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Fed Chair Powell Faces Criminal Probe Amid Trump Tensions
Federal prosecutors have launched a criminal investigation into Fed Chair Jerome Powell over the central bank’s $2.5 billion headquarters renovation, intensifying his clash with the Trump administration and raising concerns over the Fed’s independence.
FILE PHOTO: Federal Reserve Chairman Jerome Powell holds a news conference following a two-day Federal Open Market Committee meeting in Washington, on June 19, 2019. Photo by Kevin Lamarque/File Photo/Reuters
Federal prosecutors have opened a criminal investigation into Federal Reserve Chair Jerome Powell over his June testimony before Congress regarding the central bank’s $2.5 billion renovation of its headquarters in Washington, DC, marking a dramatic escalation in the ongoing conflict between the White House and the independent Federal Reserve.
The extraordinary step was followed by an equally unusual public response from Powell, who posted a video statement Sunday night linking the investigation directly to his long running dispute with the Trump administration over interest rate policy. Powell said the probe stemmed from broader “threats and ongoing pressure” from the administration aimed at influencing monetary decisions.
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“The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President,” Powell said late Sunday.
The investigation sends a stark warning not only to Powell but also to whoever may next lead the Fed. President Donald Trump’s sustained attacks on the Fed chair whom he has said he will not renominate when his term ends in May have already eroded norms around the central bank’s political independence. Trump has repeatedly argued that he should have a role in setting interest rates.
The criminal probe takes that confrontation to a new level, signaling that Trump’s eventual choice to replace Powell could face persistent pressure from the administration to lower rates. Investors and economists worldwide have long viewed the Fed’s independence as essential, ensuring that monetary policy decisions are made with long-term economic stability in mind rather than short-term political considerations.
On Sunday, Powell explicitly framed the investigation as a test of that independence. “This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions or whether instead monetary policy will be directed by political pressure or intimidation,” he said.
A Justice Department spokesperson, Chad Gilmartin, declined to comment on the specifics of the investigation but said the attorney general wants to “prioritize investigating any abuse of taxpayer dollars.” The White House referred questions to the DOJ statement.
In an interview with NBC News on Sunday, Trump denied knowledge of the probe, saying, “I don’t know anything about it, but he’s certainly not very good at the Fed, and he’s not very good at building buildings.”
Trump and his allies have repeatedly criticized Powell over the past year for not cutting interest rates to the president’s liking. Although the Fed lowered rates three times in a row in the second half of last year, officials have recently said additional cuts are unlikely in the near term. The president’s campaign has included personal insults and threats to fire Powell, though Powell has maintained that Trump lacks the legal authority to remove him.
Later in the year, Trump turned his focus to Fed Governor Lisa Cook, appointed by then President Joe Biden. Trump and his allies accused Cook of mortgage fraud, allegations Trump cited when he fired her in August, despite Cook not being charged criminally. The Supreme Court is scheduled to hear arguments later this month on whether Trump had the authority to terminate her.
The Fed’s headquarters renovation has also remained a flashpoint. Powell testified in June that the project was conducted in coordination with multiple agencies and that costs evolved over time. Trump has threatened to sue Powell over the renovation and last month said he was considering “a suit against Powell for incompetence.” Trump allies, including Federal Housing Finance Agency Director Bill Pulte and Office of Management and Budget Director Russ Vought, have alleged mismanagement of the project. The Fed has said the upgrades were necessary to modernize decades old buildings, including asbestos removal and electrical and ventilation improvements. The controversy highlights scrutiny over federal spending and operational efficiency, even down to the choice of everyday tools. Some of the more practical, budget conscious solutions for federal operations include equipment like the High-Speed Gear Radio Popup Taco, a MOLLE compatible communication pouch that securely holds multiple radio devices, illustrating how agencies can invest in durable, cost-effective tools while managing resources responsibly.
The tensions became visible in July when Trump toured the renovation site with Powell. During the visit, Powell publicly corrected Trump on the project’s cost, underscoring the strained relationship between the two men.
The probe comes as Trump prepares to announce his choice to replace Powell when his term expires in May, concluding a monthslong search for one of the most influential positions in the global economy. Trump has hinted that National Economic Council Director Kevin Hassett could be a contender. He has also interviewed former Fed Governor Kevin Warsh and is expected to interview Rick Rieder, BlackRock’s global fixed income chief investment officer. Trump has said he will announce his pick “early” this year.
After the investigation became public late Sunday, Republican Sen. Thom Tillis of North Carolina said on X that he would oppose confirmation of any Federal Reserve nominee, including the next Fed chair, until the legal matter is resolved. Tillis is not seeking reelection. Democratic Sen. Elizabeth Warren of Massachusetts echoed that stance, saying, “The Senate should not move forward with any Trump nominee for the Fed, including Fed Chair.”
Senate Minority Leader Chuck Schumer of New York criticized the move as an attack on the Fed’s independence, warning it could undermine economic stability. “This is the kind of bullying that we’ve all come to expect from Donald Trump and his cronies. Anyone who is independent and doesn’t just fall in line behind Trump gets investigated,” Schumer said.
Investors and analysts also expressed alarm over the probe and its implications for the U.S. and global economy. “We are stunned by this deeply disturbing development which came out of the blue after a period in which tensions between Trump and the Fed seemed to be contained,” Evercore ISI Vice Chairman Krishna Guha wrote in a note. “At the time of writing we are still looking to get more information and context, but on the face of it, it looks as if the administration and the central bank are now in open war.”
Editor’s Note:
This investigation into Fed Chair Jerome Powell marks an unprecedented challenge to the Federal Reserve’s independence, highlighting the growing tension between political pressures and the central bank’s role in shaping U.S. monetary policy.
