Fed Chair Powell under criminal investigation, blames Trump

Federal prosecutors are conducting a criminal investigation of Federal Reserve Chairman Jerome Powell focused on the $2.5 billion renovation to the central bank’s headquarters in Washington, D.C., and his related testimony to Congress, he said on Sunday evening.

Powell said the probe is the result of longstanding frustration by President Donald Trump over the Fed’s refusal to cut interest rates as quickly and as much as the president has demanded.

“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 a video statement tweeted by the Fed’s X account.

The chairman warned that the outcome of the investigation will determine the future of the central bank’s decisions.

“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,” Powell said.

Stock futures fell on the heels of Powell’s statement.

Powell said the Department of Justice on Friday served the Fed “with grand jury subpoenas threatening a criminal indictment related to my testimony before the Senate Banking Committee last June.”

“That testimony concerned, in part, a multi-year project to renovate historic Federal Reserve office buildings,” he said.

The threat of indictment, Powell said, “is not about my testimony last June or about the renovation of the Federal Reserve buildings.”

“It is not about Congress’s oversight role; the Fed, through testimony and other public disclosures, made every effort to keep Congress informed about the renovation project,” he said. “Those are pretexts.”

“I have deep respect for the rule of law and for accountability in our democracy,” Powell said in his statement.

“No one, certainly not the chair of the Federal Reserve, is above the law, but this unprecedented action should be seen in the broader context of the administration’s threats and ongoing pressure.”

“I have served at the Federal Reserve under four administrations, Republicans and Democrats alike,” Powell said.

“In every case, I have carried out my duties without political fear or favor, focused solely on our mandate of price stability and maximum employment,” he said. “Public service sometimes requires standing firm in the face of threats. I will continue to do the job the Senate confirmed me to do, with integrity and a commitment to serving the American people.”

A DOJ spokesperson, in a statement to CNBC, without saying the comment was about Powell, said, “The Attorney General has instructed her US Attorneys to prioritize investigating any abuse of taxpayer dollars.”

The New York Times first reported the probe, citing officials briefed on the matter.

A person familiar with the investigation told CNBC that they would not dispute the idea that the probe of Powell is related to the building renovation and his testimony to Congress.

The investigation is being overseen by the U.S. Attorney’s Office for the District of Columbia, according to the newspaper.

That office is led by U.S. Attorney Jeanine Pirro, a former New York state prosecutor and Fox News host, who was appointed to her post by Trump.

Trump, in an interview with NBC News on Sunday evening, said, “I don’t know anything about it,” referring to the criminal probe of Powell.

“But he’s certainly not very good at the Fed, and he’s not very good at building buildings,” Trump told the news outlet.

Trump has repeatedly blasted Powell for the Fed not cutting interest rates as much and as quickly as the president has demanded since entering the White House in January 2025.

But the president told NBC on Sunday that the DOJ’s subpoenas do not have anything to do with interest rates, according to the outlet.

“No. I wouldn’t even think of doing it that way,” Trump said. “What should pressure him is the fact that rates are far too high. That’s the only pressure he’s got.”

Trump on Dec. 29 said, “We’re thinking about bringing a suit against Powell for incompetence” in connection with the renovation of Fed buildings.

“It’s going to end up costing more than $4 billion,” Trump said. “Highest price of construction per square foot in the history of the world.” Trump also said that day that “I would love to fire him.”

The probe came to light nearly six months after Rep. Anna Paulina Luna, R-Fla., first said she had referred Powell to the DOJ for the potential crimes of perjury and false statements to federal officials in connection with his testimony about the renovation project for the Fed’s headquarters.

“I laid out, in detail, how Jerome Powell lied under oath to Congress and misrepresented facts in official communications to senior administration officials, including OMB Director Russell Vought,” Luna said in a tweet on Sunday. “Unelected bureaucrats do not get a free pass. This is exactly why oversight exists, and I am thankful the @DOJ is taking this seriously. No one is above the law.

Trump has made no secret of his intention to remove Powell as chair after his term expires in May.

The two leading contenders are believed to be former Fed Gov. Kevin Warsh and Kevin Hassett, the current director of the National Economic Council.

Sen. Thom Tillis, a North Carolina Republican and a member of the Senate Banking Committee, blasted the investigation of Powell and said that he would oppose the nomination of Powell’s replacement by Trump, and any other Fed Board nominee, “until this legal matter is fully resolved.”

“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 said in a statement.

“It is now the independence and credibility of the Department of Justice that are in question,” the senator said.

Senate Minority Leader Chuck Schumer, a New York Democrat, said Trump’s “assault on the Fed’s independence continues,” adding that the president is threatening the strength and stability of the U.S. economy.

“This is the kind of bullying that we’ve all come to expect from Donald Trump and his cronies. Anyone who is independent and doesn’t just fall in line behind Trump gets investigated,” Schumer said in a statement. “Jay Powell and the Fed aren’t the reason Trump’s economy and his poll numbers are in the toilet. If he’s looking for the person who caused that he should look in the mirror.”

Sen. Elizabeth Warren of Massachusetts, the ranking Democrat on the Banking Committee, echoed Tillis.

“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,” Warren said in a statement.

“Trump is abusing the authorities of the Department of Justice like a wannabe dictator so the Fed serves his interests, along with his billionaire friends,” Warren said.

“This Committee and the Senate should not move forward with any Trump nominee for the Fed, including Fed Chair.”

Brian Jacobsen, chief economic strategist at Annex Wealth Management, in a note to clients on Sunday, wrote, “President Trump is trying to bring criminal charges against Powell related to his testimony before Congress about the Fed’s headquarters renovation.”

“Powell may protest by staging a sit-in. His term as Chair is up in May, but his term as a governor isn’t up until January 2028,” Jacobsen wrote.

“With the political pressure on the Fed, he may choose to stay on as a governor out of spite. It would deprive President Trump of the ability to stack the board with another appointee,” Jacobsen wrote. “Stephen Miran’s term is up in January 2026 and that may be the only vacancy Trump gets to fill. It would be unconventional for Powell to stay on, but everything these days is unconventional.”

Trump nominated Powell to the Fed chair position in 2017; he was confirmed in 2018.

But almost from the onset of Powell’s term, Trump has repeatedly badgered the Fed chair about interest rates.

At various times, Trump has called Fed officials “boneheads” and once referred to Powell as a golfer who cannot putt.

Those criticisms intensified during Trump’s second term, as he hectored the central bank to cut rates for months, even after it implemented three consecutive quarter-percentage-point reductions beginning in September.

During that time, Trump installed his handpicked choice, Miran, as a Fed governor and has sought to remove another governor, Lisa Cook, from the board over allegations that she committed mortgage fraud.

Cook denies those claims, which were made in the form of criminal referrals to the DOJ by Federal Housing Finance Agency Director Bill Pulte, who has been an attack dog against perceived enemies of Trump, who appointed Pulte to his post.

The Supreme Court is set to hear arguments on a case challenging Cook’s removal later in January.

Krishna Guha, vice chairman of Evercore ISI and head of its Global Policy and Central Bank Strategy Team, in a note to clients on the probe of Powell, said, “We are stunned by this deeply disturbing development which came out of the blue after a period in which tensions between Trump and the Fed seemed to be contained.”

“We expect the dollar, bonds and stocks to all fall in Monday trading in a sell-America trade similar to that in April last year at the peak of the tariff shock and earlier threat to Powell’s position as Fed chair, with global investors applying a higher risk premium to US assets,” Guha said. “Gold and other safe havens should rally.”

— CNBC’s Jeff Cox, Eamon Javers, and Garrett Downs contributed to this article