By Gloria Ogbonna
Federal Reserve Chair Jerome Powell revealed Sunday that the Department of Justice has served the central bank with subpoenas and has threatened it with a possible criminal indictment connected to his congressional testimony about the Federal Reserve’s building renovation project.
The disclosure marks a dramatic and unprecedented escalation in the long-running clash between President Donald Trump and the nation’s central bank, an institution designed to operate independently from political pressure.
According to Powell, the subpoenas stem from testimony he gave before the Senate Banking Committee in June regarding the Fed’s $2.5 billion renovation of two of its office buildings.
The project, which involves aging headquarters facilities in Washington, has drawn sharp criticism from President Trump, who has repeatedly characterized the cost as excessive and unnecessary. Powell said the Justice Department’s actions, however, go far beyond routine oversight and instead represent a direct challenge to the Fed’s autonomy.
In a video statement released Sunday, Powell described the threat of criminal charges as a “pretext” aimed at weakening the Federal Reserve’s independence, particularly as it relates to monetary policy decisions.
He framed the dispute as a fundamental test of whether interest rates will continue to be set based on economic data and long-term financial stability, or whether they will be dictated by political pressure.
“This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions,” Powell said, “or whether instead monetary policy will be directed by political pressure or intimidation.”
He emphasized that the central bank’s credibility depends on its ability to operate free from fear of retaliation when its policy choices conflict with the preferences of elected officials.
President Trump has repeatedly criticized Powell and the Fed for not cutting interest rates as aggressively or as quickly as he would like, arguing that lower rates are necessary to spur economic growth. Powell’s remarks suggest that the dispute over building renovations has become intertwined with that broader policy disagreement.
The Justice Department, in a brief statement Sunday, declined to comment on the specifics of the matter. However, it noted that Attorney General Pam Bondi has instructed U.S. attorneys nationwide to prioritize investigations into any potential misuse or abuse of taxpayer funds. That statement did little to ease concerns among lawmakers who fear the investigation could set a dangerous precedent.
A spokesperson for U.S. Attorney Jeanine Pirro’s office, which would be involved in any such case, did not immediately respond to requests for comment via text message or phone call on Sunday.
The possibility of a criminal indictment against the Fed chair has already sparked alarm on Capitol Hill, including among Republicans. One Republican senator said the situation has raised such serious concerns that he plans to block future Federal Reserve nominations until the matter is resolved. That opposition would extend even to any nominee proposed as a replacement for Powell.
“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,” said Sen. Thom Tillis of North Carolina, a member of the Senate Banking Committee, which oversees Federal Reserve nominations.
Tillis added that the controversy now raises questions not only about the Fed’s independence, but also about the credibility and impartiality of the Justice Department itself.
As the standoff deepens, economists, lawmakers, and financial markets are closely watching for signs that the dispute could spill over into broader uncertainty about U.S. monetary policy.
For Powell and his supporters, the issue has become a defining moment in the ongoing debate over how insulated the Federal Reserve should remain from political influence and whether that insulation can withstand direct legal pressure from the executive branch.
Source ABC7
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