  No federal official in Washington has any standing to require these banks to take or not take actions like filing suits in federal court.

Each of these banks is legally autonomous within the complex system of 12 banks and the Board of Governors. That system is in turn autonomous within the federal government. Each bank has a legal mandate to supervise safety and soundness of depository institutions, manage complex payments systems moving tens of billions of dollars daily and enforce consumer protection. Each also plays a role in establishing monetary policy for the country as a whole.

Legally these districts are not part of the federal government. But to do their jobs correctly, the 12 district banks need the coordinating actions of the Board of Governors and its staff. So they have a vital interest in its statutory operation.

Moreover, they set their own budgets and do not depend on any congressional appropriation. And they employ dozens of staff lawyers.

So they unquestionably have legal standing to challenge a politically motivated firing of any Governor in violation of the Federal Reserve Act. There is no budget constraint. They have in-house legal staff and established connections with private law firms of all specialties. And there are many reams of legislative history proving that insulating the Board of Governors from presidential or congressional interference was not some legislative frill, but rather the core principle underlying a complex structure.

Yes, presidents name Fed governors. These must be confirmed by the Senate. There are seven of them and each, barring resignation or death, is appointed to a 14-year term. Terms begin on Feb. 1 of even numbered years. So a president inaugurated in January of an odd-numbered year could never, barring resignation or death, nominate more than three governors even if the president served two terms. Three governors are purposely only a minority on a seven-member board. This, together with the specific clause that no governor may be fired “except for cause” are the carefully legislated means to accomplish the necessary end of having a money supply free of political control. No federal court at any level will be able to deny this.

So what if key leaders in the 12 banks as well as at the board of governors decided to end interminable White House browbeating. Perhaps immediately make push come to shove with the following scenario.

Powell,  savvy Board Chair with a Princeton BA and a Georgetown JD who has rotated between Wall Street, the U.S. Treasury and the Federal Reserve for over 40 years, writes a low-key, but pointed  600-word speech. Knowing beforehand the questions his interlocuter for the Q&A will ask, he plans his answers accordingly. Eschewing usual Fed waffling, he openly predicts that Trump tariffs will boost inflation and depress output. Going entirely beyond his purview, he gratuitously opines that the GOP’s proposed budget deficit solution for 30 years is flawed and will fail.

The trap has been baited. The president has been jabbed in the gut with a sharp stick. Trump reacts angrily, makes threats, and hears his advisors’ urgings of patience. Initially holding back, he rises at 2 a.m. a few days later and sends out an angry post firing Powell. All news outlets report his decision. Pundits opine, markets fall into turmoil.

However, on the next business day, several Federal Reserve district banks, including New York, Chicago and San Francisco, jointly petition a federal court to enjoin Powell’s firing. The filing seems remarkably well drafted for such a short time! It clearly lays out how and why immunity from political control is at the very core of our nation’s central bank.

As the White House appeals at each level, the Fed banks file increasingly detailed briefs refuting whatever arguments inexperienced and demoralized Justice Department lawyers slap together. Bankers’ associations, consumer federations, retired chairs of the Senate banking committee join friend-of-the court briefs.

When it gets to the Supreme Court, an amicus brief jointly written by conservative federal judge J. Michael Luttig and Harvard constitutional scholar Lawrence Tribe helps carry the day. The justices are convinced. Even Clarence Thomas joins his colleagues in a unanimous, terse and crushing decision in favor of the Fed plaintiffs..

The upshot? Trump gets a very public judicial spanking, just as he runs into increasing headwinds on many fronts. Powell stays on as Chair until the end of January. Dr. Adriana Kugler, whose term ends the, is preplaced by Trump nominee Kevin Warsh. Powell graciously cedes the chair to Warsh, but stays on as a  board member for the two years in his term, denying Trump the ability to fill a second slot.  Monetary policy continues to be made as intended by wiser Congress a century ago.

St. Paul economist and writer Edward Lotterman can be reached at ed@edlotterman.com.

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By MICHAEL LIEDTKE, Associated Press Technology Writer

Google confronts an existential threat Monday as the U.S. government tries to break up the company as punishment for turning its revolutionary search engine into a ruthless monopoly.

The drama will unfold in a Washington courtroom during the next three weeks during hearings that will determine how the company should be penalized for operating an illegal monopoly in search. In its opening arguments, federal antitrust enforcers also urged the court to impose forward-looking remedies to prevent Google from using the same strategies to build a monopoly around artificial intelligence.

