Federal Prosecutors open investigation into Fed Chair Powell

By Glenn Thrush and Colby Smith

WASHINGTON – The US attorney’s office in the District of Columbia has opened a criminal investigation into Jerome H. Powell, the Federal Reserve chair, over the central bank’s renovation of its Washington headquarters and whether Powell lied to Congress about the scope of the project, according to officials briefed on the situation.

The inquiry, which includes an analysis of Powell’s public statements and an examination of spending records, was approved in November by Jeanine Pirro, a longtime ally of President Donald Trump who was appointed to run the office last year, the officials said.

The investigation escalates Trump’s long-running feud with Powell, whom the president has continually attacked for resisting his demands to slash interest rates significantly. The president has threatened to fire the Fed chair — even though he nominated Powell for the position in 2017 — and raised the prospect of a lawsuit against him related to the $2.5 billion renovation, citing “incompetence”.

Trump told The New York Times in an interview last week that he had decided on who he wants to replace Powell as Fed chair. He is expected to soon announce his decision. Kevin A. Hassett, Trump’s top economic adviser, is a front-runner for the top job. While Powell’s term as chair ends in May, his term as a governor runs through January 2028. Powell has not disclosed whether he plans to stay on at the central bank beyond this year.

Powell, in a rare video message released by the Fed, acknowledged Sunday (11) that the Justice Department had served the central bank with grand jury subpoenas days earlier. He described the investigation as “unprecedented” and questioned the motivation for the move, even as he affirmed that he carried out his duties as chair “without political fear or favour”.

The Fed chair warned that the investigation signalled a broader battle over the Fed’s independence. “The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the president,” Powell added. “This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions — or whether instead monetary policy will be directed by political pressure or intimidation.”

A spokesperson for Attorney General Pam Bondi did not comment on the investigation but said Bondi had “instructed her US attorneys to prioritize investigating any abuses of taxpayer dollars”.

Starting an investigation is one matter, presenting sufficient evidence to secure an indictment from a federal grand jury — or making it stick — is another.

Indictments against two of Trump’s top targets, the former FBI director James B. Comey and Letitia James, the New York attorney general, were thrown out in November by a federal judge. An investigation into Sen. Adam B. Schiff, D-Calif., has yet to yield enough evidence to present to a grand jury.

Congress granted the Fed the authority to set interest rates free of meddling from presidents, whose political fortunes are often tethered to how the economy is faring. Rather, lawmakers stipulated that the central bank should pursue low, stable inflation and a healthy labour market.

Prosecutors in Pirro’s office have contacted Powell’s staff multiple times to request documents about the renovation project, according to an official with knowledge of the investigation who discussed an open inquiry on the condition of anonymity.

Asked about the inquiry, Trump told NBC News that he had no knowledge of the US attorney’s investigation. “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.

Trump added that the subpoenas from the US attorney’s office had nothing to do with interest rates. “I wouldn’t even think of doing it that way,” he said. “What should pressure him is the fact that rates are far too high. That’s the only pressure he’s got.”

Lawmakers from both parties questioned the premise of the investigation.

Sen. Thom Tillis, R-NC, a member of the Banking Committee, vowed to oppose the confirmation of any nominee for the Fed, including any coming chair vacancy, citing reports of subpoenas. “If there were any remaining doubt whether advisers within the Trump administration are actively pushing to end the independence of the Federal Reserve, there should now be none,” he said in a statement. “It is now the independence and credibility of the Department of Justice that are in question.”

Sen. Elizabeth Warren of Massachusetts, the top Democrat on the committee, expressed similar scepticism. “As Donald Trump prepares to nominate a new Fed chair, he wants to push Jerome Powell off the Fed Board for good and install another sock puppet to complete his corrupt takeover of America’s central bank,” she said in a statement.

The US attorney’s investigation into Powell underscores Trump’s larger clash with the Fed. Other broadsides have included an effort to oust Lisa D. Cook, a governor at the central bank whom Trump tried to fire over allegations of mortgage fraud. Presidents are able to remove officials at the Fed only for “cause,” which has typically meant malfeasance or a dereliction of duty. The Supreme Court will hear arguments for Cook’s case on Jan. 21.

The renovations at the centre of the investigation into Powell broke ground in 2022 and are set to be completed in 2027. They are estimated to be about $700 million over budget. The project involves expanding and modernizing the Marriner S. Eccles Building and another building on Constitution Avenue, which date to the 1930s.

The Fed has said that neither of those buildings has been “comprehensively renovated” since their construction nearly 100 years ago, suggesting they were in need of a significant overhaul. Part of the project includes removing asbestos and lead contamination as well as making the facilities compliant with laws related to accessibility for people with disabilities.

A 2021 version of the Fed’s proposal described private elevators and dining rooms for top policymakers, water fountains and new marble features, in addition to a rooftop terrace for staff. Pressed at a congressional hearing in June, Powell denied that many of those features were part of the latest proposal.

“There’s no VIP dining room; there’s no new marble,” he said. “We took down the old marble, we’re putting it back up. We’ll have to use new marble where some of the old marble broke. But there’s no special elevators. There’s just old elevators that have been there.”

Powell added that the project’s plans had “continued to evolve” and that some features that had been initially incorporated were scrapped.

After Powell’s testimony, the Fed published a “Frequently Asked Questions” post on its website that reaffirmed Powell’s answers to lawmakers.

In explaining the cost overruns, the central bank cited expenses tied to materials, equipment and labour as well as unforeseen circumstances, such as more asbestos than anticipated and soil contamination.

-New York Times