The standoff between the White House and the Federal Reserve escalates! U.S. federal prosecutors have launched a criminal investigation into Powell

The U.S. Department of Justice is conducting a criminal investigation into Federal Reserve Chairman Jerome Powell, focusing on the renovation project at the Federal Reserve headquarters and whether Powell lied to Congress regarding the scope of the project.

On January 11, the New York Times cited informed officials revealing that the investigation was initiated by the U.S. Attorney's Office for the District of Columbia and was approved by the office's head, Jeanine Pirro, last November. The investigation includes an analysis of Powell's public statements and a review of expenditure records. This legal action not only targets the $2.5 billion renovation project and its cost overruns but also reflects the intense power struggle between the White House and the Federal Reserve over interest rate policies. Trump has consistently criticized Powell for refusing to implement significant rate cuts and has threatened to dismiss him, citing "incompetence."

Powell also stated in a recent statement that the U.S. Department of Justice has issued a grand jury subpoena to the Federal Reserve and threatened to pursue criminal charges regarding his testimony before Congress last June about the Federal Reserve headquarters renovation project.

Powell denied that the action was prompted by his testimony or the renovation project, stating, "These are just excuses; the threat of criminal charges is actually a consequence of the Federal Reserve's commitment to setting interest rates based on our best assessment of the public interest, rather than following the president's preferences."

Powell indicated that he would continue to fulfill his role confirmed by the Senate.

The initiation of this investigation coincides with Powell's term as Federal Reserve Chairman, which is set to end in May this year, and Trump has revealed that he has identified a successor, who is expected to be announced soon. Although a prosecution still requires evidence from a grand jury, the investigation itself signifies a new height of executive pressure on the central bank.

Legal Offensive and Escalation of Executive Pressure

According to the New York Times, the U.S. Attorney's Office led by Trump's long-time ally Jeanine Pirro is examining whether Powell misled Congress regarding the Federal Reserve headquarters renovation project. Informed officials stated that the prosecutor's office has repeatedly contacted Powell's team for relevant documents. While it is currently unclear whether Pirro has convened a grand jury or issued subpoenas, this marks the official start of a major legal battle against Powell.

This investigation highlights the broader conflict between Trump and the Federal Reserve. Trump has long pressured Powell to significantly lower interest rates and has threatened to sue him over the $2.5 billion renovation project. Trump has also attempted to remove Federal Reserve Governor Lisa D. Cook, accusing her of mortgage fraud, with the Supreme Court set to hear arguments on this case on January 21.

It is noteworthy that the president can typically only remove Federal Reserve officials for "just cause" (usually referring to misconduct or neglect of duty). Congress has granted the Federal Reserve the independence to set interest rates to shield it from political interference, allowing it to focus on low inflation and a healthy labor market. However, there remains a significant gap between initiating an investigation and obtaining a grand jury indictment. A federal judge dismissed charges against former FBI Director James B. Comey and New York Attorney General Letitia James last November, and the investigation into Democratic Senator Adam B. Schiff has yet to yield sufficient evidence

Controversial Renovation Project

The core of the investigation involves the renovation project at the Federal Reserve headquarters located on Constitution Avenue in Washington. The project began in 2022 and is scheduled for completion in 2027, involving the expansion and modernization of the Marriner S. Eccles building, built in the 1930s, and another building. Currently, the project is over budget by approximately $700 million.

The Federal Reserve explained that the reasons for the cost overruns include rising costs of materials, equipment, and labor, as well as unforeseen circumstances such as unexpected asbestos and soil contamination. The Federal Reserve pointed out that these two buildings have not undergone a "comprehensive renovation" since they were built nearly a century ago, and the project includes the removal of asbestos and lead contamination, as well as making the facilities compliant with accessibility laws for individuals with disabilities.

During a congressional hearing last June, Powell denied claims from a 2021 proposal version regarding the provision of private elevators, dining rooms, and new marble facilities for senior decision-makers. Powell testified at the time, "There is no VIP dining room, and no new marble. We are removing the old marble and reinstalling it, and new marble will only be used where the old marble is damaged. There are no dedicated elevators, only the old elevators that have always been there." He emphasized that the project plans have "evolved continuously," and some of the initially included features have been canceled. After the hearing, the Federal Reserve published a FAQ on its website, reiterating Powell's statements and providing a virtual tour and detailed notes in response to criticism.

Successor Candidates Emerge

As legal pressures mount, personnel changes at the Federal Reserve have also entered a critical phase. Trump stated in an interview last week that he has selected a candidate to succeed Powell as the chair of the Federal Reserve, with an announcement expected soon. Trump's chief economic advisor Kevin A. Hassett is currently a leading candidate for the position.

Although Powell's term as chair will end in May of this year, his term as a governor will continue until January 2028. Powell has not disclosed whether he plans to remain at the central bank after this year