FILE – A woman walks by a giant screen with a logo at an event at the Paris Google Lab on the sidelines of the AI Action Summit in Paris, Sunday, Feb. 9, 2025. (AP Photo/Thibault Camus, File)

“This is a moment in time, we’re at an inflection point, will we abandon the search market and surrender them to control of the monopolists or will we let competition prevail and give choice to future generations,” said Justice Department attorney David Dahlquist.

The U.S. Department of Justice is asking a federal judge to order a radical shake-up that would ban Google from striking the multibillion dollar deals with Apple and other tech companies that shield its search engine from competition, share its repository of valuable user data with rivals and force a sale of its popular Chrome browser.

The moment of reckoning comes four-and-half-years after the Justice Department filed a landmark lawsuit alleging Google’s search engine had been abusing its power as the internet’s main gateway to stifle competition and innovation for more than a decade.

“This is a time for the court to tell Google, and all the other monopolists who are out there listening, and they are listening, that there are consequences when you break anti-trust laws,” Dahlquist said.

After the case finally went to trial in 2023, a federal judge last year ruled Google had been making anti-competitive deals to lock in its search engine as the go-to place for digital information on the iPhone, personal computers and other widely used devices, including those running on its own Android software.

That landmark ruling by U.S. District Judge Amit Mehta sets up a high-stakes drama that will determine the penalties for Google’s misconduct in a search market that it has defined since Larry Page and Sergey Brin founded the company in a Silicon Valley garage in 1998.

Since that austere start, Google has expanded far beyond search to become a powerhouse in email, digital mapping, online video, web browsing, smartphone software and data centers.

Seizing upon its victory in the search case, the Justice Department is now setting out to prove that radical steps must be taken to rein in Google and its corporate parent, Alphabet Inc.

“Google’s illegal conduct has created an economic goliath, one that wreaks havoc over the marketplace to ensure that — no matter what occurs — Google always wins,” the Justice Department argued in documents outlining its proposed penalties. “The American people thus are forced to accept the unbridled demands and shifting, ideological preferences of an economic leviathan in return for a search engine the public may enjoy.”

Although the proposed penalties were originally made under President Joe Biden’s term, they are still being embraced by the Justice Department under President Donald Trump, whose first administration filed the case against Google. Since the change in administrations, the Justice Department has also attempted to cast Google’s immense power as a threat to freedom, too.

“The American dream is about higher values than just cheap goods and ‘free’ online services,” the Justice Department wrote in a March 7 filing with Mehta. “These values include freedom of speech, freedom of association, freedom to innovate, and freedom to compete in a market undistorted by the controlling hand of a monopolist.”

Google is arguing the government’s proposed changes are unwarranted under a ruling that its search engine popularity among consumers is one of the main reasons it has become so dominant.

The “unprecedented array of proposed remedies would harm consumers and innovation, as well as future competition in search and search ads in addition to numerous other adjacent markets,” Google lawyers said in a filing leading up to hearings. “They bear little or no relationship to the conduct found anticompetitive, and are contrary to the law.”

Google also is sounding alarms about the proposed requirements to share online search data with rivals and the proposed sale of Chrome posing privacy and security risks. “The breadth and depth of the proposed remedies risks doing significant damage to a complex ecosystem. Some of the proposed remedies would imperil browser developers and jeopardize the digital security of millions of consumers.”

The showdown over Google’s fate marks the climax of the biggest antitrust case in the U.S. since the Justice Department sued Microsoft in the late 1990s for leveraging its Windows software for personal computers to crush potential rivals.

The Microsoft battle culminated in a federal judge declaring the company an illegal monopoly and ordering a partial breakup — a remedy that was eventually overturned by an appeals court.

Google intends to file an appeal of Mehta’s ruling from last year that branded its search engine as an illegal monopoly but can’t do so until the remedy hearings are completed. After closing arguments are presented in late May, Mehta intends to make his decision on the remedies before Labor Day.

The search case marked the first in a succession of antitrust cases that have been brought against a litany of tech giants that include Facebook and Instagram parent Meta Platforms, which is currently fighting allegations of running an illegal monopoly in social media in another Washington D.C. trial. Other antitrust cases have been brought against both Apple and Amazon, too.

The Justice Department also targeted Google’s digital advertising network in a separate antitrust case that resulted last week in another federal judge’s decision that found the company was abusing its power in that market, too. That ruling means Google will be heading into another remedy hearing that could once again raise the specter of a breakup later this year or early next year.

