In a dramatic escalation of tensions between the US central bank and the White House, Federal Reserve Chair Jerome Powell disclosed on Sunday that the Department of Justice has served the Fed with subpoenas and threatened a criminal indictment. The move centres on Powell's testimony this summer regarding the central bank's multi-billion dollar building renovations, a project previously criticised by President Donald Trump.
Unprecedented Legal Threat Over Renovation Details
The subpoena specifically relates to Powell's June appearance before the Senate Banking Committee. At that hearing, the Fed Chair addressed questions about the Fed's $2.5 billion renovation project for two office buildings. Republican Chairman Tim Scott of South Carolina had described the plans as including "rooftop terraces, custom elevators that open into VIP dining rooms, white marble finishes, and even a private art collection."
Powell firmly disputed these details in his testimony, stating, "there's no new marble... there are no special elevators," and clarified that some items were "not in the current plan." However, in July, Russell Vought, director of the Office of Management and Budget, sent a letter to Powell suggesting his testimony "raises serious questions about the project's compliance" with earlier approved plans.
In a sharp departure from his typically restrained response to presidential criticism, Powell issued a video statement on Sunday. He bluntly characterised the legal threat as mere "pretexts" designed to erode the Federal Reserve's cherished independence in setting monetary policy. "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," Powell asserted.
A Broader Battle Over Central Bank Autonomy
This legal action marks an unprecedented intensification in President Trump's long-running battle with the independent Federal Reserve. Trump has repeatedly attacked the central bank for not cutting its key interest rate as aggressively as he would prefer. The Fed has previously attempted to placate the administration by scaling back certain policies, like efforts to consider climate change's impact on banking, which the White House opposed.
In a brief interview with NBC News on Sunday, President Trump insisted he had no knowledge of the investigation into Powell. When asked if the probe was meant to pressure the Fed Chair on interest rates, Trump replied, "No. I wouldn't even think of doing it that way."
The Justice Department, in its own statement, declined to comment on any specific case but noted that Attorney General Pam Bondi had "instructed her US Attorneys to prioritize investigating any abuse of tax payer dollars." A spokesperson for U.S. Attorney Jeanine Pirro's office also declined to comment on ongoing investigations.
Political Repercussions and Institutional Credibility at Stake
The potential indictment has already triggered significant political concern. One Republican senator has vowed to oppose any future nominee to the central bank, including a potential replacement for Powell, until "this legal matter is fully resolved." Powell's term as chair concludes in May, and Trump administration officials have hinted that a potential successor could be named this month.
North Carolina Senator Thom Tillis, a member of the Banking Committee that oversees Fed nominations, issued a stark warning. "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. "It is now the independence and credibility of the Department of Justice that are in question."
This incident is part of a broader pattern where perceived adversaries of the president have faced criminal investigation by the Trump administration's Justice Department, a departure from generations of precedent designed to keep prosecutorial decisions independent of the White House. In a related unprecedented move, Trump has also sought to fire Fed Governor Lisa Cook, who is currently suing to retain her position. The Supreme Court is scheduled to hear arguments in that case on January 21.
