Federal prosecutors have initiated an unprecedented criminal investigation targeting Federal Reserve Chair Jerome Powell, marking an extraordinary escalation in tensions between the Trump administration and America’s central banking system. Powell confirmed the probe in a dramatic video statement released Sunday evening, revealing that the Department of Justice served grand jury subpoenas threatening criminal indictment. It is unprecedented in modern history that the Fed’s chairman could face criminal charges while in office.
The Justice Department asks Powell about testimony on building renovation
The crime investigation is linked to the testimony of Powell before Congress about the $2.5 billion renovation of the headquarters of the Federal Reserve, which has sparked a lot of concerns among the Republican Congressmen. This is because Powell had testified before the Senate Banking Committee in June of the previous year about the renovation process, which had encountered significant cost overruns.
The Department of Justice has served the Fed with grand jury subpoenas on Friday about the possible indictment that is linked to the testimony of Powell about the renovation costs. Rep. Anna Paulina Luna, a Republican from the state of Florida, at first referred Powell to the Department of Justice on charges of perjury and false statements in relation to his statements on the renovation project.
A U.S. Attorney’s Office review is in process
Rep. Luna charged Powell with giving false testimony to Congress and giving false statements in official communication to top administration officials, including Office of Management and Budget Director Russell Vought. The probe is currently under review by the U.S. Attorney’s Office in the District of Columbia, headed by Jeanine Pirro, ex-host of the Fox News Channel, appointed by President Donald Trump.
Powell resists Trump’s pressure regarding independence concerns
Powell has already denied the suggestion of a link between oversight and the inquiry and has branded the inquiry “political intimidation.” According to Powell’s judgment, the current inquiry has arisen because the Fed has failed to cut interest rates as much and as widely as President Trump has done since he came into power. According to Powell, the result of the inquiry will decide whether the Fed will continue to set interest rates as per the economy or will succumb to intimidation.
Trump has also been disapproving of the approach to maintain high interest rates, calling the Fed officials ‘boneheads’ and even comparing them to a golfer who was not good at putting. Trump has also been quite vocal about his intentions to replace the current Fed Chairman, Powell, whose term ends in May. The leading candidates for the post of Fed Chairman, following the resignation of Powell, are the former Governor of the Fed, Kevin Warsh, and the current Director of the National Economic Council, Kevin Hassett.
Congressional Republicans split on threats to the independence of the Fed
Some senior Republicans have shown concern over the investigation, and the most important figure in the opposition against Trump’s attempt at weakening the independence of the Fed is actually the Banking Committee’s own Thom Tillis. Tillis declared that “there should be no remaining ambiguity about the administration’s intention to abrogate the independence of the Fed” and that he would “oppose every nominee to the Fed until this inquiry is over.”
Market analysts have forecasted that there will be turbulence in the market because of this attack on the history of the independence of central banks. The term of Powell as the head of the Fed will expire in May 2026, but he will stay as a member of the Board of Governors until January 2028, so he can be involved in the Fed, but not as the head of the Fed. This investigation is the culmination of the work of Trump, who chose Powell for the first time as the head of the Fed in 2017.
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