1. The probe centers on Powell’s congressional testimony about Fed headquarters renovations
The Department of Justice (DOJ) has opened a criminal investigation and issued grand‑jury subpoenas concerning Powell’s June 2025 testimony to Congress about the Federal Reserve’s $2.5 billion renovation of its Washington, D.C., headquarters. Prosecutors are examining whether Powell made false or misleading statements about the project’s scope, costs and details.
2. Officials are reviewing Powell’s statements and spending records
The investigation, approved by the U.S. Attorney for the District of Columbia, is examining:
Powell’s public and congressional testimony on the renovation, and
internal planning and spending documents related to the project.
No criminal charges have been publicly filed yet — the investigation is ongoing.
3. Powell and the Fed see the probe as politically motivated
Powell has strongly pushed back, saying the legal threat is being used as leverage:
He describes the investigation as a “pretext” tied to his resistance to pressure from the administration, not legitimate wrongdoing.
Powell argues the real issue is the Fed’s refusal to bow to political demands to cut interest rates, and that the action could undermine the independence of U.S. monetary policy.
In a public statement, he said threatening 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.”
4. Political context matters
This unprecedented investigation occurs amid growing tensions between Powell and President Donald Trump’s administration. Trump has repeatedly criticized Powell for not aggressively lowering interest rates, and has publicly attacked the Fed’s decisions and the renovation project itself.
Legal and financial observers are alarmed because using criminal probes in this context could have significant implications for the independence of the Federal Reserve, market confidence, and U.S. economic governance.
The Consequences
📉 Market Reactions — Immediate & Global
1. Financial Markets Have Been Shaken
Stock markets — U.S. equity futures for major indexes like the S&P 500, Dow, and Nasdaq slid as the news broke, reflecting investor anxiety about political interference in monetary policy.
Volatility spiked, as traders digest the uncertainty of a major institution being drawn into a criminal probe.
2. Safe‑Haven Assets Rising
Gold jumped to record levels as investors sought safety amid concerns over the Fed’s independence and risks to economic stability.
Silver and other traditional hedges also gained as risk‑offs increased.
3. U.S. Dollar Has Fallen
The U.S. dollar weakened against major currencies, as global traders reassessed confidence in U.S. monetary leadership and political pressures on the central bank.
4. Bonds & Yields
Long‑term Treasury yields rose (indicating reduced confidence and risk repricing), while some short‑term yields adjusted as markets anticipate possible changes in monetary policy direction.
5. Global Sentiment
While reactions have been most prominent in U.S. markets, European and Asian markets also felt the impact — with some indices slipping while others (e.g., in Asia) showed resilience, depending on local catalysts and economic outlooks.
6. Central Bank Community — Concern About Independence
Economists and analysts internationally are warning about the risk of politicizing central bank independence — a cornerstone of modern macroeconomic policy. That fear is itself a driver of market volatility, as trust in data‑driven monetary decisions is seen as eroding.
⚖️ What Powers the DOJ Has in This Kind of Investigation
Even though Powell is central bank chair, he is still subject to U.S. criminal law. Here’s what the DOJ can and can’t do:
✔ What the DOJ Can Do
Open a criminal investigation — prosecutors can investigate allegations of unlawful conduct, including misleading Congress, fraud, or other federal offenses. These inquiries are usually overseen by a U.S. Attorney’s Office and can involve grand juries.
Issue grand jury subpoenas to gather evidence from individuals and institutions, including records and testimony. Powell confirmed his office received such subpoenas.
Seek indictments — if prosecutors believe there is sufficient evidence of a crime, they can seek an indictment from a grand jury.
✖ What the DOJ Cannot Do (Without Legal Constraints)
It cannot remove Powell from office at will. The Federal Reserve’s independence is protected under statute; the President or DOJ cannot simply fire the Fed Chair arbitrarily.
It must follow due process. Investigations must be based on evidence of lawbreaking, not political preferences. If charges are ever brought, Powell would still have constitutional protections and the right to a fair trial.
It cannot dictate monetary policy. Even as the probe proceeds, the Fed retains statutory authority to set interest rates based on economic conditions — although political pressure can indirectly affect perceptions of that independence.
🧠 Why This Matters
The combination of market moves and policy silence reflects two big concerns:
Investors don’t like uncertainty — especially when it surrounds the stability of major institutions like the Fed.
Central bank independence is vital — if markets believe monetary policy could be subject to political influence or legal threats, confidence — and long‑term economic planning — can weaken.
