Housing finance regulator Bill Pulte met recently with President Donald Trump at Mar-a-Lago and shared a prop resembling a “wanted poster” he had made up featuring Federal Reserve Chair Jerome H. Powell, according to a person with knowledge of the meeting.
Pulte laid out scenarios that included investigating Powell and Trump liked the idea, the person said.
It’s not clear how the inquiry into Powell was approved, but a Justice Department official said it launched a criminal probe into Powell in November and Pulte was not a factor in the inquiry. The extraordinary investigation of a sitting Fed chairman was disclosed by Powell himself late Sunday.
The president on Sunday denied having any prior knowledge of the investigation. White House officials, including press secretary Karoline Leavitt, denied that Trump directed prosecutors to investigate Powell. Trump said in a news conference at Mar-a-Lago on Dec. 29, however, that he was considering legal action against Powell. And as far back as a public appearance last July, Trump raised concerns that the cost of a Fed renovation project was ballooning while touring the construction site with Powell.
And Pulte, an outspoken critic of Powellwho oversees the Federal Housing Finance Agency that is pivotal to the mortgage market, also denied any involvement in the probe on Bloomberg TV on Monday. A request for comment from Pulte was not returned.
Trump’s exchange with Pulte coincided with requests for information in a probe already underway by the U.S. attorney’s office in the District of Columbia, according to a person briefed on the situation.
Powell has characterized the probe as an unprecedented attack intended to undermine the central bank’s independence. Trump has spent the past year arguing that the central bank should sharply cut interest rates, while contemplating openly that he might fire Powell, whom he nominated during his first term in 2017.
Prosecutors aimed to reconcile apparent discrepancies between the renovation contractors’ statements in the filings to the National Capital Planning Commission with Powell’s testimony to Congress about the renovations.
U.S. Attorney Jeanine Pirro’s office first sent an email to Fed staff in December to request a meeting or phone conversation. Receiving no response, the staff sent another email about 10 days later, the official said, speaking on the condition of anonymity to discuss an ongoing investigation. The Fed had not responded as of last Thursday, and subpoenas authorized by a grand jury were served to the Fed the next day, the official said.
“There’s a total ignoring or dismissal or rebuffing of a simple request to have a conversation,” the official said, describing the thinking that led to the subpoenas.
The Federal Reserve received two emails from a Justice official, but there was no sense of urgency to the messages. And the messages to the Fed didn’t mention a criminal investigation, according to a person familiar with the emails who was not authorized to speak about the correspondence.
The escalation marked the most significant confrontation yet between Trump and Powell, whose relationship has been strained for years by Trump’s repeated attacks on the Fed’s interest-rate decisions and Powell’s leadership of the central bank.
Treasury Secretary Scott Bessent months ago had worked to quell Pulte’s push to go after Powell, but he believed the matter had been resolved, and did not realize there had been a renewed effort by Pulte in recent weeks to do so, said a person close to Bessent, speaking on the condition of anonymity to discuss the sensitive situation.
When the Justice Department served Powell on Friday, Bessent was angry, according to a person close to the treasury secretary said.
“Of course he tried to stop it,” the person said of Bessent’s earlier efforts to block Pulte’s anti-Powell crusade.
A Treasury Department official said there was “zero daylight between Secretary Bessent and President Trump,” and that sources do not speak for the treasury secretary, referring further questions to the Department of Justice.
And White House communications director Steven Cheung said in a statement that Pulte is “one of the President’s most loyal and important advisors who is doing a great job leading FHFA.”
“Efforts by the Fake News to sow division inside of President Trump’s all-star administration will not work and are a pathetic attempt to distract away from all of the victories being delivered for the American people,” Cheung added.
News of the probe reverberated immediately, rattling markets in early trading on Monday and pushing up the price of gold, which tends to increase during periods of political and economic instability. But the stock market ended up for the day, in part because investors believed the administration would likely back off its probe, market analysts said.
Several former Fed officials said they believed the criminal probe would likely backfire, potentially leading Powell to consider remaining on the Fed board past the expiration of his term as chair in May, to deprive the president of a crucial seat on the seven-member board.
After Bessent learned of the investigation into Powell, the treasury secretary made his displeasure known to Trump, telling the president that Powell was now unlikely to give up his position. The president, meanwhile, shrugged off the concern, the person said.
“The odds are vanishingly small in light of yesterday’s announcement that he chooses to vacate his seat one moment earlier than absolutely necessary under the law,” said David Wilcox, a senior fellow at the Peterson Institute for International Economics and the director of U.S. economic research at Bloomberg Economics. “I think it was an own goal on the part of the administration.”
In a sign that the probe could backfire against Trump, at least three key Senate Republicans spoke out against the matter. In a post on X, Sen. Thom Tillis (R-North Carolina) said he would oppose any nomination for Powell’s successor until the legal matter is resolved. “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,” he said.
Tillis’s concerns were significant because he holds an effective veto on the Senate Banking Committee, where Republicans have a narrow edge. His concerns were echoed to varying degrees by Sen. Lisa Murkowski (R-Alaska) and Kevin Cramer (R-North Dakota).
Some allies of Kevin Hassett, a top economic adviser to Trump seen as a front-runner to replace Powell as chair of the Fed, now believe his prospects have been harmed. “The Senate’s not going to give Trump a Fed director he can control after he went after Powell,” said a person close to the White House who was backing Hassett for the position but not authorized to speak openly.
The investigation originated from criticism of the central bank’s $2.5 billion renovation of its headquarters along the National Mall, which has been fanned by Pulte, who has led the charge to oust Powell. Pulte’s agency also played a central role in accusations of mortgage fraud against Sen. Adam Schiff (D-California) and New York Attorney General Letitia James (D), two high-profile Trump adversaries.
When the Federal Reserve submitted its final proposal for the first large-scale renovation of its headquarters since it was built in the 1930s, the contractors leading the project used lofty terms to describe the “vegetated roofs,” “garden terrace,” “private dining rooms” and an extension of “the Governors’ private elevator,” as well as fountains and marble touches. Later, the project’s cost ran over budget, and those renovation features became fodder for Trump’s allies, including Pulte, to attack Powell for building a marble palace that they said would rival Versailles.
In a video statement posted to its website Sunday, the Federal Reserve confirmed it had received subpoenas relating to Powell’s Senate testimony about renovations to its headquarters. In response, Powell accused the administration of using criminal proceedings to pressure the central bank to lower interest rates, a challenge to its independence.
“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. The forceful pushback came after years of generally avoidingdirectly responding to the president’s attacks even when some top officials within the Fed system pushed for a more aggressive posture, The Washington Post has previously reported.
In response to the probe, Democrats accused administration officials of weaponizing the Justice Department to undercut the central bank’s independence.
Sen. Elizabeth Warren (Massachusetts), the top Democrat on the Senate Budget Committee, accused Trump of trying to remove Powell and install another “sock puppet to complete his corrupt takeover of America’s central bank.”
Isaac Arnsdorf, Rachel Siegel, Leo Sands and Amy B Wang contributed to this report.
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