The latest big news in a year already full of big news is that US prosecutors have launched a criminal investigation into Jay Powell over the Federal Reserve’s renovations project. The Fed chair is not taking the escalation quietly.
ASR’s Ebrahim Rahbari says the renewed attempt at undermining the Fed and its chair “highlights the grave governance questions in the US”. Evercore ISI’s Krishna Guha calls it a “deeply disturbing development”. Deutsche Bank’s Jim Reid simply calls it “remarkable stuff”, and it really is.
Why do this now, at a time when there seemed to be an uneasy but market-mollifying truce between the White House and the Fed? Why launch what is probably a doomed probe that risks upsetting markets and virtually ensures that Powell stays on as governor, whoever Trump nominates as the new chair in May?
Behind this latest face-palm moment lurks a familiar, grimly predictable face. From Bloomberg:
Federal Housing Finance Agency Director Bill Pulte was a driving force behind the Trump administration’s decision to subpoena the Federal Reserve, according to people familiar with the matter, intensifying pressure on the central bank as President Donald Trump prepares to pick a new Fed chief.
Some of Trump’s allies were alarmed by the move, fearing a legal fight aimed at Fed Chair Jerome Powell will upset the bond market, some of the people said, requesting anonymity to discuss private talks within the administration. They are also concerned it will discourage Powell from leaving the Fed once his chairmanship ends in May. Powell can remain on as a Fed governor until 2028 and hasn’t yet said whether he intends to leave as is tradition.
The head of the typically staid FHFA has been a vocal force within the administration, pushing controversial housing policy ideas and investigating Trump’s foes for mortgage fraud. Pulte submitted a criminal referral to the DOJ about Fed Governor Lisa Cook that is at the root of Trump’s push to fire her. The Supreme Court is set to take up the Cook case later this month.
Even in an administration hardly known for competence, coherence and subtlety, Pulte stands out. When Treasury Secretary Scott Bessent reportedly threatened to punch Pulte “in your fucking face” and to “fucking beat your ass”, it was mostly notable for how many people both inside and outside the administration were seemingly #TeamBessent.
Pulte was until recently known only as the obscure scion of an American housebuilding empire. He studied broadcast journalism at Northwestern before starting a tiny air conditioner-focused private equity firm with his family’s money, but was ousted from the PulteGroup’s board in 2020.
He first came to Alphaville’s attention for latching on to the meme stock craze, and positioning himself as a kind of Bed Bath & Beyond Jesus. We’d share his tweets on the $BBBY affair but they were all subsequently deleted. However, thanks to Reddit, we still have a video of his “Bill Pulte Fucks” award from a fellow BBBY promoter (warning: includes footage of a man being slapped in the face with a large green dildo).
Pulte then pivoted to memecoins, promoting $ZACK, a project named after the main character from the 1990s TV show Saved By The Bell. $ZACK reached a heady height of $0.11, but is now comatose at $0.0000943. The memecoin’s backer Edward Constantin was later charged with stock market manipulation by the SEC, alongside the likes of “Deity of Dips”, “Mystic Mac”, and “Tommy Coops”.
Of course, this kind of background isn’t disqualifying to the Trump administration. In fact, it’s virtually table stakes.
Pulte cannily donated to various pro-Trump groups, bought a membership to Mar-a-Lago and ingratiated himself with the family. The NYT has reported that his main connection to property is now ownership of five dilapidated mobile-home parks in Florida, but he was still comfortably confirmed as director of the Federal Housing Finance Agency in March.
Pulte has used his position to further his attempts to be a “Little Trump”, as some administration sources termed him to the WSJ. He made himself the chair of Fannie Mae and Freddie Mac — the mortgage giants supervised by the FHFA — and used the perch to dig out documents and launch mortgage fraud cases against the likes of New York Attorney General Letitia James, US Senator Adam Schiff, Congressman Eric Swalwell, and the Fed’s Lisa Cook. He has also allegedly fired FHFA staffers that were investigating one of his friends.
The Government Accountability Office is now investigating whether Pulte has “misused federal authority and resources”. More amusingly — and fittingly for his general “shoot all the time; ask no questions ever” vibe — Reuters has reported that Pulte’s own father and stepmother appear to have done exactly what Pulte claims that Cook et al have done. ProPublica separately reported that three Trump cabinet members have also done so.
Undeterred, Pulte has been a policy cannon of remarkable energy if questionable accuracy, such as with the 50-year mortgage idea President Trump floated last year. This already seems to be DOA, with other people in the administration “furious” with Pulte, according to Politico:
The White House was blindsided by the idea, according to two people familiar with the situation granted anonymity to discuss internal thinking, and is now dealing with a furious backlash from conservative allies, business leaders and lawmakers.
On Saturday evening, Pulte arrived at President Donald Trump’s Palm Beach Golf Club with a roughly 3-by-5 posterboard in hand. A graphic of former President Franklin Roosevelt appeared below “30-year mortgage” and one of Trump below “50-year mortgage.” The headline was “Great American Presidents.”
Roughly 10 minutes later, Trump posted the image to Truth Social, according to one of the people familiar, who was with the president at the time.
Almost immediately, aides were fielding angry phone calls from those who thought the idea — which would endorse a 50 year payback period for a mortgage — was both bad politics and bad policy, a move that could raise housing costs in the long run, the person said.
Speaking of simplistic posters, these seem to have become something of a supersized calling card for Pulte. From a WSJ profile last year:
Inside the White House, Pulte’s idiosyncrasies have earned him some detractors. His penchant for carrying poster boards into meetings has become so well-known that when he shows up without one, administration aides ask where his boards are, according to administration officials.
Advisers for companies who have prepped executives for meetings with Pulte have warned them that the interactions could be unusual, according to people involved in such discussions. Some compared Pulte’s tendency to go off-topic in private meetings to Trump’s.
As additional evidence of our chaos agent theory, the WSJ’s article also includes a delightful story of how Pulte managed to oust a US attorney who hadn’t been able to build a case against Letitia James by telling Trump that he had been nominated by two Democratic senators. Trump’s own chief of staff Susie Wiles reportedly told Trump this wasn’t true — the US attorney in question was a White House pick — but out he went. His replacement has not gone well.
Then there’s the push to privatise Fannie and Freddie (which most experts say is wildly premature); the recent proposed ban on institutional investors buying single-family homes; and the order that Fannie and Freddie buy $200bn worth of MBS — all of which smell like Pulte’s bright ideas.
Interestingly, it looks like Pulte might have gone rogue in the latest tilt at the Fed. Bloomberg reported that senior Trump aides knew nothing about the subpoenas until Powell was served on Friday evening, and Trump himself told NBC that he knew about it on Sunday.
Raymond James’ policy analysts Ed Mills and Ellen Ehrnrooth speculate in a note that Pulte could end up losing his job as a result:
Press reports indicate that FHFA Chair, Bill Pulte, has been a driving force behind these subpoenas. If true, the backlash from this action could be the final straw for him keeping his role as FHFA Director (especially given multiple reports that he was almost fired previously) . . . If Pulte is removed at FHFA, that would have impact on housing and credit bureau names.
This seems a stretch to Alphaville, purely because Trump has many times demonstrated that he prizes loyalty more than competence (as well as a certain appreciation for chaos).
Nor are markets likely to puke at this, despite it unambiguously being a silly move. The criminal probe into the Federal Reserve’s $2.5bn renovation project looks like exceptionally weak sauce, but it will probably strengthen Powell’s resolve to stay on as a kind of “shadow chair” through the Trump presidency, and make more rate cuts somewhat less likely.
However, Bessent might soon be asking Pulte to step outside again.
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