Former Treasury Secretary Larry Summers on Trump's Pressure on the Fed and the Threat to US Economy

Larry Summers expresses disappointment that corporations haven't condemned President Trump's pressure on the Federal Reserve, which he believes poses a "profound threat" to the US economy. Summers has confidence in Jerome Powell's integrity and doesn't think he's acting under political pressure. He criticizes Trump's use of law enforcement and investigation to target his adversaries, including Fed Governor Lisa Cook. The erosion of US norms could lead to the "Argentinization" of the US, which Summers believes would have significant long-term economic implications.

Former US Treasury Secretary Larry Summers has expressed disappointment that corporations have not condemned President Trump's pressure on the Federal Reserve, which he believes poses a "profound threat" to the US economy. Summers, who served under the Clinton administration, has confidence in Federal Reserve Chair Jerome Powell's integrity and does not believe he is acting under political pressure [1].

Summers criticized Trump's use of law enforcement and investigation to target his adversaries, including Federal Reserve Governor Lisa Cook. He believes that the erosion of US norms could lead to the "Argentinization" of the US, which would have significant long-term economic implications [1].

Powell is currently under fire for appearing to cave to political pressure in his Jackson Hole speech on August 25, 2023. Critics argue that he made a sudden shift from a hawkish stance to a dovish one, potentially due to Trump's pressure to lower borrowing costs [2].

However, Summers believes that Powell's decision was based on economic data rather than political pressure. He pointed out that Powell had three potential avenues to take in his speech, all of which would have left him open to charges of political motivation. Ultimately, Powell indicated that the time to adjust policy was likely approaching due to worrying signs of weakness in the labor market [2].

Summers' concerns highlight the delicate balance between political pressure and independent monetary policy. As the US economy continues to evolve, it will be crucial for the Federal Reserve to maintain its independence and focus on its dual mandate of maximum employment and stable prices.

References:
[1] https://finance.yahoo.com/video/larry-summers-disappointed-corporations-wont-191500518.html
[2] https://www.reuters.com/markets/us/powell-plays-best-hand-he-can-politically-stacked-deck-2025-08-25/