Powell Criminal Probe Threatens Fed Independence

Federal Reserve Chair Jerome H. Powell confirmed on Jan. 11, 2026, that the Justice Department has opened a criminal investigation related to his June 2025 Senate testimony and that grand jury subpoenas were served on Jan. 9. Powell said the probe threatens Federal Reserve independence.

DOJ Subpoenas and Powell’s Statement

Powell made his remarks in a video statement released by the Federal Reserve, calling the investigation “pretexts” linked to White House pressure over interest-rate policy. He warned the subpoenas could lead to an unprecedented criminal indictment. Powell said he respects the rule of law and will continue serving as Fed chair while the matter proceeds.

The investigation, handled by the U.S. Attorney’s Office in Washington, is in the investigative and grand-jury subpoena phase, with no indictment filed. Officials began examining Powell’s testimony and spending records in late 2025 and formally approved the probe in November 2025. A Justice Department spokesperson said U.S. Attorneys are prioritizing inquiries into alleged abuse of taxpayer dollars.

Renovation Costs and Disputed Testimony

The Fed’s Washington headquarters renovation, focused on the Marriner S. Eccles Building and an adjacent facility, is now estimated at about $2.5 billion, roughly $700 million above earlier plans of $1.8–1.9 billion. The multi-year project began around 2017, entered its current phase in 2022, and is scheduled for completion in fall 2027, with staff expected to return in March 2028. Officials say the investigation has not altered this timetable.

Cost growth is attributed to higher-than-expected prices for materials, equipment, and labor, as well as unforeseen site conditions including additional asbestos, soil contamination, and a high water table. In June 2025 Senate testimony, Powell denied that the plans included luxury amenities such as new marble, special elevators, water features, beehives, or roof terraces. He defended the work as necessary for safety and waterproofing. Investigators are probing whether his statements accurately reflected the project’s scope and cost trajectory, potentially forming the basis for perjury or false-statement allegations. After the hearing, the Fed posted FAQs and a virtual tour emphasizing that many criticized features had been removed and that the work primarily involves safety and infrastructure upgrades on roughly 90-year-old buildings.

Governance and Political Stakes

President Donald Trump has repeatedly criticized Powell for not cutting interest rates more aggressively, publicly pressured the Fed, and assailed the renovation as mismanaged. Trump has threatened to remove Powell and reportedly selected a successor, with leading contenders including Kevin Hassett and Kevin Warsh.

Powell was appointed Fed chair in 2018; his chair term expires in May 2026, while his board term runs through January 2028. Statutes generally allow removal of governors only “for cause,” typically inefficiency, neglect of duty, or malfeasance. Commentators say the criminal probe could provide a legal “cause” narrative distinct from policy disagreements.

Separate litigation over the attempted removal of Governor Lisa Cook is pending before the U.S. Supreme Court, expected to hear arguments later this year. These cases may test the scope of presidential authority over Federal Reserve officials and the meaning of “for cause” protections.