Criminal investigation against Federal Reserve Chair Jerome Powell

Washington, D.C. – In a dramatic escalation of tensions between the U.S. Federal Reserve and the White House, federal prosecutors have opened a criminal investigation into Federal Reserve Chair Jerome H. Powell, the central bank’s top official. Powell confirmed the probe in a video statement released on Sunday evening, calling the development “unprecedented” and suggesting it stems from his refusal to bow to political pressure from President Donald Trump on interest rate policy.

The investigation marks an extraordinary confrontation between the independent central bank and the executive branch, fueling concerns over the Federal Reserve’s independence. No sitting Fed Chair has ever faced a criminal inquiry in the institution’s 110-year history, and the move has left many economists, lawmakers, and investors stunned—with one prominent financial analyst calling the situation “absolute absurdity.”

Federal Prosecutors Serve Subpoenas to the Fed

According to Powell’s statement, agents of the Department of Justice (DOJ) delivered grand jury subpoenas to the Federal Reserve on Friday, signaling that a criminal indictment of the Fed Chair could be forthcoming. The subpoenas, Powell said, relate to his testimony before the Senate Banking Committee in June of last year, specifically regarding a multi-year project to renovate the Federal Reserve’s historic headquarters and adjacent office buildings in Washington, D.C.

In his video message—posted on the Federal Reserve’s official social media accounts—Powell openly acknowledged the investigation. “Federal prosecutors have opened a criminal investigation of Federal Reserve Chairman Jerome Powell,” he stated. Powell did not detail the exact charges under consideration but implied that the inquiry was linked to allegations of misleading Congress about the costs or details of the Fed’s building renovations.

“On Friday, the Department of Justice served the Federal Reserve with grand jury subpoenas threatening a criminal indictment related to my testimony before the Senate Banking Committee last June,” Powell said. “That testimony concerned, in part, a multi-year project to renovate historic Federal Reserve office buildings.”

Powell’s remarks suggest investigators may be scrutinizing whether he misrepresented facts during that congressional hearing. It was during a June 2023 Senate Banking Committee hearing—part of the Fed Chair’s semiannual monetary policy testimony—that Powell was questioned by lawmakers about an expensive renovation plan for the Fed’s iconic Marriner S. Eccles Building and an adjacent facility. The modernization project, aimed at upgrading the nearly 90-year-old buildings’ infrastructure and security, has drawn scrutiny due to its multibillion-dollar price tag.

While details of the DOJ’s exact focus remain unclear, legal experts say any potential charges could revolve around whether Powell knowingly provided false or misleading testimony about the project’s scope, costs, or contracting process.

Powell Pushes Back at “Unprecedented” Probe

In his extraordinary public response, Jerome Powell defended the Federal Reserve’s integrity and monetary policy independence, strongly implying that the criminal inquiry is politically motivated.

Speaking directly to the camera, the 70-year-old Fed chief struck a defiant tone. “We set interest rates based on our best assessment of what will serve the public, rather than following the preferences of President Donald Trump,” Powell said, framing the DOJ’s probe as retaliation for the central bank’s policy decisions.

Powell noted that he respects the rule of law and accountability for public officials but underscored how extraordinary the situation is. “I have deep respect for the rule of law... No one – certainly not the Chair of the Federal Reserve – is above the law,” Powell said. “But this unprecedented action should be seen in the broader context of the administration’s threats and ongoing pressure.”

A History of Tension Between Trump and Powell

Jerome “Jay” Powell was appointed as Fed Chair by President Trump in February 2018. However, despite having appointed him, Trump grew increasingly critical of Powell as the Fed moved to raise interest rates in 2018 and 2019. Higher interest rates tend to slow economic growth—something Trump vehemently opposed.

Throughout his first term, Trump broke with decades of presidential precedent by repeatedly and publicly pressuring the independent central bank. In 2019, he infamously tweeted:

“My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?” – President Donald Trump

Powell largely refrained from responding to these barbs at the time, emphasizing that the Fed would continue to make decisions based on its dual mandate: maximizing employment and stabilizing prices. In 2019, when asked if he would yield to calls to resign, Powell flatly said he would not step down even if Trump requested it, citing the principle that the Fed Chair can only be removed “for cause.”

