On Sunday evening, the New York Times reported that the U.S. Department of Justice had launched a federal criminal investigation into Federal Reserve Chair Jerome Powell in a dramatic escalation of President Donald Trump’s pressure campaign against the Fed.
The U.S. Attorney’s Office for the District of Columbia’s probe focuses on the cost and scope of ongoing renovations to the Federal Reserve building in Washington, D.C., which has been underway since Trump’s first term, unnamed officials told the Times. The probe began in November and was approved by Jeanine Pirro, former reality TV judge and MAGA conspiracy theorist turned U.S. Attorney for D.C.
Powell is the second Fed member to fall victim to a bogus legal attack from the administration. As Trump has made clear, he wants the Fed to cut interest rates more aggressively than economists at the central bank find prudent to uphold its dual mandate for maximum employment and controlled price inflation.
The unprecedented moves from the White House and Trump’s allies have yielded strong responses from Powell, key Republican senators, and a distinguished group of top U.S. economists.
Here are five points on how we got here and what Trump’s relentless attack on Fed independence could mean for the U.S.
Trump’s Pressure Campaign Against the Fed Has Been Mounting for Years
Trump nominated Powell to head the central bank in 2017 during his first administration. That didn’t stop the president from reportedly trying to oust Powell in 2018 for raising interest rates.
During this presidency, Trump has publicly pressured Powell to slash rates by 1%, and openly debated with the Fed Chair about the cost of renovations during a rare presidential visit to the Federal Reserve building. The president threatened to fire Powell last June over the Federal Reserve Board’s rate decisions.
Powell isn’t the only Fed member who has come under the microscope of Trump’s DOJ; Fed Governor Lisa Cook is under investigation for alleged mortgage fraud. In September, an appeals court ruled that Cook could not be fired while the case remains ongoing. The Supreme Court will hear oral arguments in the case next week.
Mortgage Fraud Scheme Orchestrator Bill Pulte Behind Powell Subpoena
The alleged orchestrator of the Powell investigation is a familiar name. Bill Pulte, head of the Federal Housing Finance Agency, is largely responsible for the administration’s subpoena of the Federal Reserve, according to a report from Bloomberg. Pulte claimed not to know anything about the Fed investigation in an interview with Bloomberg.
The Pulte Homes heir has turned the staid federal housing agency into a tool for presidential retribution. Pulte is behind the mortgage fraud investigations against both Fed Governor Cook and U.S. Sen. Adam Schiff (D-CA), a case which has yet to go before a grand jury.
It’s all part of Trump’s retribution machine against political opponents, which has also caught in its cogs former FBI Director James Comey and New York Attorney General Letitia James, both of whose cases were thrown out by a judge.
Fed Renovation Costs Have Jumped, But With Reason
In 2017, the Fed Board approved a renovation project of two of the Federal Reserve’s historic buildings, according to an explainer put out by the Fed in July. Initially pegged at $1.9 billion, the project, which will upgrade HVAC, electric and plumbing systems in the more than 90-year-old buildings, rose to $2.5 billion. The Fed attributed the cost spike to factors including increased material and labor costs, which spiked in 2021 and 2022 after pandemic-era inflation, and “unforeseen conditions” during construction, like findings of higher levels of asbestos than planned and toxic soil contamination.
During the unusual July visit to the Fed, Trump, wearing a hardhat at the construction site, said the project had ballooned to $3.1 billion, a claim Powell rejected.
Powell Fights Back, Joined by Bipartisan Chorus of Economists and Officials
On Sunday evening, Powell released a video characterizing the investigation as an attack on the independence of the Federal Reserve.
“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 said in the video. “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,” he continued.
Powell was supported by the usual GOP suspects who have been most outspoken against Trump over the last year. Retiring Sen. Thom Tillis (R-NC) said he would block Trump’s Fed nominees, including the nominee for Fed Chair, while the legal case against Powell is ongoing.
“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,” Tillis, who is a member of the Senate Banking Committee, said on X.
Sen. Lisa Murkowski (R-AK) called the administration’s investigation into Powell and the Fed “nothing more than an attempt at coercion,” in a post on X, and cosigned Tillis’ vow to block Trump’s Fed nominees.
Sen. Elizabeth Warren (D-MA), the top Democrat on the Banking Committee, said in a statement the committee shouldn’t “move forward with any Trump nominee for the Fed, including Fed Chair,” in light of the investigation, also calling Trump a “wannabe dictator.”
And a bipartisan group of 13 of the nation’s top economists issued a joint statement condemning the administration’s “criminal inquiry” into Powell as “an unprecedented attempt to use prosecutorial attacks to undermine” Federal Reserve independence. Economists who signed the statement include: two-term Fed Chair and former President George W. Bush’s economic advisor Ben Bernanke, five-time Fed Chair Alan Greenspan, conservative economist and former Bush advisor Glenn Hubbard, Jared Bernstein, who chaired the Council of Economic Advisers under President Joe Biden, and former Treasury Secretary and Fed Chair Janet Yellen.
Politicizing the Fed Could Decimate the U.S. Economy
The economists in their statement emphasized the danger of compromising the Federal Reserve’s independence.
“This is how monetary policy is made in emerging markets with weak institutions, with highly negative consequences for inflation and the functioning of their economies more broadly,” they wrote. “It has no place in the United States whose greatest strength is the rule of law, which is at the foundation of our economic success.”
Trump and his administration officials have openly flouted and expressed their disdain for independence of federal statistical and economic policy agencies. In August, Trump fired the Bureau of Labor Statistics chief for publishing jobs data he didn’t like. Later that month, Commerce Secretary Howard Lutnick called the independence of federal statistics “nonsense” during a town hall for Census Bureau and Bureau of Economic Analysis employees. And throughout his second term, the Trump administration has so manipulated federal data of all sorts that one expert told TPM in October that anything coming from the federal government should be “treated with a certain amount of skepticism, if not suspicion.”
Countries around the world offer grave warnings about what happens when central banks become nothing more than political tools of the executive branch. In Argentina, politicized monetary policy led to a 4,923% inflation rate in 1989. More recently, Turkey saw inflation peak at 85% in 2022.
As for the Fed, Trump has already installed his top economic advisor Stephen Miran to the board while Miran remains a member of the administration, an unprecedented conflict of interest. Since joining the board, Miran has voted twice to cut rates more than what was the consensus among governors, in lockstep with policy pushed by the president.
