Trump's Fed Pressure: Bessent Faces Senate Grilling

Treasury Secretary Scott Bessent faced sharp questioning from the U.S. Senate regarding President Donald Trump's aggressive push for interest rate cuts, a campaign that critics fear could ignite inflation.

During a Thursday hearing of the Senate's Financial Stability Oversight Council, Democratic senators pressed Bessent on rising consumer prices and Trump's apparent efforts to influence the Federal Reserve, the nation's independent central bank.

Figure 1: Treasury Secretary Scott Bessent testified before the Senate, facing questions on Federal Reserve independence and inflation.

Trump's Campaign for Lower Interest Rates

The hearing follows President Trump's repeated public demands for the Federal Reserve to slash interest rates as low as possible. In a December interview with The Wall Street Journal, Trump stated he wanted to see rates at "one percent and maybe lower than that," adding, "We should have the lowest rate in the world." The current federal interest rate stands at approximately 3.6 percent.

Economists warn that while a sudden, deep rate cut could create a short-term market boom by making loans cheaper, the resulting flood of cash into the economy could devalue the dollar and trigger higher prices over the long term.

This push for lower rates coincides with Trump's nomination of Kevin Warsh to replace Jerome Powell as Federal Reserve chair. Powell has drawn sustained criticism from the president for his policy of lowering rates gradually.

A Pattern of Pressure on Fed Officials

The Federal Reserve has long operated as an independent agency, a principle designed to shield national monetary policy from political interference. However, critics accuse President Trump of attempting to undermine this independence through legal threats and investigations targeting Fed members.

Recent actions have intensified these concerns:

• Lisa Cook: In August, Trump tried to fire Federal Reserve Governor Lisa Cook, an appointee of his predecessor Joe Biden, over allegations of mortgage fraud, which she denies. Cook has claimed the move was politically motivated, and the case is now before the Supreme Court.

• Jerome Powell: In early January, the Department of Justice launched a criminal investigation into current Fed Chair Jerome Powell, focusing on his management of renovations to the Federal Reserve building. Powell responded with a rare public statement, accusing the president of using the threat of criminal charges to bully Fed leaders into adopting his preferred interest rate policy.

Bessent Under Fire in Senate Hearing

Against this backdrop, a recent comment from President Trump about his Fed nominee fueled further alarm. Trump joked about suing Kevin Warsh if he failed to follow presidential demands on interest rates. While Trump later dismissed the remark as "all comedy" during a press gaggle on Air Force One, senators at the hearing were not amused.

Warren Questions Fed Nominee's Independence

Senator Elizabeth Warren directly confronted Bessent over the report, asking for a commitment that Warsh would not be sued or investigated if he did not cut interest rates as Trump desires.

"Mr Secretary, can you commit right here and now that Trump's Fed nominee Kevin Warsh will not be sued, will not be investigated by the Department of Justice, if he doesn't cut interest rates exactly the way that Donald Trump wants?" Warren asked.

Bessent sidestepped the question, replying, "That is up to the president."

Warren rebuked the Treasury chief, stating, "I don't think the American people are laughing. They're the ones who were struggling with the affordability."

Figure 2: Senator Elizabeth Warren questioned Treasury Secretary Scott Bessent during a Financial Stability Oversight Council hearing.

Bipartisan Rebuke from Senator Tillis

The concern over the administration's actions extended across the aisle. Senator Thom Tillis, a Republican, opened his remarks by denouncing the investigation into Jerome Powell. While acknowledging his own disappointment with the current Fed chair, Tillis stated his belief that Powell committed no crime.

He warned that such probes would discourage transparency and hinder future oversight hearings, imagining a scenario where officials, fearing "perjury traps," would refuse to answer questions without extensive legal consultation. "Is that really the way we want oversight to go in the future?" Tillis asked.

Figure 3: Republican Senator Thom Tillis expressed concern that the investigation into Fed Chair Jerome Powell could undermine future government oversight.

For his part, Bessent told the council that he supported the Federal Reserve's long-term inflation target of about 2 percent. "What is desirable is to get back to the Fed's 2 percent target, and for the past three months, we've been at 2.1 percent," he noted.

New Scrutiny Over Trump's IRS Lawsuit

The hearing also turned to another contentious issue: President Trump's lawsuit against the Internal Revenue Service (IRS), a department within his own executive branch.

Trump is seeking $10 billion in damages related to the leak of his tax returns during his first term. The leak was perpetrated by a former government contractor, Charles Littlejohn, who has since been sentenced to five years in prison.

Democrat Ruben Gallego questioned the apparent conflict of interest, given that Trump's own Justice Department would defend the lawsuit and could potentially approve a settlement paid for by taxpayers.

When Gallego asked where the $10 billion would come from, Bessent confirmed, "It would come from Treasury." He added that Trump has said any awarded money would go to charity and that the Treasury would not be the entity deciding on the damages.

Gallego pressed further, noting that Bessent, as a political appointee who can be fired by the president, would ultimately be in charge of disbursing the funds. "Have you recused yourself from any decisions about paying the president on these claims?" Gallego asked.

Bessent again evaded a direct answer, stating simply, "I will follow the law."