Alleged Motivations: Interest Rates and a Renovation Project

The precise focus of the DOJ’s criminal inquiry centers on a Federal Reserve building renovation project. During the June 2023 Senate Banking Committee hearing, some senators quizzed Powell about the Fed’s ongoing renovations of the Marriner S. Eccles Building and the William McChesney Martin Jr. Building.

The project has seen cost estimates rise significantly—reportedly to over $2 billion—due to inflation and expanded scope. Critics in Congress have condemned the price tag, with some dubbing the overhauls the “Fed’s Palace.” Powell assured lawmakers that the renovations were necessary investments and that the Fed was being prudent with its funds, which come from the Fed’s own earnings rather than tax dollars.

Some analysts suspect the investigation is a pretext to apply pressure on Powell. Since early 2022, the Fed has raised its benchmark interest rate to over 5%—the highest level in 22 years—to combat inflation. President Trump has repeatedly argued that rates should be cut to stimulate growth.

Unprecedented Challenge to Federal Reserve Independence

The Federal Reserve is designed to operate independently of direct political influence. While presidents appoint Fed governors, they serve fixed terms and cannot be removed except “for cause”—a legal standard typically interpreted as serious misconduct, not policy disagreement.

If the DOJ’s investigation leads to charges, it could provide a pretext for Powell's removal. “Whether you hate the Fed or not, using the DOJ to threaten the Chair with prison time because rates aren’t low enough is a massive escalation,” one financial commentator warned.

Former Fed officials and bipartisan lawmakers have voiced alarm. Senator Sherrod Brown (D-Ohio), Chairman of the Senate Banking Committee, issued a statement defending Powell: “The Federal Reserve must be allowed to make decisions free of political interference. Any attempt to intimidate or punish Chairman Powell for doing his job is unacceptable and dangerous.”

Economic and Market Fallout

The unprecedented nature of the investigation has left financial markets on edge. Ahead of Monday’s trading session, investors warned of potential volatility. If Powell’s position were threatened, some fear a more politically pliant replacement could unleash a wave of easy money that might reignite inflation or damage the Fed’s long-term credibility.

On social media, the reaction was one of shock. “This is actually insane. We are watching Trump and the Federal Reserve openly declare war on each other,” one viral post noted. Financial experts are concerned that the DOJ probe may itself roil the economy by undermining confidence in the independence of U.S. financial institutions.

White House and DOJ Silent So Far

As of Monday morning, neither the Department of Justice nor the White House has issued an official statement explaining the investigation’s rationale. It remains unclear to what extent President Trump or his close advisors were involved in the decision to pursue a criminal probe of the Fed Chair.

Legal scholars point out that any attempt by a President to direct a criminal investigation against a sitting central bank chief would be an alarming breach of institutional norms. “It crosses a bright red line safeguarding the Fed’s independence,” noted one legal expert.

What Comes Next for Powell and the Fed?

The investigation arrives as the Federal Reserve prepares for its next policy meeting. Powell, whose second term expires in 2026, is expected to continue in his role while the legal process unfolds.

In his Sunday statement, Powell made clear he has no intention of backing down. The Chair underscored that the Fed would not be swayed from making decisions it deems in the best interest of the economy. “We will continue to do our jobs free from political influence,” Powell affirmed.

As this highly unusual standoff unfolds, all eyes will be on both the legal developments and the Fed’s upcoming actions. The outcome could determine the future of the independence of the Federal Reserve.

Frequently Asked Questions (FAQ)

What is the criminal investigation about?
Federal Reserve Chair Jerome Powell revealed that federal prosecutors served the central bank with grand jury subpoenas related to his testimony before the Senate Banking Committee in June 2023 regarding building renovations.

Why is this considered “unprecedented”?
No sitting Federal Reserve Chair has ever faced a criminal investigation. The Fed is designed to be independent of political influence to ensure stable monetary policy.

Can the President fire the Federal Reserve Chair?
The President can only remove a Fed Chair “for cause,” such as legal misconduct or neglect of duty, rather than disagreements over interest rates.

What was the renovation project at the center of this?
The project involves modernization of the Marriner S. Eccles Building and the William McChesney Martin Building, with costs estimated at over $2 billion.