TL;DR
Federal Reserve Chair Jerome Powell says the Justice Department has served subpoenas and threatened criminal charges tied to his June testimony about a $2.5 billion Fed office renovation. Powell framed the action as an attempt to pressure the Fed and undermine its independence, a development that analysts warn could rattle markets and affect borrowing costs.
What happened
Federal Reserve Chair Jerome Powell announced that the Department of Justice has issued subpoenas to the central bank and threatened criminal indictment over his June testimony about a roughly $2.5 billion renovation of two Fed office buildings. In a video statement, Powell called the prospect of charges a pretext aimed at influencing monetary policy decisions rather than a straightforward legal inquiry. The subpoenas follow his rebuttal at a Senate Banking Committee hearing to descriptions of luxury touches in the renovation plan, and to subsequent scrutiny from the Office of Management and Budget. The Justice Department declined to comment on specific cases but said the attorney general had instructed U.S. attorneys to prioritize probes of alleged taxpayer-fund abuse; a U.S. attorney's office spokesperson also declined comment. President Trump said he was unaware of the investigation and denied that it was intended to pressure Powell on interest-rate policy. The episode has revived concerns about political interference with the Fed as Powell’s term approaches its May expiration.
Why it matters
- Federal Reserve independence is central to setting interest rates based on economic data rather than political preferences; officials say the subpoenas risk undermining that independence.
- Heightened political pressure on the Fed could unsettle global investors and weaken confidence in U.S. Treasury securities, with potential ripple effects across financial markets.
- Analysts warn immediate market volatility could follow, potentially pushing up borrowing costs for mortgages and other loans.
- The episode raises questions about whether prosecutorial tools are being used for political ends, fueling debate over the Justice Department’s impartiality.
Key facts
- The subpoenas relate to Powell’s June testimony before the Senate Banking Committee about renovations to two Federal Reserve office buildings.
- The renovation project cited in testimony is reported as roughly $2.5 billion.
- Powell described the threat of criminal charges as a pretext intended to influence Fed policymaking.
- The Justice Department said it cannot comment on particular cases and noted the attorney general instructed U.S. attorneys to prioritize investigating potential abuse of taxpayer funds.
- A spokesperson for the U.S. attorney overseeing the matter declined to comment on ongoing investigations.
- President Trump told NBC News he did not know about the probe and denied any intent to use the investigation to pressure Powell on rates.
- Analyst Krishna Guha at Evercore ISI predicted that the dollar, bonds and stocks could fall in immediate trading after the news.
- Powell’s term as Fed chair expires in May; the administration has signaled it could name a potential successor this month.
- President Trump has moved to remove Fed Governor Lisa Cook; she sued and courts allowed her to remain on the board while the case proceeds, with the Supreme Court scheduled to hear arguments on Jan. 21.
- Sen. Thom Tillis said he would oppose future Fed nominees, including potential replacements for Powell, until the legal matter is resolved.
What to watch next
- Whether the Justice Department will file criminal charges against Powell — not confirmed in the source.
- Market reactions in the days following the subpoenas, including movements in the dollar, Treasuries and stocks.
- Whether the administration formally nominates a replacement for Powell before his term ends in May.
- Outcome of the Supreme Court proceeding on Jan. 21 related to Fed Governor Lisa Cook’s challenge to removal.
Quick glossary
- Subpoena: A legal order requiring a person or organization to provide testimony or produce documents for an investigation or court proceeding.
- Federal Reserve independence: The principle that the central bank should make monetary policy decisions based on economic considerations rather than direct political direction.
- Interest rate: The cost of borrowing money, often set by a central bank as a policy tool to influence inflation and economic activity.
- Department of Justice (DOJ): The U.S. federal agency responsible for law enforcement, legal affairs and overseeing federal prosecutions.
- Treasury securities: Debt instruments issued by the U.S. Treasury to finance government operations; they are widely held by global investors and underpin global financial markets.
Reader FAQ
Has Jerome Powell been indicted?
Not confirmed in the source.
What are the subpoenas about?
They concern Powell’s June testimony to the Senate about the Federal Reserve’s renovation of two office buildings.
Did the Justice Department confirm an investigation?
The DOJ declined to comment on specific cases but said the attorney general instructed U.S. attorneys to prioritize probes into possible misuse of taxpayer funds.
Will Powell be removed or replaced before his term ends?
Not confirmed in the source; his term ends in May and the administration has signaled it could name a potential replacement this month.
Could this affect financial markets?
Analysts cited in the report predicted immediate pressure on the dollar, bonds and stocks; broader effects on borrowing costs were also raised as a concern.
Full Episode Monday, Jan 12 By — Christopher Rugaber, Associated Press Leave your feedback Share WATCH: Powell vows to stand firm against 'unprecedented' Trump administration indictment threats Politics Jan 12,…
Sources
- Powell vows to stand firm against 'unprecedented' administration threats
- Federal Reserve Chair Powell says DOJ has subpoenaed …
- Powell says the Federal Reserve was served DOJ …
- US Fed chair Jerome Powell under criminal investigation
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