By CHRISTOPHER RUGABER, AP Economics Writer

WASHINGTON (AP) — President Donald Trump repeated his attacks Monday against the chair of the Federal Reserve, demanding that the central bank lower its key interest rate to boost the economy.

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Trump called Powell “a major loser” and said that energy and grocery prices are “substantially lower” and “there is virtually No Inflation.” Yet Trump said the economy could slow without rate cuts.

Gas prices have fallen for the past two months, in part because oil costs have dropped on fears of slower growth, but food prices jumped in January and March and overall inflation remains above the Fed’s 2% target.

Trump’s comments drove the stock market and the dollar lower as investors in the U.S. and overseas grow increasingly wary about the economic standing of the U.S. On Friday, a top White House adviser said the administration is studying whether it can fire Powell, a move that would undermine the Fed’s independence and likely send shock waves through global financial markets.

Markets, which had already been heading sharply lower Monday, tumbled further after Trump’s post, with the broad S&P 500 stock index down 2% in early trading.

Trump’s threats against Powell and his higher tariff policies have driven down the dollar and also pushed up the interest rate on 10-year Treasuries, which ticked higher to 4.35% Monday. Those rates are the benchmark for mortgage rates, meaning that borrowing costs to buy a house will likely stay elevated.

A drop in the dollar is unusual when stock prices fall and Treasury yields rise, because investors typically buy U.S. government bonds during market turmoil. Instead, they appear to be avoiding U.S. markets generally.

Trump lashed out at Powell on Friday and said he could fire him if he wanted, though it would likely touch off a legal battle that could go to the Supreme Court. Powell has said the president doesn’t have the authority to fire him and has also made clear he won’t step down until his term ends in May 2026.

By MARCOS ALEMAN and MEGAN JANETSKY

SAN SALVADOR, El Salvador (AP) — Salvadoran President Nayib Bukele proposed carrying out a prisoner swap with Venezuela on Sunday, suggesting he would exchange Venezuelan deportees from the United States his government has kept imprisoned for what he called “political prisoners” in Venezuela.

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In a post on the social media platform X, directed at President Nicolás Maduro, Bukele listed off a number of family members of high-level opposition figures in Venezuela, journalists and activists detained during the South American government’s electoral crackdown last year.

“The only reason they are imprisoned is for having opposed you and your electoral fraud,” he wrote to Maduro. “However, I want to propose a humanitarian agreement that includes the repatriation of 100% of the 252 Venezuelans who were deported, in exchange for the release and surrender of an identical number (252) of the thousands of political prisoners you hold.”

Among those he listed were the son-in-law of former Venezuelan presidential candidate Edmundo González, a number of political leaders seeking asylum in the Argentine embassy in Venezuela, and what he said were 50 detained citizens from a number of different countries across the world. Bukele also listed the mother of opposition leader María Corina Machado, whose house the political leader has said was surrounded by Venezuelan police in January.

Bukele said he would ask El Salvador’s foreign ministry to be in contact with the Maduro government.

Venezuela’s prosecutor’s office responded Sunday night, calling Bukele’s statements “cynical” and referred to the Salvadoran leader as a “neofascist.”

It demanded Bukele’s government provide the Venezuelan government with a list of the people detained as well as their legal status and medical reports.

“The treatment received by Venezuelans in the United States and El Salvador, constitutes a serious violation of international human rights law and constitutes a crime against humanity,” it said in the statement.

The proposal comes as El Salvador has come under sharp international scrutiny for accepting Venezuelans and Salvadorans deported by the Trump administration, which accused them of being alleged gang members with little evidence. Deportees are locked up in a “mega-prison” know as the Terrorism Confinement Center (CECOT), built by the Bukele government during his crackdown on the country’s gangs.

Controversy has only continued after it was revealed that a Maryland father married to a U.S. citizen, Kilmar Abrego Garcia, was deported by mistake. The U.S. Supreme Court ordered the U.S. government to facilitate his return, but there’s no sign of that happening.

El Salvador’s archbishop José Luis Escobar Alas on Sunday called on Bukele not “to allow our country to become a big international prison.”

Despite the controversy, Bukele maintained that all of the people he has kept in the prison were “part of part of an operation against gangs like the Tren de Aragua in the United States.”

Janetsky reported from Mexico City.