WASHINGTON: The U.S. Department of Justice has issued subpoenas to the Federal Reserve in a criminal investigation involving Chair Jerome Powell, escalating a clash between the White House and the central bank that has drawn bipartisan concern and unsettled financial markets. Powell said the subpoenas were tied to his testimony to the Senate Banking Committee in June about cost overruns in a renovation of two historic Federal Reserve office buildings in Washington. The project’s estimated cost has risen to about $2.5 billion.
Powell said the Fed received the subpoenas last week and that prosecutors warned of a potential criminal indictment linked to his congressional testimony. He acknowledged public scrutiny of the renovation is legitimate while disputing allegations that he misled lawmakers. The inquiry is an unusually direct use of federal criminal process involving an institution designed to operate independently from elected officials. The Justice Department has not publicly disclosed detailed allegations against Powell.
President Donald Trump has repeatedly criticized Powell over interest rates and the renovation costs, calling for the Fed chair’s resignation while pressing for sharper rate cuts. Trump has denied directing the Justice Department to open the investigation, but the subpoenas arrived amid continued public attacks on Powell and the central bank’s policy decisions. The White House has also highlighted the renovation in public statements, describing the price tag as excessive and demanding accountability for the increase.
The standoff intensified after prosecutors began informal outreach in late December 2025 about the renovation project, including email inquiries that Federal Reserve officials did not answer, according to accounts described by people familiar with the exchanges. The U.S. attorney in Washington, Jeanine Pirro, later treated the lack of response as a serious issue and the inquiry moved toward compulsory process, leading to the subpoenas that Powell disclosed. The investigation remains at an early stage, according to published reports.
Central bank independence becomes the issue
The subpoenas immediately widened the dispute beyond construction management and into questions about the boundary between criminal enforcement and monetary governance. Lawmakers in both parties said the use of criminal tools against the Fed chair risked undermining the credibility of U.S. economic institutions. Former central bank officials and market participants warned that the appearance of political pressure on monetary authorities can be destabilizing, regardless of the merits of any inquiry into procurement and cost controls.
Republican resistance has been notable in the early political response. Senator Thom Tillis of North Carolina said he planned to block confirmations of future Federal Reserve nominees until the matter involving Powell is resolved, adding friction to Trump’s effort to influence the central bank through appointments. Other lawmakers have demanded more clarity from the Justice Department about the basis for the probe and whether standard investigative steps were followed. Powell’s term as chair is scheduled to end in May 2026.
Markets also reflected the sensitivity of the confrontation. After Powell publicly described the subpoenas and the threat of indictment, the U.S. dollar fell in trading while investors moved toward traditional safe havens, according to market reports. The Federal Reserve’s benchmark interest rate decisions affect borrowing costs across the economy, and market participants closely watch signals about the institution’s independence. The Fed’s next scheduled policy meeting is Jan. 27 to 28.
A renovation dispute moves into the courtroom
The renovation itself has been a focal point for months. The project, covering two landmark-era buildings, has faced rising costs, with estimates moving from roughly $1.9 billion to about $2.5 billion. In his Senate testimony, Powell addressed questions about whether the plans included high-end amenities and said some reported features were not part of the renovation. The subpoena demand places those statements under criminal scrutiny, a rare posture for a sitting Fed chair.
Powell has not indicated he will step aside, and the Federal Reserve has continued its day-to-day operations while preparing responses to the subpoenas. The episode has also complicated the administration’s wider economic message by forcing attention onto the Justice Department’s role in a dispute with the central bank and by prompting intra-party friction in the Senate over nominations. For now, the investigation and the Fed’s policy deliberations are moving forward on parallel tracks, with both under heightened public scrutiny. – By Content Syndication Services.