After a year-long campaign by the Trump Administration to pressure the Federal Reserve into lowering its interest rates or for its Chair, Jerome Powell, to quit, the U.S. Attorney’s office in the District of Columbia has opened a criminal investigation into Powell.
[time-brightcove not-tgx=”true”]
The investigation, first reported by the New York Times, centers around the central bank’s $2.5 billion renovation of its headquarters—the high cost of which President Donald Trump and his allies have alleged Powell mismanaged and lied to Congress about. U.S. Attorney for D.C. Jeanine Pirro, a Trump appointee and former Fox News host, approved the investigation in November, which includes an inspection of spending records and Powell’s public statements, according to the Times.
Powell, who was appointed as Fed Chair by Trump in 2018, said in a video statement on Sunday that the Fed has “made every effort to keep Congress informed about the renovation project,” which Fed staffers have previously reportedly said came at such a high cost due to tariffs and inflation. Instead, Powell said, the Trump Administration has used the renovations as a pretext to exert more political pressure on the independent central bank. Powell said the Justice Department had served the Fed with grand jury subpoenas.
“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 in the video statement. “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.”
Trump has for months attacked Powell for refusing to bow to his demands to significantly cut interest rates. He has publicly insulted Powell, suggested that he could fire him—which he is not allowed to do without cause—and floated the possibility of suing Powell for “incompetence” over the renovation project.
The Fed is authorized by Congress to set monetary policy independent of the wishes of the President. The central bank is meant instead to strike a balance between keeping inflation at low and stable levels and promoting a strong job market.
Trump told NBC on Sunday that he had no knowledge of the investigation.
“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,” the President said.
A spokesperson for the Justice Department told news outlets that Attorney General Pam Bondi had “instructed her U.S. attorneys to prioritize investigating any abuses of taxpayer dollars.”
Trump told the Times last week that he has decided on his pick to replace Powell as Fed Chair when Powell’s term expires in May, though he did not reveal the name. Among the candidates speculated to be the next Fed Chair is White House National Economic Council Director Kevin Hassett.
Read More: Who Does Trump Want to Be the Next Fed Chair?
Powell’s term as a governor on the Fed Board expires at the end of January 2028.
Renovations
The renovation project, which began in 2022 and is set to be completed in 2027, is meant to expand and modernize the Marriner S. Eccles Building and a building on Constitution Avenue. The Fed has previously said that the buildings have not been “comprehensively renovated” since they were constructed in the 1930s. The project involves removing asbestos and lead contamination, updating the facilities to be compliant with accessibility laws, and upgrading electrical and ventilation systems.
In congressional testimony last June, Powell said the costs of the project had changed over time as the project’s plans evolved. The renovations are around $500 to 700 million over its $1.9 billion budget in 2024, with a current estimated cost of nearly $2.5 billion. The Fed has said the increase in costs is due to differences over time between estimated and actual costs of material, equipment, and labor, and unforeseen conditions, including more asbestos than anticipated and toxic contamination in the soil.
Federal Housing Finance Agency Director Bill Pulte and Office of Management and Budget Director Russ Vought, both ardent Trump allies, have been vocal in criticizing Powell over the project. Trump visited the Federal Reserve last July to inspect the ongoing renovations, during which the President claimed the costs had reached $3.1 billion. Powell corrected Trump, noting that the document Trump was citing included costs for a separate building whose construction was completed in 2020.
An initial version of the Fed’s proposal for the project from 2021 included private elevators and dining rooms, water fountains, and new marble embellishments. But Powell testified before Congress that many of those features had not made it into the latest proposal.
“There’s no V.I.P. dining room, there’s no new marble,” Powell said. “We took down the old marble, we’re putting it back up. We’ll have to use new marble where some of the old marble broke. But there are no special elevators. There’s just old elevators that have been there. There are no new water features, there’s no beehives and there’s no roof terrace gardens.”
The Fed published a virtual tour of the buildings to its website, along with annotations to the 2021 proposal and photographs of the renovations. It reaffirmed Powell’s answers, noting that there is no new VIP dining room, no VIP elevator, no new water features, and that new roof terraces refer to green roofs which are meant to help with stormwater management and building efficiency and are found on other federal government buildings, including the Departments of Justice. It also said that the project will reduce costs for the Fed over time, as the Board has had to lease spaces in commercial office buildings to support its operations in the past.
Pressure on the Fed
Powell has not been the only target of the Trump Administration’s feud with the Fed. Trump tried to fire Fed Governor Lisa Cook in August over allegations of mortgage fraud. Pulte, who publicly made the allegations, also called on the DOJ to investigate Cook. Presidents are only allowed to remove Fed officials “for cause” which has typically been interpreted to mean gross misconduct on the job or a violation of the law.
Cook has denied wrongdoing. Cook’s removal was temporarily blocked by a U.S. District Judge in September while Cook’s legal challenge to her firing proceeds. The Supreme Court will hear arguments in Cook’s case on Jan. 21.
The Supreme Court indicated last May that it would shield Fed officials from Trump’s broader mass firings across independent federal agencies. The justices allowed for Trump to fire two federal officials at independent U.S. labor boards, but noted in their ruling that the implications of their decision did not extend to the Federal Reserve, as it is a “uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States.”
Trump has also directed the DOJ to pursue investigations into other political adversaries, including former F.B.I Director James Comey and New York Attorney General Letitia James. A federal judge threw out the indictments against Comey and James in November, concluding that the prosecutor, Lindsey Halligan, had been unlawfully appointed. The Justice Department also initiated an investigation into Sen. Adam Schiff (D, Calif.) over mortgage fraud allegations, which has not yielded sufficient evidence to present to a federal grand jury. The DOJ is reportedly investigating the handling of the Schiff probe including the potential involvement of people impersonating federal agents, and examining whether grand jury materials in the James case were illegally shared outside authorized channels.
News of the federal probe into Powell has rattled lawmakers, investors, and economists. Sen. Thom Tillis (R, N.C.) posted on X, “If there were any remaining doubt whether advisers within the Trump Administration are actively pushing to end the independence of the Federal Reserve, there should now be none. It is now the independence and credibility of the Department of Justice that are in question.”
Tillis said he would oppose the confirmation of any nominee for the Fed, including Trump’s upcoming nomination for Fed Chair, “until this legal matter is fully resolved.”
Rep. Ro Khanna (D, Calif.) said in a post that the investigation “undermines the rule of law which is the very foundation for American prosperity.”
The news also prompted a selloff in the dollar, and declines in Treasuries and U.S. equities in early Asia trading on Monday. Some investors warned that the escalation could lead to market volatility and a renewed “Sell America” sentiment—a view held by some investors in favor of reducing exposure to U.S. assets due to tariffs and other turbulent Trump Administration policies.
“Any development that raises questions about the Fed’s independence adds uncertainty around US monetary policy,” Gary Tan, portfolio manager at Allspring Global Investments, told Bloomberg. “This is likely to reinforce existing trends of diversification away from the dollar and increase interest in traditional hedges such as gold.”
In a note to clients, Krisha Guha, vice chairman of Evercore ISI, called the development “deeply disturbing.”
“At the time of writing we are still looking to get more information and context,” Guha wrote. “But on the face of it, it looks as if the Administration and the central bank are now in open war.”
The post What to Know About the Investigation Into Jerome Powell appeared first on TIME.
