Elon Musk has never been one to bite his tongue, especially when it involves how he thinks organizations should run. Lately, the billionaire behind Tesla and SpaceX has set his sights on a new target: the U.S. central bank. It basically started as a few spicy posts on X (formerly Twitter), but it’s spiraled into a full-blown debate about how much manpower is actually needed to manage the nation's money. When Elon Musk criticizes Federal Reserve for being overstaffed, he isn't just complaining about government bloat; he's signaling a major shift in how the Department of Government Efficiency, or DOGE, wants to gut-renovate the American bureaucracy.
Honestly, the numbers are kind of eye-opening. The Federal Reserve System employs roughly 24,000 people. To Musk, that’s an "absurd" figure for an agency whose primary job is setting interest rates and supervising banks. He’s argued that with modern technology, a massive chunk of these roles could be automated or simply deleted.
Why Musk thinks the Fed is "Absurdly Overstaffed"
Musk’s logic usually follows a specific pattern: if a company can’t explain why it needs every single employee, those employees shouldn't be there. He did this at Twitter, where he slashed the workforce by nearly 80% and the site didn't immediately implode. Now, he's trying to apply that same "first principles" engineering logic to the Federal Reserve.
In late 2024 and through 2025, Musk repeatedly called out the Fed’s headcount as a symbol of inefficiency. His beef isn’t just with the total number of bodies in the building; it’s about the cost. While the Fed doesn't technically take taxpayer money—it funds itself through interest on securities—its expenses still eat into the profits it would otherwise send back to the U.S. Treasury. Every dollar spent on a middle manager’s salary at the Fed is a dollar that doesn't go toward reducing the national deficit.
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The DOGE initiative, which Musk led alongside Vivek Ramaswamy before its formal sunsetting in late 2025, put the Fed under a microscope. Musk suggested that the Fed could drastically reduce its headcount by leveraging AI and streamlining its 12 regional banks. Why do we need 12 separate regional headquarters in 2026? In Musk’s view, that’s a legacy system designed for a world where people traveled by steam train, not a world of instant digital transactions.
Jerome Powell Claps Back: Overworked or Overstaffed?
Federal Reserve Chair Jerome Powell hasn't exactly taken this lying down. During congressional hearings in early 2025, Powell stood his ground. He basically told lawmakers that the Fed isn't overstaffed; if anything, his people are overworked.
Powell’s argument is rooted in the complexity of the modern financial system. He points to the 2020 pandemic as proof. When the markets started freezing up, it wasn't an algorithm that saved the day. It was the "knowledge base" of career professionals who had seen crises before. Powell argued that you can't just automate the judgment calls required to prevent a global economic meltdown.
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The Standoff by the Numbers:
- Current Fed Headcount: Approximately 24,000.
- Musk’s Target: Unspecified, but he has hinted at "drastic" reductions.
- The Compromise: The Fed actually announced its own internal plan to trim the workforce by 10% by 2027 through attrition and voluntary buyouts.
- Specific Cuts: The Fed’s Supervision and Regulation unit is looking at a 30% reduction in management layers by the end of 2026.
It seems like Musk’s pressure might be working, even if the Fed won't admit it. By late 2025, the central bank began showing signs of tightening its own belt. Vice Chair for Supervision Michelle Bowman even authored a memo detailing plans to shrink the supervision workforce from 500 down to about 350.
The Tension Between "Efficiency" and "Stability"
You’ve gotta wonder if Musk is right or if he’s just being a disruptor for the sake of it. Critics of the DOGE approach, like those at the Economic Policy Institute, argue that the government isn't a startup. If Tesla has a bad quarter, a few people lose money. If the Federal Reserve has a "bad quarter" because they didn't have enough staff to catch a bank failure, the entire global economy can tank.
There’s also the legal side of things. The Fed is designed to be independent. Musk’s attempt to audit or downsize it through an executive-led "efficiency department" has sparked massive legal pushback. Fourteen states even filed motions claiming Musk’s influence over independent agencies was unconstitutional.
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But Musk isn't deterred. He’s been very vocal about "zombie payments" and redundant roles. He even sent out those famous "what did you do last week?" emails to various federal agencies. Imagine getting that email from Elon Musk while you're just trying to process bank stress tests. It’s a total culture clash.
What This Means for You in 2026
If you’re watching this from the sidelines, it might feel like billionaire theater. But the outcome matters. If Musk successfully forces the Fed to lean out, we could see a more "tech-forward" central bank. That might mean faster decisions and less bureaucracy.
On the flip side, if the "mass firings" lead to a brain drain, the Fed might lose the very experts who know how to navigate the next recession. We’re already seeing some "haphazard" firings in other agencies like the FAA and NASA leading to delays. If that happens at the Fed, it could mess with interest rate timing or bank oversight.
Actionable Insights for the Future:
- Watch the Attrition Rates: If you see a mass exodus of senior Fed economists in the 2026 data, expect more volatility in interest rate predictions. The "institutional memory" is leaving the building.
- Monitor the Regional Banks: There is a real chance the Fed consolidates its 12 regional branches. If you live in a city like St. Louis or Kansas City, this could impact local banking influence and jobs.
- Follow the "DOGE Effect" on Policy: Even though DOGE officially "shuttered" recently, its ideology is baked into the current administration. Expect more pressure on "independent" agencies to justify their budgets.
- AI Integration: Keep an eye on the Fed’s budget for technology. If they aren't hiring people, they are likely buying software. Companies providing financial AI tools to the government are in a prime position right now.
Musk’s criticism has forced a conversation that most people in D.C. didn't want to have. Whether the Fed is actually "absurdly overstaffed" or just "robustly prepared" is still up for debate. But one thing is for sure: the days of the Fed operating in a quiet, unquestioned bubble are over.
To stay ahead of how these staffing changes might impact your own portfolio, you should regularly check the Fed’s quarterly "H.2" releases and the Board of Governors' annual reports. These documents will show if the headcount is actually dropping or if the "efficiency" is just talk. If the Supervision and Regulation unit continues to shrink by 30% as planned through 2026, we’ll see very quickly if the "lean" version of the Fed can still handle the heat.