Federal Reserve Chair Jerome Powell this weekend said that the Justice Department's investigation into him is a major test of the central bank's independence, which has been the norm since 1951. CBS News' Lindsey Reiser explains how the Fed became independent.

Washington

Federal Reserve Chair Jerome Powell has stated that the Trump administration is subpoenaing the agency for records related to renovations at its headquarters, denying any wrongdoing and affirming his intention to serve until his term ends. The investigation is seen as a significant test of the Federal Reserve's independence, which has evolved since its founding in 1914, with a major turning point in 1951 following the Treasury-Fed Accord.

Lawmakers from both parties have criticized the investigation, with some calling it an abuse of power and others vowing not to support future Fed nominees until the issue is resolved. The probe centers on Powell's congressional testimony about the renovations, which was part of a broader hearing on monetary policy, and is now being used as the basis for a criminal investigation.

How the Federal Reserve gained its independence

And returning to one of our top stories, Federal Reserve Chair Jerome Powell this weekend said the Trump administration is subpoenaing the agency for records related to the renovation of its headquarters. Powell denied any wrongdoing related to the renovations of the building and said he will stay as Federal Reserve Chair until his term ends on May 15th. He stated that this investigation is a major test of the Fed's independence, which has been the norm since 1951. That wasn't always the case, though. Despite the intention for the Federal Reserve to be independent from its creation in 1914 to 1951, it essentially acted as a branch of the Treasury Department. Treasury leadership served on the Federal Reserve Board and the Fed even met inside the Treasury Building until the late 1930s, according to the Federal Reserve Richmond Branch's history of the department. During World War I, the Federal Reserve's mission was to give banks financing to purchase Treasury war bonds. During the Great Depression, Congress ordered the Fed to assist the Treasury Department with its move away from the gold standard. More independence came during a battle over Treasury bond prices in 1951. The Fed allowed the price of bonds to drop after years of internally pushing back over the Treasury Department's pricing policy. In response, President Truman summoned the entire Federal Open Market Committee to the White House to pressure it to change policy, but the members didn't back down. Eventually, a compromise was reached, the 1951 Treasury-Fed Accord, which is widely seen as the start of the modern era of Fed independence. That independence was tested during the Nixon era. After public and private White House pressure, the Fed pursued expansionary monetary policy, such as making borrowing cheaper ahead of the 1972 election. Despite internal objections, economists at the Fed have cited this decision as helping push the country's inflation to a level that took a decade to correct. Beginning in 1979, then-Fed Chair Paul Volcker cemented the Fed's independence by pushing against intense White House pressure and letting interest rates increase in an effort to tame inflation. Neither President Carter nor Reagan challenged Volcker's authority, which restored the Fed's independent control of monetary policy. CBS News Congressional Correspondent Nicole Killian joins us now. Nicole, we know some Republican senators are speaking out against this investigation into Powell. What are you hearing? Well, I think to be clear, it's both Republicans and Democrats. You know, obviously Democrats are pretty critical, suggesting that this is bullying and abuse of power on the part of the administration, but there are some pretty striking statements from Republicans as well, most notably Tom Tillis, who has said that he will not support any Fed appointee or nominee that the administration puts forth going forward until this issue is resolved. He spoke to reporters a short time ago calling this whole situation involving the Fed chair amateur hour on the part of the administration. We also heard from the chair of the House Financial Services Committee, French Hill, earlier today, calling this an unnecessary distraction. GOP leaders, for their part, both Speaker Mike Johnson and John Thune, though, have been putting some distance between themselves and the administration's actions here with the speaker telling reporters that he believes the investigation should be allowed to play out, and also leader Thune telling reporters, you know, he hopes that the matter is quickly resolved so that there are no signs of any political interference. This investigation appears to hinge on Powell's congressional testimony from last June. Why were lawmakers looking into those ongoing renovations at the Fed? Well, keep in mind, this was a broader hearing. It was not strictly focused on the renovations per se. It's just something that came up in the course of the hearing as the Fed chair was testifying about monetary policy. It's pretty routine for the Fed chair to do that and deliver a semi-annual report to Congress. But in the context of that, you know, there was a pretty robust back and forth between the Fed chair at the time and the chair of the Senate Banking Committee, Tim Scott, where he was pressed on these renovations at the Fed. Chairman Scott calling these renovations lavish and really kind of pressing the Fed chair on this. So this is kind of where this testimony originated from that the administration is now pointing to as the basis for its criminal investigation. Nicole Killian, thank you.

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