Powell "threatens" the Trump administration: If the investigation continues, he will remain a Federal Reserve Board member until January 2028

Powell's lawyer has conveyed a clear signal to federal prosecutors: If the criminal investigation against Powell continues, he will not voluntarily leave the Federal Reserve Board after his term as chairman ends in May, and his board seat can be retained until January 2028. This statement directly ties the fate of the Federal Reserve leadership transition to the direction of the Department of Justice investigation.

According to court documents released on Friday, Powell's private lawyer met with federal prosecutor Jeanine Pirro on January 29 and communicated the above position. The Department of Justice characterized this communication as "pressure" on the prosecutor. Meanwhile, Chief Judge James Boasberg of the U.S. District Court for the District of Columbia revoked the grand jury subpoena against Powell on March 11, stating in a 27-page ruling that "the government has not provided any evidence that Powell committed a crime, and the only reasonable inference is that the government is targeting Powell out of malice or harassment." Prosecutor Pirro subsequently announced an appeal.

The initiation of the appeal process means that the Senate confirmation process for Trump's nominee for Federal Reserve chairman, Waller, will face further obstacles. North Carolina Republican Senator Thom Tillis, a key vote on the Senate Banking Committee, stated that he would continue to block Waller until the Powell investigation is resolved, and the court ruling did not change his position.

TD Cowen analysts stated on Friday that the probability of Powell remaining in office after his term as chairman ends on May 15 has significantly increased due to the aforementioned developments. RSM Chief Economist Joe Brusuelas believes that Powell's extended tenure could have a calming effect on the market, as "the independence of the central bank is an indispensable cornerstone of the modern American economy, and its erosion is not in the interest of the U.S. economy."

Unprecedented Prospects for Tenure and Market Impact

Powell's term as chairman of the Federal Reserve will end on May 15. By convention, outgoing chairmen typically vacate their board seats when their successors are sworn in. However, Powell's statutory term as a Federal Reserve governor does not expire until January 2028, meaning there is no legal obligation for him to leave. If he chooses to remain, he will continue to serve as a voting member of the Federal Open Market Committee (FOMC) throughout the midterm elections and into the final year of Trump's second term.

For the financial markets, it is unprecedented for a former chairman to work alongside the current chairman. How the market interprets any potential disagreements between the two, and how the new chairman appointed by Trump will share decision-making power with the predecessor, remains uncertain. TD Cowen analysts stated on Friday that, given the Department of Justice's appeal and the government's statements in the unsealed documents, the likelihood of Powell remaining in office after May 15 has increased.

However, there are also views suggesting that remaining in office could help stabilize expectations. RSM Chief Economist Joe Brusuelas pointed out on Friday that Powell's extended term could reassure the market. He emphasized that the independence of the central bank is an essential condition for the modern American economy, and undermining that independence is not in the interest of the U.S. economy

Escalation of Judicial Confrontation and Grand Jury Investigation

The declassified documents reveal details of the confrontation between the two sides during the meeting on January 29. Powell's lawyer conveyed four points to federal prosecutor Jeanine Pirro: the President lacks sufficient votes in the Senate to confirm the new chair; Powell believes that maintaining the independence of the Federal Reserve requires him to hold his position; he will not resign from the board if the investigation is unresolved; but if the investigation is dropped, the outcome may be different.

The investigation stems from a hearing last June in the Senate Banking Committee regarding the Federal Reserve's $250 million budget overrun for renovations at its Washington headquarters. In late 2025, the U.S. Attorney's Office initiated a grand jury investigation to determine whether the overrun constituted fraud and whether Powell made false statements to Congress. According to the prosecutor's office, they had contacted the Federal Reserve in December seeking a meeting but received no response.

On March 11, Chief Judge James Boasberg of the U.S. District Court for the District of Columbia quashed the related grand jury subpoena. In a 27-page opinion released on Friday, he stated that the subpoena lacked a legitimate law enforcement purpose and indicated that "the government has no evidence that Powell committed any crime other than annoying the President." The judge inferred that the government was targeting Powell out of malice or harassment. Powell had previously publicly countered, stating that the threat of criminal charges was due to the Federal Reserve setting interest rates based on public interest rather than presidential preference.

Blocked Succession Nomination and Political Stalemate

Despite the court's favorable ruling for Powell, the Department of Justice has not backed down. Jeanine Pirro criticized James Boasberg as a "radical judge" during a press conference on Friday, claiming his ruling was "out of touch with the law," and announced that the Department of Justice would appeal. She accused Powell of currently being protected by immunity, which prevents his office from investigating the Federal Reserve. When asked if the appeal would continue to hinder Trump's nominee for Federal Reserve chair confirmation, Jeanine Pirro dismissively stated that she only cared about the legal aspects, "the rest is just white noise."

The direct consequence of this legal battle is that the nomination of former Federal Reserve Governor Warsh is stalled in the Senate. Key Republican senator Thom Tillis from the Senate Banking Committee reiterated on Friday that the Department of Justice's appeal would only further delay Warsh's confirmation as the next Federal Reserve chair, vowing to block the nomination until the dust settles on Powell's investigation.

In response to the declassified court documents, the White House did not directly address the content of the documents in a statement. According to media reports, White House spokesperson Kush Desai stated that Kevin Warsh's academic background, private sector experience, and previous tenure on the Federal Reserve Board make him fully qualified for the next Federal Reserve chair. He emphasized that the White House is working closely with Congress to expedite the confirmation of the nomination and restore public confidence and credibility in the Federal Reserve