Fed Under Siege: DOJ Threatens Powell with Indictment in Historic Clash
The conflict between the Trump administration and the Federal Reserve has exploded into a potential constitutional crisis, with Chair Jerome Powell announcing Sunday that the central bank has been served grand jury subpoenas from the Justice Department threatening criminal indictment. While the subpoenas officially target Powell’s June congressional testimony regarding cost overruns at the Fed’s headquarters renovation, Powell forcefully characterized the move as a pretext for political intimidation. In a defiant statement, he argued the threat of criminal charges is a direct consequence of the Fed refusing to bow to President Trump’s demands for aggressive interest rate cuts, framing the investigation as a battle for the very soul of the institution’s independence.
The market reaction was swift and negative. US stock futures dropped 0.7% and the dollar weakened, while gold surged to a record high as investors fled to safety amidst the institutional chaos. Although President Trump denied knowledge of the probe in an NBC interview, the investigation aligns with a months long campaign by his allies including Budget Director Russ Vought and FHFA Director Bill Pulte to find "cause" to remove Powell. They allege he lied under oath about "extravagant" design features in the $2.5 billion renovation project. However, analysts view this as "Trumpian vengeance" designed to force Powell out before his term as Chair expires in May, clearing the way for a loyalist successor like front runner Kevin Hassett.
The political fallout has already fractured the President's support in the Senate. Republican Senator Thom Tillis immediately rallied to the Fed’s defense, pledging to block any Fed nominee including a new Chair until the legal matter is resolved. This creates a massive hurdle for the administration, as the Senate Banking Committee plays a critical role in confirming the central bank's leadership. With the Supreme Court also set to hear a case regarding the attempted firing of Fed Governor Lisa Cook later this month, the US central bank is now fighting for its autonomy on multiple legal fronts, leaving monetary policy clouded by unprecedented uncertainty.