Banking and Finance Law Daily Wrap Up, FEDERAL RESERVE SYSTEM—Key Senate Democrats charge White House with Fed interference, hiding costs of tariffs, (Feb 25, 2026)

By Suzanne Cosgrove

The legislators are demanding National Economic Council Director Kevin Hassett explain why he said Fed staff should be “disciplined” for a negative report on tariffs.

In a letter dated Feb. 24, 2026, sent to White House advisor Kevin Hassett, the Director of the National Economic Council, a group of Democatic senators demanded that Hassett retract his suggestion that civil servants be punished for demonstrating the cost of the Trump tariffs to U.S. businesses and consumers. The senators, led by Sen. Angela Alsobrooks (D-Md.), Senate Minority Leader Chuck Schumer (D-N.Y.), and Senate Banking Committee Ranking Member Elizabeth Warren (D-Mass.), requested answers to four questions regarding the protection of career civil servants, the independence of the Federal Reserve, and whether the White House has interfered with or pressured agencies responsible for publishing other economic data.

“We are deeply troubled with your public suggestion on February 18, 2026, that Federal Reserve officials be disciplined for an evidence-based study which concluded that American consumers and businesses are bearing the economic burden of President Trump’s chaotic tariffs,” they wrote.

Study stirs debate. The report behind the controversy, “Who Is Paying for the 2025 U.S. Tariffs?” was issued by the Federal Reserve Bank of New York on February 12, 2026. The New York Fed studied tariff price increases in 2025 and concluded that “90 percent of the tariffs’ economic burden fell on U.S. firms and consumers.”

The report aggregates data from the U.S. Census Bureau, the U.S. International Trade Commission and the Federal Reserve. It states that most of the cost increases from Trump’s tariffs are borne by the U.S. importers -- not by foreign exporters -- which are then passed down supply chains to consumers.

In a subsequent interview on CNBC’s Squawk Box, Hassett called the study “an embarrassment,” and said Fed researchers associated with it should be disciplined.

30 days to respond. “Your comments undermine the Federal Reserve’s independent research, call into question the integrity of its future data, and suggest the Trump Administration is more interested in prohibiting Americans from learning the cost of its tariff regime than meaningfully lowering costs for American families,” the senators said.

The senators demanded Hassett respond to their letter within 30 days. Specifically, the questions they posed raised concerns about improper White House influence on Fed economic analyses:

• Do you agree that your comments were inappropriate and commit that the NEC/White House will not use its platform to influence objective economic data from the Federal Reserve Board, regional reserve banks, or other agencies?

• Do you believe Federal Reserve staff, either at the Federal Reserve Board or in the regional reserve banks, should be disciplined for the economic analyses they produce?

• Has the White House interfered with or pressured agencies responsible for publishing other economic data—such as the Bureau of Labor Statistics—to produce data in alignment with the White House’s desired policy outcomes?

• Are your recent comments consistent with your September 7, 2025, statement on Face the Nation that “the Federal Reserve’s independence is really, really important… monetary policy should be fully independent of political influence?” If so, how?

LegislativeActivity: BankingOperations FederalReserveSystem FinancialStability PrudentialRegulation OversightInvestigations