By Howard Schneider and Ann Saphir
WASHINGTON, Jan 11 () – The administration of Donald Trump has warned of charging Federal Reserve Chair Jerome Powell with a crime due to his testimony before Congress last summer regarding a Fed construction project, an accusation that Powell described as a “justification” for seeking greater control over the central bank and its monetary policies.
The ongoing push by President Donald Trump to gain more influence over the Federal Reserve led to immediate consequences, as Republican Senator Thom Tillis, a member of the Senate Banking Committee responsible for reviewing presidential candidates for the Fed, stated on X that the potential indictment raises concerns about the Department of Justice’s “independence and credibility.” Tillis mentioned he would oppose any Trump nominees for the Fed, including the president’s upcoming selection for a new chair, “until this legal issue is completely addressed.”
Powell disclosed the subpoenas and warnings in a statement released on Sunday night.
On Friday, the Department of Justice issued grand jury subpoenas to the Federal Reserve, indicating a potential criminal indictment concerning my testimony before the Senate Banking Committee in June,” Powell stated. “I have significant respect for the rule of law and for accountability within our democracy. No one—especially not the chair of the Federal Reserve—is above the law.
“But this extraordinary move must be viewed within the larger framework of the administration’s warnings and continuous efforts” to reduce interest rates and, more generally, to exert more influence over the Federal Reserve, he stated.
This emerging danger has nothing to do with my testimony from last June or the upgrading of the Federal Reserve’s facilities. It is also unrelated to Congress’s supervisory function…These are just excuses. The risk of legal action stems from the Federal Reserve determining interest rates according to our most accurate judgment of what benefits the public, rather than adhering to the President’s desires.
Trump informed NBC News on Sunday that he was unaware of the Justice Department’s activities. “I don’t know anything about it, but he certainly isn’t doing a good job at the Fed, and he isn’t doing well with construction,” Trump stated.
A representative from the Department of Justice refused to provide a statement regarding the case but stated: “The Attorney General has directed her U.S. Attorneys to focus on examining any misuse of public funds.”
The Powell Inquiry was a ‘low point’ in Trump’s presidency.
Trump has been pushing the Federal Reserve to significantly lower interest rates since returning to office in January, accusing its policies of hindering economic growth and even suggesting the possibility of dismissing Powell, although there are legal safeguards meant to protect the Fed chair from being removed. He is also attempting to remove Fed Governor Lisa Cook, a case that is currently under review by the Supreme Court.
The autonomy of central banks, particularly in determining interest rates to manage inflation, is seen as a fundamental principle of strong economic policy, shielding monetary officials from immediate political pressures and enabling them to concentrate on long-term initiatives to maintain price stability.
The investigation of Powell “marks a significant low point in Trump’s presidency and a dark chapter in the history of American central banking,” stated Peter Conti-Brown, a Federal Reserve historian from the University of Pennsylvania. “Congress did not establish the Fed to mirror the president’s daily mood swings, and since the Fed has resisted President Trump’s attempts to undermine it, he is now employing the full force of American criminal law against its Chair.”
Financial markets showed minimal shifts in short-term expectations regarding Federal Reserve policy following the conclusion of Powell’s tenure as chair in May, as rate futures still anticipate two interest rate reductions for the year.
The U.S. dollar declined and equity futures dropped following the latest developments, although the changes remained fairly limited at this point. [MKTS/GLOB]
Recent Actions by the Trump Administration Signal a Critical Moment?
The legal orders and Powell’s statement signal a significant change in the long-standing conflict between Trump and Powell. Trump appointed Powell to the chair position during his first term, but soon lost favor with him, expressing his disapproval through various criticisms and warnings.
Powell, on his part, had mostly avoided commenting on the president’s actions or remarks, instead recognizing that top executives frequently share views on numerous topics, and vowing, as he did in the Sunday statement, to “keep doing the job the Senate approved me for.”
Nevertheless, the Trump administration’s recent actions, occurring just months before Powell’s chairmanship ends in May, seem to have signified a pivotal moment, with Powell explicitly blaming the administration for attempting to use the judicial system to push the Fed to reduce interest rates more rapidly and extensively than the central bank’s group of 19 policymakers believes is suitable.
Although Powell’s tenure as chair concludes in May, he is eligible to remain on the Fed board until January 31, 2028, preventing the president from making another Fed appointment—Trump’s fourth out of seven members—until close to the end of his term.
The White House started expressing disapproval last year regarding the Federal Reserve’s $2.5 billion upgrade of two structures in Washington, calling it excessively expensive and showy.
Some analysts at the time referred to it as a cover for the Trump administration’s efforts to push for reduced interest rates, but Powell did not. The Federal Reserve chair instead published thorough explanations of the work on the central bank’s website and sent letters to members of the Trump administration with additional context.
In June, during Powell’s regular semi-annual testimony regarding monetary policy before Congress, he was frequently questioned about the project, which he described as essential upgrades to obsolete infrastructure. In July, Trump made an unusual presidential visit to the location, and Powell provided him with a tour.
(Contributed by Howard Schneider and Ann Saphier; Further reporting by Trevor Hunnicutt and Michael Derby; Edited by Neil Fullick and Shri Navaratnam)