Treasury Chief Warns Trump: Powell Probe Could Roil Financial Markets
US Treasury Secretary Scott Bessent reportedly expressed strong concerns to President Trump late Sunday about the criminal investigation into Federal Reserve Chair Jerome Powell. Sources familiar with the call told Axios that Bessent warned the probe could create significant problems for financial markets.
Unexpected Investigation Causes Tension
The report emerged as President Trump appeared to distance himself from the investigation into Powell. The probe focuses on allegations that Powell misrepresented renovation costs for the Federal Reserve's Washington D.C. headquarters. US Attorney Jeanine Pirro's office launched the investigation without notifying Treasury officials, top White House staff, or the main Justice Department.
Sources described Bessent as unhappy about the situation. He reportedly told President Trump that the investigation has complicated matters significantly. Bessent had expected Powell to leave his position once Trump nominated a replacement, but now Powell appears determined to stay through the end of his term in May.
Financial Markets React
Bessent's concerns about market stability materialized quickly. On Monday, the dollar dropped while bond yields and gold prices rose. Investors expressed worries about potential political interference in the Federal Reserve's operations.
According to sources, Bessent's objections weren't just about market stability. He reportedly believed the investigation has created an unnecessary mess that could have been avoided with better coordination.
Treasury Responds to Reports
A Treasury spokesperson pushed back against the characterization of tension between Bessent and Trump. The spokesperson told Axios that there is complete alignment between the secretary and the president. The spokesperson emphasized that the sources quoted in the story do not represent Bessent's views.
Sources clarified that Bessent didn't question the need for investigating Powell during his conversation with Trump. He also wasn't defending the Fed chair personally. His concerns focused primarily on the timing and execution of the probe.
Growing Criticism of the Investigation
The Trump administration's decision to investigate Powell drew widespread criticism on Monday. Former Federal Reserve chairs condemned the move, and key Republican Party members expressed concerns about the implications.
Powell himself issued an unusually sharp public response. He called the administration's probe a pretext for gaining presidential influence over interest rate decisions. The Fed chair revealed that the central bank received subpoenas from the Justice Department late Sunday.
Prosecutor Defends Investigation
US Attorney Jeanine Pirro, a Trump ally, defended the investigation in a statement Monday evening. She explained that the Justice Department took action because the Federal Reserve ignored requests to discuss cost overruns in renovation projects at its headquarters.
Pirro emphasized that her office makes decisions based strictly on legal merits. She posted on social media platform X that the investigation follows proper procedures and focuses on factual evidence.
The situation continues to develop as financial markets monitor the potential impact of political tensions on Federal Reserve independence. The investigation into Powell's handling of renovation costs remains active while Treasury officials work to manage market concerns.
