The Trump administration’s legal threat against Federal Reserve Board Chairman Jerome Powell is as unprecedented as it is ham-fisted. Powell revealed in a video statement Sunday that the Justice Department had opened a criminal investigation into him over the renovations of the Washington headquarters of the independent agency he runs. Although everyone can see through the stated reason for the lawsuit to the president’s obsession with interest rates — which Powell articulated sharply — it’s startling that the Justice Department is willing to risk colossal damage to the U.S. economy to further President Donald Trump’s agenda. Especially considering it still might not even accomplish the latter.
As a criminal matter, the investigation makes little sense. Federal prosecutors are examining whether Powell lied to Congress about the scope of the project or did not obtain the proper permits to undertake the $2.5 billion renovations, The Wall Street Journal reported. The project has run over budget, but the Fed has been transparent about where the additional costs have come from, and which features from an earlier proposal that drew criticism had been nixed. It’s hard to see how benefit Powell could have benefited from this situation.
As a criminal matter, the investigation makes little sense.
Trump said in an interview Sunday with NBC News that he’d had no role in the criminal investigation of Powell. “I don’t know anything about it, but he’s certainly not very good at the Fed, and he’s not very good at building buildings,” he said.
The Justice Department’s involvement makes slightly more sense when the source of the probe is considered. The New York Times reported that the “inquiry, which includes an analysis of Mr. Powell’s public statements and an examination of spending records, was approved in November by Jeanine Pirro, a longtime ally of President Trump” who was appointed U.S. attorney for the District of Columbia last year.
Pirro is a former Fox News host and well-practiced conspiracy theorist. Would she greenlight a political fishing expedition? As former U.S. attorney Barbara McQuade noted last year, Pirro “has plenty of what Trump seems to prize most — loyalty.” McQuade also warned: “Pirro’s history as a strident Trump booster would absolutely and obviously undermine public confidence in the soundness of her discretionary decision-making in the high-profile cases that are likely to come across her desk.”
But in escalating this matter to the point that the normally staid Powell was motivated to respond with a defiant public statement, Pirro’s office has already made a mess of its hatchet job. Until lawyers formally try to obtain an indictment, this matter is going to linger in a way that lessens the pressure on Powell. So far, Sens. Thom Tillis of North Carolina, Elizabeth Warren of Massachusetts and Lisa Murkowski of Alaska have all said they won’t vote for anyFederal Reserve nominees , including a next chair, until the investigation against Powell has ended.
But the timing of the investigation remains baffling. For one thing, Powell’s four-year term as Fed chair is due to end in May; after months of insults and criticisms of Powell by the president, there’s no chance that Trump, who first appointed Powell in 2017, does so again. When Powell’s term expires, he’ll still have two years left in his time as a member of the Fed’s Board of Governors. Before last week, it seemed most likely Powell would have followed past precedent and resigned from the board entirely. That’s less certain now, as doing so would leave another seat open for Trump to fill.
Pirro’s office has already made a mess of its hatchet job.
Bear in mind, too, that the Supreme Court is set to hear arguments in the case of Lisa Cook, a member of the Board of Governors whom Trump attempted to fire last year. Fed governors are meant to be insulated from political whims and, as my colleague Jordan Rubin has noted, the justices, noting the historical independence of the agency, have allowed Cook to keep her seat as they consider her case. The intensified spotlight on the pressure campaign against Powell could make the justices less partial to arguments to end the Federal Reserve’s independence, including presidential attempts to fire the chairman outright.
The Justice Department also served grand jury subpoenas about two weeks before the next Federal Open Market Committee meeting on interest rates. Powell played a key role in getting the committee to cut rates three times last year, but Wall Street analysts have suggested the investigation is a detriment to further reductions. As NBC News reported, JPMorgan analysts “now expect the Fed to stay on hold throughout 2026.” In other words, the exact opposite of what Trump has been hoping to accomplish by bullying Powell for the past year.
Importantly, this case is still in early stages. The administration has managed to fail to obtain grand jury indictments in several high-profile cases against other Trump political enemies. It’s entirely possible that the case against Powell fizzles out without any charges ever being filed.
In meddling with Federal Reserve operations, Trump’s Justice Department prosecutors have rattled Wall Street and prompted bipartisan backlash from the Hill. And even if they succeed in indicting the head of U.S. monetary policy — still a big if — they risk sparking a global economic crisis over fears of a fully Trump-controlled Fed and economy. It’s a lose-lose situation for the administration, one that ends with a chastened retreat or a serious blow to America’s monetary health.
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