Fannie Mae Chair Pulte sends harsh message to Fed Chair Powell

It's getting real.

The Trump administration's war of words targeting Fed Chairman Jerome Powell's stance on interest rate cuts ramped up this week.

Fannie Mae Chairman and Director of the Federal Housing Finance Agency Bill Pulte released a statement calling on Congress to investigate Powell.

Pulte suggested that Powell should vacate his role at the Fed because of multibillion-dollar plans to renovate the Federal Reserve building and comments to Congress regarding the upgrades.

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The formal statement increases the heat on Powell, who has drawn the ire of Donald Trump for refusing to lower interest rates in 2025.

Pulte has questioned the Fed's decision to shift to the sidelines as politically motivated because the Fed reduced interest rates by 1% late last year when President Biden was still in office.

The Fed's dovish tilt in 2024 led many to expect the Fed would announce additional cuts in 2025, providing mortgage relief to home buyers and those hoping to refinance their mortgages.

However, the Fed has instead put rate cuts on hold, which could have dire consequences for the economy if it weakens.

The Fed risks falling behind the curve (again)

Powell infamously incorrectly labeled inflation in 2021 as transitory, a major miscalculation that allowed inflation to take hold and accelerate to over 8% in 2022.

If Powell had acted faster to raise rates, the Fed may have avoided embarking on the most hawkish rate policy since former Fed Chair Paul Volcker fought inflation in the 1980s by sending interest rates to double digits.

The Fed's rate hikes in 2022 and 2023 successfully lowered inflation below 3%, but higher rates have caused cracks in the job market. The unemployment rate was 4.1% in June, up from 3.4% in 2023.

The Fed's dual mandate is low inflation and unemployment, two often contrary goals. When the Fed raises rates, it lowers inflation but slows economic activity, increasing unemployment. The opposite occurs when it lowers rates.

Changes to the Fed Funds Rate influence everything from credit card interest to mortgage rates because it's the interest rate that banks charge each other when lending or borrowing reserves from each other overnight.

There's been significant debate over the Fed's interest rate policy this year, mainly because of President Trump's tariffs.

Since February, the White House has placed 25% tariffs on Mexico, Canada, and autos. It has also enacted a 30% tariff on China and a 10% baseline tariff on all imports.

Most economists agree that tariffs can increase consumer costs. However, there's disagreement over whether their impact on inflation is temporary or lasting.

More Federal Reserve:

• Fed interest rate cut decision resets forecasts for the rest of this year
• Federal Reserve prepares strong message on long-term interest rates
• Fed official revamps interest-rate cut forecast for this year

Companies will likely absorb some tariffs, but most, including Walmart, have suggested that at least some of the import taxes will be passed along to buyers.

Chairman Powell decided to keep rates at their current range of 4.25% to 4.5% last month, citing uncertainty over the impact of tariffs on inflation.

Fannie Mae Chair blasts Fed's Powell; calls for investigation

Powell's refusal to cut rates has led to sharp criticism from President Trump, who has called Powell “Mr. Too-Late” and a “numbskull” over his policy decision.

President Trump has also threatened to remove Powell from his role at the Fed, despite the Fed's long-standing autonomy.

Rumors have also swirled that President Trump may try to appoint a shadow Fed chairman, and some suggest Treasury Secretary Scott Bessent could win the nomination for the Federal Reserve when Powell's term expires in May 2026.

President Trump isn't the only member of the administration on the offensive.

Bill Pulte has recently ratcheted up rhetoric, too, saying Powell should resign from office immediately for keeping rates high.

High rates hit home buyers hard because the Fed Funds Rate helps determine Treasury bond yields, and banks often use the 10-year Treasury Note yield when setting mortgage rates.

On July 2, Pulte released a statement from the Federal Housing Finance Agency (FHFA) asking Congress to investigate Powell, and calling for Powell's dismissal:

I am asking Congress to investigate Chairman Jerome Powell, his political bias, and his deceptive Senate testimony, which is enough to be removed ‘for cause.’ Jerome Powell‘s $2.5B in capitalizations of Building Renovation Scandal stinks to high heaven, and he lied when asked about the specifics before Congress. This is nothing short of malfeasance and is worthy of ’for cause.'

Pulte focused particularly on Powell's role in overseeing a major $2.5 billion renovation project on the Federal Reserve building.

“As Senator Cynthia Lummis said, ”he [Chairman Powell] made a number of factually inaccurate statements to the Committee regarding the Fed's plush private dining room and elevator, skylights, water features, and roof terrace,“ and that 'this is typical of the mismanagement and 'don't bother me' attitude that Chair Powell has always shown.'”

Given his social media comments, Pulte's statement likely won't be the last we hear on the matter.

“How does one spend $2.5 billion on a building renovation? Something smells,” wrote Pulte on X. “Where did the $2.5 Billion go?”

Pulte's barrage continued on July 3, with him posting on X, “It‘s funny to see elite commentators try to justify Powell’s Renovation Scandal, as if spending $2.5 billion on a building renovation isnt corruption or at a minimum, malfeasance.”