WASHINGTON (AP) 鈥� Federal Reserve Chair the Department of Justice has served the central bank with subpoenas and threatened it with a criminal indictment over his testimony this summer about the Fed’s building renovations.
The move represents an unprecedented escalation in President Donald Trump’s battle with the Fed, an independent agency he has repeatedly attacked for not cutting its key interest rate as sharply as he prefers. The renewed fight will likely rattle financial markets Monday and could over time escalate borrowing costs for mortgages and other loans.
The subpoenas relate to Powell’s testimony before the Senate Banking Committee in June, the Fed chair said, regarding the Fed’s $2.5 billion renovation of two office buildings, a project that .
Powell on Sunday cast off what has up to this point been a restrained approach to Trump’s criticisms and personal insults, which he has mostly ignored. Instead, Powell issued a in which he bluntly characterized the threat of criminal charges as simple 鈥減retexts鈥� to undermine the when it comes to setting interest rates.
鈥淭he 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. 鈥淭his is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions 鈥� or whether instead monetary policy will be directed by political pressure or intimidation.鈥�
It’s a sharp departure from the Fed’s understated response to Trump this year. The central bank has attempted to placate the administration by dialing back some policies, such as efforts to consider the impact of climate change on the banking system, that the administration clearly opposed.
The renewed attacks on the Fed鈥檚 independence, and Powell鈥檚 full-throated defense, reignite what had appeared to be a dormant battle between Trump and the chair he appointed in 2017. The subpoenas will renew fears that the Fed’s independence from day-to-day politics will be compromised, which could undermine global investors’ confidence in U.S. Treasury securities.
鈥淲e 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鈥檚 position as Fed chair,鈥� Krishna Guha, an analyst at Evercore ISI, an investment bank, wrote in a note to clients.
鈥淲e 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,鈥� Guha added.
In a brief interview with NBC 草莓传媒 Sunday, Trump insisted he didn鈥檛 know about the investigation into Powell. When asked if the investigation is intended to pressure Powell on rates, Trump said, 鈥淣o. I wouldn鈥檛 even think of doing it that way.鈥�
Powell’s term as chair ends in May, and Trump administration officials have signaled that he could name a potential replacement this month. Trump has also sought to fire Fed governor Lisa Cook, an unprecedented step, though she has sued to keep her job and remain in her seat while the case plays out. The Supreme Court will hear arguments in that case Jan. 21.
At the Senate Banking Committee hearing in June, Chairman Tim Scott, a Republican from South Carolina, said the Fed’s building renovation included 鈥渞ooftop terraces, custom elevators that open into VIP dining rooms, finishes, and even a private art collection.鈥�
Powell disputed those details in his testimony, saying 鈥渢here鈥檚 no new marble. … there are no special elevators” and added that some of the controversial items are 鈥渘ot in the current plan.鈥� In July, Russell Vought, director of the Office of Management and Budget, said that his testimony about changes to the building plans 鈥渞aises serious questions about the project’s compliance鈥� with previous plans approved by a planning commission.
Still, later that month, Trump site and, while standing next to Powell, of the renovation. Later that day, Trump, speaking to reporters, downplayed any concerns with the renovation. He said, 鈥渢hey have to get it done鈥� and added, 鈥淟ook, there鈥檚 always Monday morning quarterbacks. I don鈥檛 want to be that. I want to help them get it finished.鈥�
When asked if it was a firing offense, Trump said, 鈥淚 don鈥檛 want to put that in this category.鈥�
The Justice Department in a statement Sunday said it can鈥檛 comment on any particular case, but added that Attorney General Pam Bondi 鈥渉as instructed her US Attorneys to prioritize investigating any abuse of tax payer dollars.鈥�
Timothy Lauer, a spokesperson for U.S. Attorney Jeanine Pirro鈥檚 office, said they don鈥檛 comment on ongoing investigations.
With the subpoenas, Powell becomes the latest perceived adversary of the president to face a criminal investigation by the Trump administration’s Justice Department. Trump himself has urged prosecutions of his political opponents, obliterating institutional guardrails for a Justice Department that for generations has taken care to make investigative and prosecutorial decisions independent of the White House.
The potential indictment has already drawn concern from one Republican senator, who said he鈥檒l oppose any future nominee to the central bank, including any replacement for Powell, until 鈥渢his legal matter is fully resolved.鈥�
鈥淚f 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,鈥� said North Carolina Sen. Thom Tillis, who sits on the Banking Committee, which oversees Fed nominations. 鈥淚t is now the independence and credibility of the Department of Justice that are in question.鈥�
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Associated Press writers Seung Min Kim, Eric Tucker, Michael Kunzelman, and Alanna Durkin Richer contributed to this report.
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